CUNA Regulatory Comment Call

July 19, 2002

Proposed Patriot Act Regulations on Member/Customer Identification



On October 26, 2001, the President signed the Patriot Act. The law is intended to facilitate the prevention, detection, and prosecution of international money laundering and the financing of terrorism. Section 326 of the Patriot Act directs the U.S. Department of the Treasury (Treasury) to jointly prescribe with each of the federal financial institution agencies, the Securities and Exchange Commission, and the Commodities Futures Trading Commission regulations setting forth minimum standards for financial institutions regarding the identification and verification of any person who applies to open an account. The Patriot Act specifies that those regulations must, at a minimum, require financial institutions to implement reasonable procedures for: (1) verifying the identity of any person seeking to open an account, to the extent reasonable and practicable; (2) maintaining records of the information used to verify the person’s identity; and (3) determining whether the person appears on any list of known or suspected terrorists organizations provided to the financial institution by any government agency. The Treasury has issued these proposed regulations for the purpose of soliciting comments.


Definition of “Account”

The proposed “know your customer/member” regulations would apply to persons seeking to open a new account at a financial institution. “Account” is defined in the proposal so as to make clear that this term is not intended to cover infrequent transactions such as the occasional purchase of a money order or a wire transfer: “Account means each formal banking or business relationship established to provide ongoing services, dealings, or other financial transactions. For example, a deposit account, a transaction or asset account, and a credit account or other extension of credit would each constitute an account.”

Definition of “Customer”

Definition of “Bank”

General Rule

Identity Verification Procedures

Information Required

Verification Through Documents

Non-Documentary Verification Methods

Lack of Verification


Comparison With Government Lists

Member/Customer Notice

The CIP must include procedures for providing financial institution members/customers with adequate notice that the institution is requesting information to verify their identity. An institution may satisfy the notice requirement by generally notifying its members/customers about the procedures the institution must comply with to verify their identities. For example, a credit union may post a sign in its lobby or provide members with any other form of written or oral notice. If an account is opened electronically, such as through an Internet website, the institution may also provide notice electronically.



  1. Is the proposed definition of account appropriate? Should other examples of accounts be added to the text of the regulation?

    Yes ______ No ______

    If yes, what changes should be made or what examples should be added?

  2. How should the proposed regulation apply to various types of accounts that are designed to allow a customer to transact business immediately?

  3. Should the definition of “bank” in the proposed regulation be amended with respect to foreign branches by (i) excluding foreign branches or (ii) clarifying that a foreign branch must comply on to the extent the institution’s program does not contravene applicable local law?

    Yes ______ No ______

    If yes, how should the definition be amended?

  4. What are ways that financial institutions can comply with the requirement that an institution obtain both the address of an individual’s residence and, if different, the individual’s mailing address in situations involving individuals who lack a permanent address?

  5. Will non-U.S. persons that are not individuals be able to provide an institution with the identifying information or should other categories of identifying information be added to permit non-U.S. persons who are not individuals to open accounts? Please suggest other means of identification that financial institutions currently use or should use.

  6. Are there laws in your state that would prevent credit unions from following this proposal? For example, we understand that some states make it an offense to photocopy a driver’s license from that state.

    Yes ______ No ______

    If yes, please cite and describe any potentially conflicting state laws.

  7. The legislative history of this section of the Patriot Act indicates that Congress intended “the verification procedures prescribed by Treasury [to] make use of information currently obtained by most financial institutions in the account opening process.” Please indicate the extent to which the verification procedures required by the proposed regulation make use of information that credit unions currently obtain in the account opening process.

  8. Do you believe the proposed recordkeeping and document retention requirements are appropriate? In particular, would the photocopying requirements be burdensome?

    Yes ______ No ______

    If not, how should those requirements be modified?

  9. Should any of the exemptions from the customer identification requirements in Section 103.34(a)(3) of the BSA mentioned in the proposal summary be continued in the exemptions section (103.121(c)) of the proposal?

    Yes ______ No ______

    If yes, which exemptions do you believe should be continued in the proposal?

  10. Do you believe the operational changes your credit union would have to make to conform to this proposed regulation would be a significant burden in terms of staff time or expense? Such operational changes could include, for example, obtaining and verifying the identification of a joint account owner, co-signer or guarantor on loans.

    Yes ______ No ______

    If so, could you quantify that burden?

  11. Are the requirements in the proposal clearly stated?

    Yes ______ No ______

    If not, how could the regulation be more clearly stated?

  12. Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand?

    Yes ______ No ______

    If so, what specific changes to the format would make the regulation easier to understand?

  13. Other comments?

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •
CUNA's Comment Call on this Issue CUNA's Comment Letter on this Issue CUNA's Final Rule Analysis on this Issue