Chapter 3 - Account Verification/USA PATRIOT ACT

Question 1

Under provisions of the USA PATRIOT Act, broker-dealers are required to:

Answer 1

• verify the identity of any new customer;
• maintain records of the information used to verify identity;
• and determine whether the person appears on any list of known or suspected terrorists or terrorist organizations

Question 2

Under the USA PATRIOT Act, records relating to the verification of customers’ identity must be retained for

Answer 2

5 years

Question 3

As part of its customer identification program (CIP), a broker-dealer must, before opening an account, obtain the following information at a minimum:

Answer 3

Customer name

Date of birth

Address

An identification number (e.g., SSN)

Question 4

T/F - New customers must be advised, before the account is opened, that the firm is requesting information to verify their identities.

Answer 4

True

Question 5

Is a birth certificate a valid means to verify an individual’s identity ?

Answer 5

No because it doesnt have a photo on it

Question 6

How much time does a firm have to verify a customer’s identity ?

Answer 6

Firms must verify a customer’s identity within a reasonable time before or after the account is opened. The SEC does not proscribe what firms must do if they are unable to verify identity. The SEC does say, however, that a firm’s written supervisory procedures must state what it will do in this situation.

Question 7

Each retail customer who opens a new account must, within how days of the opening of the account, be furnished with a copy of the account record.

Answer 7

30 days and subsequently 36 months thereafter

Question 8

If the customer should notify the firm of any changes to the account record, such as change in name, address, or investment objectives, the firm must send a copy of the updated account record within how many days of receiving notice of the change.

Answer 8

30 days

Question 9

Are accounts that are acquired through acquisition of another member fir subject to customer identification procedures ?

Answer 9

NO - Accounts that are acquired through acquisition of another member firm are not subject to customer identification procedures. It can be presumed that the other member fulfilled its obligation

Question 10

A broker-dealer is required to retain records of all of the identification information obtained from the customer for how many years after the account is closed.

Answer 10

A broker-dealer is required to retain records of all of the identification information obtained from the customer for five years after the account is closed.

Question 11

Records made about the information verifying a customer’s identity have to be retained for how many years after the record is made ?

Answer 11

Records made about the information verifying a customer’s identity have to be retained for only five years after the record is made.

Question 12

Top 4 things BDs are required to adhere to due to the passage of the Patriot Act :

Answer 12

■ AML compliance programs;

■ customer identification programs;

■ monitoring, detecting, and filing reports of suspicious activity;

■due diligence on foreign correspondent accounts, including prohibitions on transactions with foreign shell banks;