Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA.

As a general rule, we believe your bank may accept a customer’s electronic signature on a signature card in place of a wet ink signature. Both Illinois and federal law generally provide that an electronic signature may not be denied legal effect, validity, or enforceability solely because it is in electronic form. Additionally, Illinois law provides that an electronic or computer-generated document (such as an electronic signature card) “shall have the same force and effect under the laws of this State as one comprised, recorded, or created on paper or other tangible form.”

As to mortgage documents, the Illinois Electronic Commerce Security Act’s (ECSA) sanctioning of electronic records and signatures does not apply to “negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title” unless they are stored in a manner that “allows for the existence of only one unique, identifiable, and unalterable original with the functional attributes of an equivalent physical instrument, that can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy.” Consequently, unless your bank possesses such electronic storage capabilities, we recommend obtaining wet ink signatures for mortgages (and any other documents recorded with a county recorder) and for mortgage notes that are not disqualified as “negotiable instruments” under the Uniform Commercial Code (either because they include certain undertakings and conditions outside of the payment of money or contain a conspicuous statement that they are not negotiable). Also, note that Fannie Mae and Freddie Mac impose their own requirements on the use of electronic signatures.

In addition, we strongly recommend against using electronic signatures for trust instruments and their amendments and addenda.

As to certification of beneficial ownership forms, we believe your bank may accept an electronic signature, provided your bank’s Customer Identification Program (CIP) does not require a wet ink signature. FinCEN has recognized that a beneficial owner may be unavailable to appear in person during the opening of a new account and has noted that “many institutions obtain and maintain customer data electronically rather than in paper form.” However, we do not recommend accepting sensitive customer data through an electronic channel unless your bank has a secure online portal or email system.

To combat synthetic identity fraud — where fraudsters create fictional identities linked to valid Social Security numbers — the Federal Reserve has noted that a financial institution can use the Social Security Administration’s (SSA) Consent Based Social Security Number Verification (CBSV) service to verify that a customer’s name, date of birth, and Social Security number matches the administration’s records. Currently, the written consent that must be obtained for a CBSV search cannot be signed with a digital or electronic signature. However, the SSA is developing a new eCBSV system which will allow electronic consents in the future.

For resources related to our guidance, please see:

• Electronic Signatures in Global and National Commerce (ESIGN) Act, 15 USC 7001(a)(1) (“A signature, contract, or other record . . . may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”)

• Illinois Electronic Commerce Security Act, 5 ILCS 175/5-110 (“Information, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form.”)

• Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(a) (“If in the regular course of business, a financial institution possesses, records, or generates any document, representation, image, substitute check, reproduction, or combination thereof . . . by any electronic or computer-generated process that accurately reproduces, comprises, or records the agreement, transaction, act, occurrence, or event . . . [it] shall have the same force and effect under the laws of this State as one comprised, recorded, or created on paper or other tangible form by writing, typing, printing, or similar means.”)

• Electronic Commerce Security Act, 5 ILCS 175/5-115(a) (“Where a rule of law requires information to be “written” or “in writing”, or provides for certain consequences if it is not, an electronic record satisfies that rule of law.”)

• Electronic Commerce Security Act, 5 ILCS 175/5-115(b)(2) (“The provisions of this Section shall not apply: . . . to any record that serves as a  unique and transferable instrument of rights and obligations including, without limitation, negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title” must be maintained in paper form unless “an electronic version of such record is created, stored, and transferred in a manner that allows for the existence of only one unique, identifiable, and unalterable original with the functional attributes of an equivalent physical instrument, that can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy.”)

• Electronic Commerce Security Act, 5 ILCS 175/5-120(a) (“Where a rule of law requires a signature, or provides for certain consequences if a document is not signed, an electronic signature satisfies that rule of law.”)

• Electronic Commerce Security Act, 5 ILCS 175/5-120(c)(2) (“The provisions of this Section shall not apply: . . . to any record that serves as a unique and transferable instrument of rights and obligations including, without limitation, negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title, unless an electronic version of such record is created, stored, and transferred in a manner that allows for the existence of only one unique, identifiable, and unalterable original with the functional attributes of an equivalent physical instrument, that can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy.”)

• UCC, 810 ILCS 5/3-104(a) (“Except as provided in subsections (c) and (d), ‘negotiable instrument’ means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of any obligor.

• UCC, 810 ILCS 5/3-104(d) (“A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Article.”)

• Fannie Mae eMortgage Delivery Guide (May 22, 2018), page 5 (“Fannie Mae will purchase eMortgages only from lenders with which we have an addendum to the lender’s Master Selling and Servicing Contract that specifically authorizes eMortgage deliveries and/or servicing (‘eMortgage Addendum’).”)

• Freddie Mac eMortgage Guide (March 2019), page 6 (“An eMortgage is a Mortgage that is originated using an ‘Electronic Note’ or ‘eNote’. The Security Instrument and other loan documents can be paper or Electronic Records. Most types of Mortgages are eligible for delivery to Freddie Mac as eMortgages. Mortgages that are not currently eligible for sale to Freddie Mac as eMortgages, due to additional risks associated with such Mortgages, are identified and set forth in Section 2.5 below.”)

• FinCEN Customer Due Diligence Rule, 31 CFR 1010.230(b) (“With respect to legal entity customers, the covered financial institution’s customer due diligence procedures shall enable the institution to: (1) Identify the beneficial owner(s) of each legal entity customer at the time a new account is opened, unless the customer is otherwise excluded pursuant to paragraph (e) of this section or the account is exempted pursuant to paragraph (h) of this section.”)

• FIN-2018-G001 — FAQs Regarding Customer Due Diligence Requirements for Financial Institutions (April 3, 2018) (Question 6: What process should a covered financial institution use to identify and verify the identity of a beneficial owner of a legal entity customer when the beneficial owner is unavailable to appear in person during the opening of a new account and chooses to provide to the legal entity’s representative a copy of a driver’s license? A. A covered financial institution may identify the beneficial owner(s) of a legal entity customer either by obtaining a completed Certification Form or equivalent information from the legal entity customer’s representative and may rely on such information, provided that it has no knowledge of facts that would reasonably call into question the reliability of such information. Furthermore, covered financial institutions may verify the identity of a beneficial owner who does not appear in person, through a photocopy or other reproduction of a valid identity document, or by non-documentary means described in response to Question 4 above.”)

• Final Rule, Customer Due Diligence Requirements for Financial Institutions, (May 11, 2016) (“FinCEN understands that many institutions obtain and maintain customer data electronically rather than in paper form to the greatest extent possible, and that mandating the use and retention of a specific form would require significant technological and operational changes that could be costly and challenging to implement for some financial institutions. We have therefore amended the final rule to permit, but not require, financial institutions to use the Certification Form to collect beneficial ownership information.”)

• Federal Reserve Executive Summary – Synthetic Identity Fraud (“Synthetic identities are essentially fictional ‘people’ linked to valid Social Security numbers. The creation of synthetic identities is increasingly popular among fraudsters, who can use the identity to commit payments fraud and other types of fraud, such as filing false insurance claims or applying for government benefits that the fraudster isn’t eligible to receive.”)

• Federal Reserve Executive Summary – Synthetic Identity Fraud (“As another precaution, the financial institution can use the Social Security Administration’s Consent Based Social Security Number Verification (CBSV) Service to verify that the applicant’s name, date of birth and Social Security number match the administration’s records. However, this verification currently requires written consent of the Social Security number holder and cannot yet be requested electronically.”)

• Social Security Administration, Consent Based Social Security Number Verification (CBSV) Service (“SSA is currently developing a new electronic Consent Based Social Security Number Verification (eCBSV) system which will allow permitted entities to accept electronic consents.”)