IBA Compliance Connection

Your go to source for compliance!

We recently signed an agreement to purchase two bank branches. The selling bank has agreed to provide us with two years’ worth of documents related to the acquired accounts. However, we are aware that Illinois law requires some documents to be retained for seven years. Are there any special exceptions to record retention requirements that apply to branch acquisitions? What are our record retention obligations for these acquired accounts?

—

by

admin

We are not aware of any special record retention exceptions that apply when acquiring branches from another institution. As such, we believe your bank will be held to the same record retention requirements as if it had originated the acquired accounts.

There are several record retention provisions that will require more than two years’ worth of records for the acquired deposit accounts. The Uniform Commercial Code requires financial institutions to retain checks, or records that allow the furnishing of legible copies of checks, for seven years. The FinCEN’s Bank Secrecy Act regulations require financial institutions to retain deposit account statements, signature cards and many other customer account records for five years after they are created, including suspicious activity and currency transaction reports. Also, the NACHA rules require participating depository financial institutions to retain records of ACH entries for six years.

In addition to following these record retention requirements, we recommend following your bank’s record retention schedule for the acquired accounts and obtaining the same records that you would maintain for any other deposit accounts from the selling bank. Also, to the extent that you cannot obtain records that meet the applicable retention requirements from the selling institution, we recommend noting this fact in the corresponding account files.

For resources related to our guidance, please see:

  • Uniform Commercial Code, 810 ILCS 5/4-406(b) (“If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of 7 years after receipt of the items.”)
  • FinCEN Regulations, 31 CFR 1010.430(d) (“All records that are required to be retained by this chapter shall be retained for a period of five years.”)
  • FinCEN Regulations, 31 CFR 1020.410(c) (“Each bank shall, in addition, retain either the original or a microfilm or other copy or reproduction of each of the following: (1) Each document granting signature authority over each deposit or share account, . . . . (2) Each statement, ledger card or other record on each deposit or share account, showing each transaction in, or with respect to, that account.”)
  • FinCEN Regulations, 31 CFR 1020.320(d) (“Retention of records. A bank shall maintain a copy of any SAR filed and the original or business record equivalent of any supporting documentation for a period of five years from the date of filing the SAR. . . .”)
  • FinCEN Regulations, 31 CFR 1010.306(a)(2) (“(2) A copy of each report filed pursuant to §§1010.311 [filing obligations for currency transaction reports], 1010.313, 1020.315, 1021.311 and 1021.313, shall be retained by the financial institution for a period of five years from the date of the report.”)
  • 2018 NACHA Operating Rules § 1.4 Records, SUBSECTION 1.4.1 (“A Participating DFI must retain a Record of each Entry for six years from the date the Entry was Transmitted, except as otherwise expressly provided in these Rules.”)