CUNA Comment Letter

Section 326 Notice of Inquiry: Recordkeeping

July 23, 2003

326 Recordkeeping Comments
U.S. Department of the Treasury
Office of the General Counsel
1500 Pennsylvania Avenue, NW
Washington, DC 20220-0002

To Whom It May Concern:

On behalf of the Credit Union National Association, we are pleased to file comments following the request of the U.S. Department of Treasury for additional input on its final rules under Section 326 of the USA Patriot Act regarding recordkeeping requirements. More specifically, the Treasury is seeking comments on whether financial institutions relying on documents to verify identity at account opening should be required to photocopy such documents and maintain files of the photocopies. By way of background, CUNA is the largest domestic credit union trade association and represents more than more than 90% of our nation’s 10,000 state and federal credit unions.

CUNA’s comments were developed under the auspices of the CUNA Examination and Supervision Subcommittee chaired by Mr. John Franklin, President and CEO of the South Carolina Credit Union League. They also are based on communications we have had with our state leagues, individual credit unions and officials at NCUA as well as the Treasury’s Financial Crimes Enforcement Network, FinCEN.

Summary of CUNA’s Views on Whether Institutions Should be Required to Photocopy Documents Provided at Account Opening

Requirements of the Final Rule

Under the final rule, an institution’s member/customer identification program must include procedures for making and maintaining records relating to all information obtained to verify an individual’s identity at account opening.

As CUNA urged in its comment letter, the final rule provides that an institution’s records are to include “a description,” rather than a copy, of any document upon which the institution relied in order to verify the identity of the member/customer. The description must note the type of document, any identification number contained in the document, the place of issuance, and, if any, the date of issuance and expiration date. The final rule also clarifies that the record must include “a description” of the methods and results of any measures undertaken to verify the identity of the member/customer, and of the resolution of any substantive discrepancy discovered when verifying the identifying information obtained, rather than any documents generated in connection with these measures.

While the final rule eliminated the proposed requirement that a financial institution retain copies of the documents used to verify the identity of the member/customer, it provides for an extensive, two-part record retention schedule for the information obtained. First, an institution must retain the identifying information received about a member/customer for five years after the date the account is closed, or in the case of credit card accounts, five years after the account is closed or becomes dormant. Second, the institution must retain the records it makes regarding the information relating to a member's/customer's identity for 5 years after the record is made.

CUNA’s Opposes Any New Requirement to Photocopy Documents Provided at Account Opening

In our view, the recordkeeping requirements under Section 326 are substantial, and we question whether proponents of additional, photocopying requirements are aware of what the final rule requires now.

In our comment letter filed last September, we strongly opposed the proposed requirements to photocopy and retain for five years each document relied upon for verification of an individual’s identity. We opposed these onerous requirements based on several reasons. First, such photocopying is not specifically required by the USA Patriot Act, and we believe the Treasury has the authority to require alternative, less intrusive measures, as provided in the final rule, to meet the recordkeeping provisions of Section 326.

Second, where there are two or more approaches to achieve similar levels of compliance with a statute, and one of them is less burdensome on the regulated entities faced with the duty of compliance, we believe it is good public policy for the federal government to implement the alternative that is less burdensome. This approach to regulation has been a hallmark of the Bush Administration, and we believe it was a key objective of the Treasury Department is promulgating the final rule. Proponents of photocopying have not provided sufficient reasons to deviate from this approach.

Third, as we stated in our previous letter, proponents of photocopying tend to dismiss the costs that a number of institutions would incur to implement a system for photocopying. While the final rule recognizes and utilizes procedures institutions already have in place, photocopying documents at account opening and maintaining records of such documents are not procedures that most institutions currently undertake.

Further, implementing any new procedures such as these divert credit unions and other financial institutions from their primary purpose, which is to provide financial services to American consumers. Credit unions are doing their part to help the federal government crack down on and ferret out individuals who would use the financial system in this country to support terrorism or perpetrate other crimes. However, there is a limit as to what financial institutions should and can be asked to do to assist the federal government in this endeavor and in our view, requirements for photocopying documents at account opening and maintaining records of such documents is beyond what should reasonably be expected of financial institutions.

Another point we raised previously is that in some states, such as Virginia, it is illegal to make a copy of a driver’s license issued by that state without its permission. Other states, for security reasons, issue licenses that cannot be completely copied. Thus, if the federal government were to require photocopying of documents relied upon, such as driver’s licenses, institutions would likely be forced to keep track of all conflicting state laws and establish separate procedures to verify the identity of individuals from such states.

In addition, neither the federal government nor private entities have provided sufficient evidence to show that photocopying documents and retaining records of such documents will substantially improve the government’s ability to pursue terrorists or other criminals. In our view, the final rule captures a more appropriate balance between reasonable requirements that can be imposed on institutions to help police criminal activity and the compliance burdens such police activities demand of financial institutions.

Treasury Should Not Make Any Rule Changes At This Time

As we are also stating in our letter regarding the use of consular identification cards, we are very concerned that Treasury might make changes to the final rule prior to the compliance date of October 1. Such changes, even if implemented at some later date, would be too disruptive to the compliance process. Credit unions are making a concerted effort to meet their compliance requirements under the rule beginning in October. Thus, we urge Treasury to refrain from imposing additional requirements now and for a reasonable period of time into the future. Such additional requirements would frustrate compliance under Section 326, not enhance it.

OFAC Requirements

On a different but related matter, the issue of compliance with Office of Foreign Assets Control requirements is a continuing concern, particularly since compliance with Section 326 is intended to dovetail with OFAC requirements. As we stated in our earlier comment letter last fall, we strongly encourage the development of guidelines that will address operational issues and facilitate compliance with OFAC requirements.


For the significant reasons stated above, we do not think sufficient evidence has been presented to justify the imposition of additional photocopying requirements on institutions; such requirements would be a substantial regulatory burden on a number of institutions. We urge the Treasury Department to continue the final rule as adopted.

Thank you for the opportunity to express our views. Please do not hesitate to contact me if you have any questions regarding our comments.


Mary Mitchell Dunn
Associate General Counsel and Senior Vice President