Do we need to obtain identifying information from real estate companies when they open escrow accounts to hold funds for pending real estate transactions? Also, do we need identifying information from the employees who will be authorized signers on the accounts?

Yes, we believe that your bank should collect identifying information about companies that open escrow accounts. For purposes of its customer identification program (CIP), your bank must collect identifying information about each of its “customers,” which in this case would be the company establishing an escrow account. Interagency guidance confirms that a real estate agent opening an escrow account on behalf of a third party is the bank’s customer for CIP purposes (not the third party).

At a minimum, your bank’s CIP program should collect a business customer’s name, address and taxpayer identification number. It may be prudent to also obtain identifying information on the authorized signers for these accounts, depending on your bank’s assessment of their risk. Both interagency and FinCEN guidance suggest obtaining identifying information on account signatories for higher risk accounts.

Also, we do not believe that this answer will change after FinCEN’s amended Customer Due Diligence (CDD) requirements become effective on May 11, 2018. In its Federal Register notice, FinCEN noted that “intermediaries,” such as escrow agents, should be treated as the customer for CDD purposes, rather than the intermediary’s clients. Consequently, we believe that a real estate company should be treated as your bank’s customer for CIP and CDD purposes.

For resources related to our guidance, please see:

Interagency FAQs, Customer Identification Program Rule (April 28, 2005), printed page 7 (“10. Who is the ‘customer’ for purposes of escrow accounts? An escrow account is an account generally established for the deposit of funds that are to be paid to a specified party on the fulfillment of escrow conditions or returned. If a bank establishes an account in the name of a third party, such as a real estate agent, who is acting as escrow agent, then the bank’s customer will be the escrow agent. If the bank is the escrow agent, then the person who establishes the account is the bank’s ‘customer.’ For example, if the purchaser of real estate directly opens an escrow account and deposits funds to be paid to the seller upon satisfaction of specified conditions, the bank’s customer will be the purchaser. . . ‘A bank will not be required to look through trust, escrow, or similar accounts to verify the identities of beneficiaries and instead will only be required to verify the identity of the named accountholder.’ See 68 FR 25090, 25094 (May 9, 2003). However, the CIP rule also provides that, based on the bank’s risk assessment of a new account opened by a customer that is not an individual, the bank may need ‘to obtain information about’ individuals with authority or control over such an account, including signatories, in order to verify the customer’s identity. See 31 C.F.R. § 103.121(b)(2)(ii)(C). (April 2005).”)

Federal Register Notice, Customer Due Diligence Requirements for Financial Institutions, Supplementary Information, 81 Fed. Reg. 29397, 29415–29416 (May 11, 2016) (“. . . if an intermediary is the customer, and the financial institution has no CIP obligation with respect to the intermediary’s underlying clients pursuant to existing guidance, a financial institution should treat the intermediary, and not the intermediary’s underlying clients, as its legal entity customer. . . . To the extent that Start Printed Page 29416existing guidance provides that, for purposes of the CIP rules, a financial institution shall treat an intermediary (and not the intermediary's customers) as its customer, the financial institution should treat the intermediary as its customer for purposes of this final rule. FinCEN also confirms that other guidance issued jointly by FinCEN and one or more Federal functional regulators relating to the application of the CIP rule will apply to this final rule, to the extent relevant.”)

31 CFR 1020.220(a)(2)(i) (“The CIP must contain procedures for opening an account that specify the identifying information that will be obtained from each customer. Except as permitted by paragraphs (a)(2)(i)(B) and (C) of this section, the bank must obtain, at a minimum, the following information from the customer prior to opening an account: (1) Name; (2) Date of birth, for an individual; (3) Address . . .; and (4) Identification number. . .”)

FFIEC BSA/AML Examination Manual, Customer Due Diligence (If a bank determines that a customer presents a higher risk, then “the bank should consider obtaining” information on “individuals with ownership or control over the account, such as beneficial owners, signatories, or guarantors.”)

FFIEC BSA/AML Examination Manual, Business Entities (“Required account opening information may include . . . the appointment of a person to act as a signatory for the entity on the account.”)