QUESTION
We submitted our CIP policy to our regulator in an examination.
In the exit interview, we were told the CIP policy does not have a set of core procedures required under the USA Patriot Act. We’ve provided this policy before, and they never said anything. Now they want us to revise it by including a checklist, but they are not telling us what goes into the checklist!
We could use an outline of some basic checklist items to update the checklist.
What should we provide as some checklist areas to implement our CIP policy?
ANSWER
Remember that whatever you put into a policy document with respect to procedures must be monitored and tested periodically. How do you know any checklist works if you are not monitoring and testing its effectiveness?
The USA Patriot Act is a foundational Act for Customer Identification Procedures (CIP), and any checklist must conform with the Act’s mandates.
In my view, your checklist should contain at least four procedural features: verifying identity, recordkeeping, list-checking, and customer notice.
Let’s consider each of them in a checklist format.
Verifying Identity
The identity of every mortgage loan applicant should be
screened for the following information (at minimum):
· Name
· Date of birth
· Residential or business street address
· Citizenship:
o
For a U.S. person, use a taxpayer
identification number.
o
For a non-U.S. person, one or more
of the following:
§ a taxpayer identification number; passport number, and
country of issuance;
§ alien identification card number, or number and country of
issuance of any other government-issued document evidencing nationality or
residence and bearing a photograph or similar safeguard.
o
Instead of obtaining a taxpayer
identification number from a customer before opening the account, you may open
an account for a customer who has applied for a taxpayer identification number
but has not yet received one. In this case, however, you should confirm the
application for the number was filed before the customer applied for the loan,
and you should obtain the taxpayer identification number within a reasonable
period of time after the account is opened.
One warning: Documents used to verify identity may include any unexpired government-issued identification evidencing nationality or residence and bearing a photograph or similar safeguards, such as a driver’s license or passport. But be very careful in utilizing this method!
Recordkeeping
It is essential to maintain records of the information used to verify a person’s identity, including, but not limited to:
· All identifying information about a customer;
· A description of any document relied on, noting 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;
· A description of the methods and the results of any measures undertaken to verify the identity of the customer; and,
· A description of the resolution of any substantive discrepancy discovered when verifying the identifying information obtained.
Record of the foregoing information should be kept for at least five years after the mortgage loan is paid off or transferred to a loan purchaser.
List-Checking
Checking certain lists is a critical aspect of the CIP process. You should determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations available to your financial institution or provided to your financial institution by any government agency.
· Designate a person or department responsible for determining whether each new customer appears on any list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by the Treasury Department in consultation with the federal functional regulators.
· The designated person should make a determination within a reasonable period of time after a loan closes, or earlier, if required by another federal law or regulation or federal directive issued in connection with the applicable list.
· Follow all federal directives issued in connection with the lists.
Customer Notice
Be sure to provide customers with adequate, written notice that you request information to verify identities as required by the USA Patriot Act.
Jonathan Foxx, Ph.D., MBAChairman & Managing Director
