Compliance Blog

Happy early Thanksgiving! Amongst many other things, I am thankful that social media filters work on my cat, Quincy, so I can take fun holiday photos of him to share.

This week, my blog is going to focus on Customer Identification Program (CIP) requirements and non-U.S. persons. I have been getting quite a few questions on this lately, so I thought a blog refresher may help.

The PATRIOT Act and federal regulations require each credit union to implement a written Customer Identification Program (CIP) that includes certain minimum requirements, such as the collection of identifying information at account opening and risk-based identity verification procedures. The purpose of the CIP is to allow the credit union to form a reasonable belief that it knows the true identity of each customer.

The CIP rules are found in section 748.2(b)(2) of the NCUA regulations and section 1020.220  of the FinCEN regulations.

Under section 1020.220(a)(2)(i)(A) it states:

“In general. The CIP must contain procedures for opening an account that specify the identifying information that will be obtained from each customer. Except as permitted by paragraphs (a)(2)(i)(B) and (C) of this section, the [credit union] must obtain, at a minimum, the following information from the customer prior to opening an account:

(1) Name;

(2) Date of birth, for an individual;

(3) Address, which shall be:

(i) For an individual, a residential or business street address;

(ii) For an individual who does not have a residential or business street address, an Army Post Office (APO) or Fleet Post Office (FPO) box number, or the residential or business street address of next of kin or of another contact individual; or

(iii) For a person other than an individual (such as a corporation, partnership, or trust), a principal place of business, local office, or other physical location;

(4) Identification number, which shall be:

(i) For a U.S. person, a taxpayer identification number; or

(ii) For a non-U.S. person, one or more of the following: A taxpayer identification number; passport number and country of issuance; alien identification card number; or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.” (Emphasis added).

Based on the above, for a non-U.S. person, “a taxpayer identification number, passport number and country of issuance, alien identification card number, OR number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph” is acceptable for the identification number requirement.

Furthermore, section 1020.220(a)(2)(i)(B) states the following regarding an exception for persons applying for a taxpayer identification number:

“(B) Exception for persons applying for a taxpayer identification number. Instead of obtaining a taxpayer identification number from a customer prior to opening the account, the CIP may include procedures for opening an account for a customer that has applied for, but has not received, a taxpayer identification number. In this case, the CIP must include procedures to confirm that the application was filed before the customer opens the account and to obtain the taxpayer identification number within a reasonable period of time after the account is opened.” (Emphasis added).

As such, a credit union’s CIP can describe how the credit union will handle potential customers who have begun the process of obtaining a taxpayer identification number. This can help provide a little breathing room for credit unions, however, as mentioned above, the credit union’s CIP “must include procedures to confirm that the application was filed before the customer opens the account”. Additionally, the taxpayer identification number needs to be obtained “within a reasonable period of time after the account is opened.”

Furthermore, section 1020.220(a)(2)(ii) requires that the credit union’s CIP “contain procedures for verifying the identity of the customer, using information obtained in accordance with paragraph (a)(2)(i) of this section, within a reasonable time after the account is opened. The procedures must describe when the [credit union] will use documents, non-documentary methods, or a combination of both methods as described in this paragraph (a)(2)(ii).” (Emphasis added). Credit unions may want to review the different examples listed in the section regarding verification through documents and verification through non-documentary methods for more information.  

So, the regulation does require the credit union to obtain certain information for non-U.S. persons seeking to open an account and allows the credit union to obtain additional information (credit unions will need to make a risk-based determination regarding what additional information to obtain). The regulation also requires the credit union to verify the identity of each person opening an account and allows the credit union to do this verification through documents (obtaining copies of the documents), or non-documentary methods. The credit union’s CIP is required to specify the method that the credit union will use and outline the documents or non-documentary method(s) for verifying members identities. 

The FFIEC BSA/AML examination manual also has a section regarding nonresident aliens and foreign individuals. Per the manual:

“The [credit union’s] CIP should detail the identification requirements for opening an account for a non-U.S. person, including an NRA [nonresident alien]. The program should include the use of documentary and nondocumentary methods to verify a customer.”

The FFIEC BSA/AML examination manual provides more information and states that “[a] [credit union] need not establish the accuracy of every element of identifying information obtained, but it must verify enough information to form a reasonable belief that it knows the true identity of the customer.”

I hope everyone has a great Thanksgiving tomorrow!

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