IBA Compliance Connection

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We received a citation to discover assets naming an individual who is the authorized signer on a corporate account at our bank. While the account is a business account, we do not have a tax ID number attached to the account (which predates the Customer Identification Program requirements), and we have been accepting the authorized signer’s social security payments as deposits into the account. When responding to the citation, should we name the corporate account? Are the social security funds protected?

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Based on the information you have provided to us, it appears that the citation to discover assets does not cover the corporate account. The citation indicates that the individual is the debtor, not the corporation. Generally, a corporation’s assets are separate from an individual’s assets, even if that individual is an authorized signer on the corporation’s bank account. Consequently, you are not required to freeze the corporate account because it is ot the debtor’s property.

Even if the citation applied to the corporate account, federal law would protect the debtor’s social security payments, provided that the payments were made by direct deposit, tagged as public benefit payments, and were deposited within a two-month “lookback period.” But going forward, we do not recommend accepting an individual’s social security deposits into a corporate account.

For resources related to our guidance, please see:                         

  • Illinois Code of Civil Procedure, 735 ILCS 5/2-1402(m)(2) (A citation to discover assets “becomes a lien . . . (2) When the citation is directed against a third party, upon all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor and comes into the possession or control of the third party to the time of the disposition of the citation.”)

  • 31 CFR 212.3 (“Protected amount means the lesser of the sum of all benefit payments posted to an account between the close of business on the beginning date of the lookback period [of two months] and the open of business on the ending date of the lookback period, or the balance in an account when the account review is performed. Examples illustrating the application of this definition are included in Appendix C to this part.”)

  • 31 CFR 212.3 (“Benefit payment means a Federal benefit payment referred to in § 212.2(b) paid by direct deposit to an account with the character ‘XX’ encoded in positions 54 and 55 of the Company Entry Description field and the number ‘2’ encoded in the Originator Status Code field of the Batch Header Record of the direct deposit entry.”)