When acquiring customers who have decided to move their account from another bank, what documentation should we require to open a sole proprietorship account for a customer “doing business as” an assumed name who started the business before assumed name certificates were required? Is using the business’s employer identification number (EIN) sufficient? What should we do if the customer wants to use their social security number for the account?

When opening a new sole proprietorship account, we recommend following the guidance in FinCEN’s CIP Rule FAQs, which describe how to verify a sole proprietorship’s identity. Using a fictitious or assumed name certificate is one documentary method for verifying a sole proprietorship’s identity, but you may use non-documentary methods described in the CIP rules as well. FinCEN’s FAQs state that if there are no documentary or non-documentary verification methods available, you should instead verify the identity of the sole proprietor or other individual with authority over the account (obtaining their name, address, date of birth and tax identification number).

If you are verifying the sole proprietorship’s identity, we believe you may collect either a social security number or EIN — generally, sole proprietorships are not required to obtain EINs, but they are eligible to obtain EINs (for example, to pay employment-related taxes). If you are instead verifying a sole proprietor or other individual’s identity, we believe you should collect a social security number to verify their identity.

Additionally, if the sole proprietorship was a longstanding customer of the bank that previously held its account, you may be able to rely on that bank’s verification of the sole proprietorship’s identity. According to the FAQs, you can rely on another bank’s verification of a customer’s identity (performed before the bank was subject to the CIP rule) if such reliance is reasonable under the circumstances — such as when a review of the other bank’s verification procedures indicates that they were adequate.

Also, we note that the Assumed Business Name Act, which became law in 1941, requires every person who does business under a name other than their own to file a certificate with the county clerk and publish notice in a local newspaper for three weeks.

For resources related to our guidance, please see:

FinCEN CIP Rule FAQs (“5. How should a bank verify the identity of a sole proprietorship that opens a new account, (such as an account titled in the name of an individual ‘doing business as’ a sole proprietorship) when there are no documents or non-documentary methods that will establish the identity of the sole proprietorship?
In some states, sole proprietorships are required to file ‘fictitious’ or ‘assumed name certificates.’ Banks may choose to use these certificates as a means to verify the identity of a sole proprietorship, if appropriate. However, when there are no documents or non-documentary methods that will establish the identity of the sole proprietorship, the bank must undertake additional verification by obtaining information about the sole proprietor or any other individual with authority or control over the sole proprietorship account — such as the name, address, date of birth, and taxpayer identification number of the sole proprietor, or any other individual with authority or control over the account — in order to verify the sole proprietorship’s identity, as described in 31 C.F.R. § 103.121(b)(2)(ii)(C).”)

FinCEN CIP Rules, 31 CFR 1020.220(a)(2)(ii)(A) (“Verification through documents. For a bank relying on documents, the CIP must contain procedures that set forth the documents that the bank will use. These documents may include: . . . (2) For a person other than an individual (such as a corporation, partnership, or trust), documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement, or trust instrument.”)

FinCEN CIP Rules, 31 CFR 1020.220(a)(2)(ii)(B) (“Verification through non-documentary methods. For a bank relying on non-documentary methods, the CIP must contain procedures that describe the non-documentary methods the bank will use. (1) These methods may include contacting a customer; independently verifying the customer’s identity through the comparison of information provided by the customer with information obtained from a consumer reporting agency, public database, or other source; checking references with other financial institutions; and obtaining a financial statement. . . .”)

FinCEN CIP Rules, 31 CFR 1020.220(a)(2)(ii)(C) (“The CIP must address situations where, based on the bank’s risk assessment of a new account opened by a customer that is not an individual, the bank will obtain information about individuals with authority or control over such account, including signatories, in order to verify the customer’s identity. This verification method applies only when the bank cannot verify the customer’s true identity using the verification methods described in paragraphs (a)(2)(ii)(A) and (B) of this section.”)

FinCEN CIP Rules, 31 CFR 1020.220(a)(2)(i) (“[T]he 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, which shall be: For a U.S. person, a taxpayer identification number; . . .”)

IRS Publication 1635, Understanding Your EIN, printed page 13 (“If you are required to report employment taxes or give tax statements to employees or annuitants, you need an employer identification number (EIN). . . . ”)

FinCEN CIP Rule FAQs (“2. When a longstanding customer of another financial institution (including an affiliate) opens a new account at the bank, can a bank rely on the other financial institution’s verification of the identity of the customer performed before a CIP procedure was required?
A bank that is subject to the CIP rule may rely on another financial institution’s verification of the identity of the customer if the requirements of the reliance provision are satisfied. The bank would have to be able to demonstrate that such reliance upon the other financial institution’s verification of the identity of the customer is reasonable under the circumstances. For example, the bank could do so by reviewing the relied-upon institution’s procedures to ensure that they were adequate although the institution was not yet subject to a CIP rule when it verified the customer’s identity.”)

Assumed Business Name Act, 805 ILCS 405/1 (“No person . . . shall conduct or transact business in this State under an assumed name . . . unless such person or persons shall file in the office of the County Clerk of the County in which such person or persons conduct or transact or intend to conduct or transact such business, a certificate setting forth the name under which the business is, or is to be, conducted or transacted, and the true or real full name or names of the person or persons owning, conducting or transacting the same . . .”)

Assumed Business Name Act, 805 ILCS 405/1 (“Notice of the filing of such certificate shall be published in a newspaper of general circulation published within the county in which the certificate is filed. Such notice shall be published once a week for 3 consecutive weeks. . . . Proof of publication shall be filed with the County Clerk within 50 days from the date of filing the certificate. Upon receiving proof of publication, the clerk shall issue a receipt to the person filing such certificate . . .”)