3 Major Customer Identification Program Procedures for Compliance Officers

The Customer Identification Program (CIP) requires financial institutions to take the appropriate actions and steps to have a reasonable belief that all customers who enter into a formal banking relationship with them are who they say they are. The requirement went into effect on June 9, 2003, and is activated through Section 326 of the Patriot Act. It is a mandatory Bank Secrecy Act (BSA) compliance element.

Financial institutions must have the procedures in place on how to verify information collected on each customer. The verification procedures should be done within a reasonable amount of time after the customer’s account has been opened. 

This article will give you an overview of some of the most important customer identification information and the procedures you should follow to verify customer information.

3 Major Customer Identification Program Procedures for Compliance

There are multiple kinds of identification numbers a customer may provide to a bank to prove they are who they say. This could be a Tax ID number, an alien ID card number, or a passport number. 

This number is used as one of four pieces of identification required by most federal institutions. The whole list of information that customers provide are: 

• Customer Name
• Date of Birth
• Address
• And Identification Number

However, there are going to be cases where the customer is unable to provide documentation. This means you as a financial institution have to find ways to verify identity without documents. 

Regardless of if your customer has documents or not, you can still ensure you comply with federal law. Here are the procedures you must follow to identify your new customers correctly. 

1. Individual Customers [With Documents]

If an individual customer wishes to open an account with your institution, more often than not, they will provide you with a US-issued government identification card. This is usually a state identification card, a passport, or a driver’s license. 

Many of your customers will opt-in for these sorts of documents because most individuals commonly hold them. It provides the date of birth, address, and name of the person on one easy-to-read card, making three of the four pieces of documentation you’re required to record readily available. 

You may also be given a federally-issued passport. Passports hold all of the same information that a state-issued identification card has and are legally accepted documents. 

In both cases, the fact that there is a photograph for you to verify the document does indeed belong to the person handing you it is beneficial, as it is an extra step in preventing fraud. 

These situations also allow for non-Americans to open accounts. Accepting cards that provide all essential information, regardless of where it was issued, allows foreign nationals to open an account still if they need one. 

2. Corporations [With Documents]

Corporations trying to open accounts have a little more work that they need to do to prove their identity.

First, the goal isn’t just to prove who they say they are, but to prove that they’re an actual existing company rather than a shell company only existing to launder money.

A business can provide a few different documents when trying to open an account to verify their identification. These include:

• Certified articles of incorporation
• Government-issued business license
• Partnership agreement
• Trust instrument

By verifying these documents, you can be reasonably sure that the company is legitimized and uses the account for legal and valid purposes.

3. Individual Customers [Without Documents]

There will be situations where an individual customer will come to you without any documents and still want to open an account. This can be tricky since you may not gather the identifying information you need to be legally compliant.

First, your organization needs to contact the customer and compare information from the customer with information you find elsewhere. You can find information on the customer through consumer reporting agencies, public databases, and/or other sources.

Another way your business can verify a customer’s identity is by checking with another financial institution and obtaining a financial statement. By doing so, you can be reasonably sure the customer is who they are claiming to be.

What If You’re Unsure? 

There are some situations where a customer’s identity will not be able to be easily verified. In this scenario, financial institutions need to have the procedures in place to respond efficiently and effectively.

But when do you need to stop and make decisions on when to verify identity? There are multiple points along the account-opening process that may prove difficult for you and the customer if you’re unsure of identity verification.

These procedures need to be established when the financial institution should not open the account when the customer can use it. Simultaneously, the institution verifies customer information, when the organization should close the account, and when the organization needs to file a suspicious activity report.

Now, these situations may not all apply to each specific case. Sometimes, verifying identity allows you to gather the proof needed to let a customer use the account. It also reveals that an account should be closed, and suspicious activity must be reported to the appropriate parties.

This means, however, your business needs to be diligent in verifying identity at every step of the process to ensure you’re always in compliance with federal law.

Sound like too much for your business to handle alone? The Enterprise Risk Governance Framework can help your team make sure your targeted plan of action is safe, sound, and compliant. This Framework allows you to ensure each step you are taking throughout the verification process matches up with standards and that you’re completing the steps you need to complete before allowing or continuing to allow access to an account.

Check out our website here for instant access to our Enterprise Risk Governance Framework today to ensure your checks and balances throughout the account opening process are up to federal regulation.