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Congress passed the USA PATRIOT Act mandating a customer (member) identification program at financial institutions shortly after the terrorist attacks in 2001. The intent was to have you confirm the identity of each person or entity who opens a new deposit or loan account. The requirement became effective in 2003, so now every account ties to an actual person or entity in order to make sure that accounts are not owned by non-existent entities or fraudulent names that might be a front for terrorist financing and money laundering schemes.
Individual Identification
The basic premise of the MIP requirement is pretty simple -- a credit union collects four pieces of information on each potential member or borrower.
- (Full Legal) Name
- Physical Address
- Tax Identification Number*
- Date of Birth
Once those are collected, each must be verified using documentary and/or non-documentary methods (more on that below) until the credit union establishes a "reasonable belief" of the person's identity. The information is then retained for a period of at least five years. Copies of the items you use for verification are not required if you note the details on your account card or loan application. Credit unions are discouraged from photocopying military IDs or having copies of photo IDs in a loan file, so noting the details can be especially useful in those situations.
Entity Identification
For entities, a credit union must verify the entity itself exists, generally with documentation from the Secretary of State or IRS, and can also choose to verify the individuals associated with the entity. Since it is optional to include individual verification with entities, make sure you find out what your credit union policy requires. Entities would include business, trust, and organization accounts. We will discuss the Beneficial Ownership rule that includes business verification in lesson #6 this week.
*Non-U.S. Citizens
If you are opening an account for a person who does not have a U.S. taxpayer identification number (TIN), you have the option to accept any one (or more) of the following:
- a passport number with country of issuance;
- an alien identification card number; or
- the number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photo or similar safeguard.
With a more diverse population moving into our state or looking for financial services, now is a good time to review your policies and procedures to ensure they provide your credit union with the direction and flexibility needed to assist all members with obtaining credit union services.
Evolving Program
Hopefully your MIP program has evolved since 2003, just like your credit union. Many credit unions started with a fairly rigid policy and have found more success over the years by being more flexible and offering options when desired documents are not readily available. The regulation itself provides many options for possible documents and verification methods, as described below. If you find places that your program might need other adjustments as your products and services transition, be sure to discuss them with your supervisor or BSA compliance officer.
When you encounter unusual situations for identification or verification, look to your policy for answers first. You can also view the FAQ document that FinCEN released in 2004. It covers many of them and lays out the expectations for such things as minor accounts, fiduciary relationships (i.e. POA), and more. With some of the housing challenges in Montana, homeless individuals might need to be served. There are options to use an address of a family member or known individual, again, if your policy allows it.
It is also reasonable to tie your identification process back to your risk level with the account. There are also current challenges with driver's license renewal appointments and timelines, so using a second method verification may be easier than requiring an unexpired ID for some of your members. This is one area that many policies have evolved in the last twenty years. It helps ensure consumers who need financial services can get them.
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