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July 17, 2002
PO-3263
Treasury and Federal Financial Regulators Issue
Patriot Act Regulations on Customer Identification
The Department of the Treasury and seven federal financial
regulators today issued proposed rules that would require certain financial institutions
to establish minimum procedures for identifying and verifying the identity of customers
seeking to open new financial accounts. Written comments on the proposed rules may be
submitted within 45 days of their publication in the Federal Register, which is expected
to occur later this week.
These proposed rules implement section 326 of the USA
PATRIOT Act, which directs the issuance of regulations requiring financial institutions to
implement reasonable procedures for (1) verifying the identity of any person seeking to
open an account, to the extent reasonable and practicable; (2) maintaining records of the
information used to verify the person’s identity and; (3) determining whether the
person appears on any list of known or suspected terrorists or terrorist organizations.
Final rules implementing section 326 must be effective by October 25, 2002.
The proposed rules seek to protect the U.S. financial
system from money laundering and terrorist financing. Additionally, by requiring identity
verification procedures for all new accounts opened after the effective date of the final
rules, the rules could also protect consumers against various forms of fraud, including
identity theft.
The proposed rules were developed jointly by the Treasury
Department, Treasury’s Financial Crimes Enforcement Network and seven federal
financial regulators, including the Board of Governors of the Federal Reserve System,
Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, National
Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift
Supervision, and Securities and Exchange Commission.
The proposed rules outline requirements for the following
financial institutions: banks and trust companies, savings associations, credit unions,
securities brokers and dealers, mutual funds, futures commission merchants, and futures
introducing brokers.
The financial institutions subject to the proposed rules
would be required to establish programs specifying procedures for obtaining identifying
information from customers seeking to open new accounts. This identifying information
would be essentially the same information currently obtained by most financial
institutions and for individual customers generally, including the customer’s name,
address, date of birth and an identification number (for U.S. persons, a social security
number and for non-U.S. persons, a similar number from a government-issued document).
Customers with signature authority over business accounts would furnish substantially
similar information.
A financial institution’s program would also have to
contain procedures to verify the identity of customers within a reasonable period of time.
The proposed rules contemplate that financial institutions will generally use the same
forms of identity verification that are already in place, such as examining driver’s
licenses, passports, credit reports, and other similar means.
While every program must meet these minimum elements, the
proposed rules give financial institutions the flexibility to tailor their procedures as
appropriate, taking into consideration an individual institution’s size, location,
and type of business. In developing these regulations, the importance of many factors was
taken into account, including the need to guard the U.S. financial system against
terrorist financing and money laundering, the legitimate privacy interests of customers,
and the need for these regulations to be effectively integrated into the daily operations
of financial institutions. |
