CIP: Identity Verification & Compliance Flashcards by Peter Lundstrom

What exactly is CIP, and what does it accomplish?

Customer Identification Program; allows institutions to form a reasonable belief that it knows the true identity of each new customer.

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What will happen if my bank and I do not follow minimum CIP requirements?

Failing to adhere to mandatory CIP program requirements could generate large substantial fines to you and your bank, prison time, and/or a take over of your bank by your regulator

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Which acts is CIP associated with?

The Bank Secrecy Act (BSA) and the USA Patriot Act of 2001; is specific for each institution, not a one size fits all program

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Are recording references in line with CIP?

No, a person’s information and identification must always be verified by the institution’s CIP.

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Following your institution’s CIP rules allows you to prevent which activities?

Illegal Gambling
Terrorist Activities
Drug Dealing
Tax Evasion
Elder Theft
Money Laundering
Prostitution
Bootlegging

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When was CIP created?

in October 2001, following 9/11/01, when President Bush signed the USA Patriot Act

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What are the requirements of CIP?

CIP rules state that your institution must document the procedures which will be followed when opening account. The procedures must specify the identifying information that will be obtained from each customer; CIP is not a one size fits all program; each institution must develop their own plan

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Which four piece of identifying information must be obtained?

Name
Date of Birth
Street Address
Identification Number

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Individual Name data includes:

the individual’s legal name and potentially a DBA name

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Individual Date of Birth data includes:

the actual DoB; age is not sufficient

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Individual Address data includes:

a residential or business street address
in the case of members of the military, Army Post Office (APO) or Fleet Post Office (FPA) are acceptable
for people w/o residential addresses, a residential or business address of next of kin or a contact individual is necessary

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Individual Identification Number data includes:

a SSN (resident alien)
a passport number and country of issuance
an alien ID card (green card)
a number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard

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Corporation Name data includes:

legal name of the entity or DBA name

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Corporation Identification Number data includes:

Employer Identification Number (EIN) for a US person
A Taxpayer ID Number (TIN)/EIN or alternate gvmt issued documentation certifying the existence of the business or enterprise for a non-US person

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Corporation Address data includes:

the address of the entity’s principal place of business, local office, or other physical location and any other mailing addresses

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Corporation Authority Figure Data:

information on Corporation Authority Figures is institution specific; check with supervisor to determine what NMSB requires

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Corporation Beneficial Owner data:

only applicable at the time of account opening; may rely on the customer to state who its beneficial owners are

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Who in the institution has the authority to waive any of the minimum CIP information requirements of the USA Patriot Act and its implementing regulation?

Nobody

What are the two CIP exception categories?

Persons applying for a TIN

2. Credit card accounts

How can an institutions CIP accommodate the TIN exception?

by examination of a copy of the TIN application
by making a copy of the TIN application
by having the customer sign an “awaiting TIN” certification

How can an institutions CIP accommodate the Credit Card exception?

by acquiring necessary identifying information from a trusted third-party

What type of documents can be collected for an individual?

unexpired government photo ID (Driver’s License, passport, green card); limited use of utility and credit card bills

What type of documents can be collected for a person other than an individual?

certified Articles of Incorporation, a government-issued license, a partnership agreement or a trust instrument; the bank may rely on photocopies or other reproductions

What Non-documentary ID methods are acceptable?

contact the customer directly
Verify information provided by customer with a consumer-reporting agency
check references with prior financial institutions (do not use institution contact info provided by the customer)
Obtain a financial statement

CIP procedures must address non-documentary situations such as:

1. an individual is unable to present government issued photo ID 2. the bank is not familiar with the document presented 3. accounts are opened by mail or over the internet 4. accounts are opened without the customer present 5. any other situation which the bank determines to be likely as a result of its risk assessment

What is considered additional verification for corporations?

- obtaining a Certificate of Good Standing from the Secretary of State of the state where the Corporations is domiciled - Certified Articles of Incorporation

What must be collected to verify Sole Proprietorships and General Partnerships?

- obtain a copy of the business or occupation license - Obtain a copy of the IRS Assignment of the Number (if using EIN) - Obtain a copy of the Partnership Agreement - For Sol Prop., information on individuals with authority/control, including all signatories - For Gen. Part., information on individuals with authority/control, including signatures to fully ID customer

Whether to close an account or to allow the account to remain open is at the discretion of the institution. Your CIP should include procedures to describe:

- When your institution should not open an account - The terms under which a customer may use an account while your institution attempts to verify the customer's identity - When your institution should close an account, after attempts to verify the customer's identity - When your institution should file a Suspicious Activity Report (SAR) in accordance with applicable law and regulation

Are institutions required to compare all new customers with those on Government lists?

Yes, particularly OFAC

What does OFAC stand for?

Office of Foreign Assets Control

In order to verify the minimum information a bank obtains on a new customer, the bank:

may use a combination of documentary and non-documentary evidence

ToF: Regulations require your bank to close the account of a customer whose identity it is unable to verify.

False

When are CIP requirements triggered?

when a "person" opens an account

What is a US Person?

- a US citizen | - a person other than an individual that is organized or established under the laws of a state or the US

What is a non-US Person?

- Resident Aliens - Non-Resident Aliens - Any foreign corporation, partnership, trust or other entity

What is a customer?

a person who: - opens a new account; and - an individual who opens a new account for an individual who lacks legal capacity or an entity that is not a legal person, such as a club

A customer does not include:

- a financial institution regulated by a federal functional regulator or a bank regulated by a state regulator - a person that has an existing account with the bank, provided the bank has reasonable ID - Publicly traded companies listed on the major exchanges and their subsidiaries (Treated as Exempt Persons under BSA Regulations) - A department or agency of the US, of any state, or of any political subdivision of any state

What types of accounts are ruled by the CIP?

- deposit accounts - transaction/asset accounts - credit accounts - safe deposit boxes - safekeeping - cash management services - custodian services - trust services - prepaid cards that customers can recharge or that have overdraft coverage

What types of accounts are NOT ruled by the CIP?

- purchase of negotiable instruments - Indirect loans - an account opened for the purpose of participating in an employee benefit plan - use of an ATM by a cardholder who does not have a relationship with the bank

Minimum records required by the CIP

- All identifying info obtained during account opening - a description of any document that was relied on during account opening (type of doc, doc #s, place of issuance, date of issuance, exp date, etc...)

What else must be retained by an institution?

- a description of identifying methods | - a description of the resolution of substantive identity discrepancies.

How long must identifying information be retained?

5 years

How should customers be notified of the CIP program?

Notified before account opening via: - lobby posting - website posting - account applications - orally or other forms