Treasury Proposes ID Requirements for New Bank Accounts
Posted Jul 26, 2002

The Department of the Treasury and seven federal financial regulators, including the Office of Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC), issued proposed regulations that would require certain identification procedures for persons opening new bank accounts. The proposed rules reflect the USA PATRIOT Act requirement that financial institutions implement procedures for establishing the identity of persons seeking to open new bank accounts.

As explained, the purpose of the provisions is to protect the U.S. from efforts to launder money and finance terrorism. The rules, when finalized, will apply to new accounts opened at banks and trust companies, savings associations, credit unions, securities brokers and dealers, mutual funds, futures commission merchants, and futures introducing brokers. Under the USA PATRIOT Act, the regulations must be in place by October 25, 2002. There is a comment period of 45 days following publication of the regulations. More information, including the proposed regulations for each type of financial institution, is available on the Department of Treasury WebSite in an article entitled Treasury Issues Patriot Act Regulations for Customer Identification. [Please note that the article was available at this URL at the time this issue of the MURTHYBULLETIN was posted.]

At a minimum, each financial institution would have to establish a procedure for (a) identification and verification of persons seeking to open accounts; (b) recordkeeping; and (c) checking the customer's personal data against government lists of known or suspected terrorists or terrorist organizations.

The institutions would have to establish programs setting forth procedures for collecting identifying information from new customers. According to the Department of the Treasury this information should not vary greatly from the information currently required. It would include name, address, date of birth, and an identification number. The identification number for U.S. citizens is the social security number; for non-U.S. citizens a similar government-issued number will be required. Presumably, this means a social security number or Internal Revenue Tax Identification Number.

The regulations will apply to all customers opening new accounts, including individuals and business entities such as corporations, partnerships, and trusts. The customer includes all persons with signature authority on an account. All persons opening new accounts will be subjected to the requirements, even if they already have an account at the bank. The regulation is limited to new accounts; it includes transfers of accounts from one bank to another, but only if those transfers are initiated by the customer. Account transfers not initiated by the customer, such as certain transfers due to mergers and similar situations, would not be affected.

Until these regulations are implemented, it is unclear how onerous the identification process will be. While the proposed regulation implies that the new procedure should not differ greatly from the current one, the need to check against government lists may cause some problems due to misidentification of persons whose names are identical or similar to those on the lists.