Could it be considered discriminatory to refuse accounts for nonresident aliens because they do not have a social security number (SSN) or individual tax identification number (ITIN)? Are you aware of any sample forms or guidance related to conducting enhanced due diligence on nonresident aliens?

Opening accounts for nonresident aliens is a business decision dependent on the amount of risk that your institution is willing to accept.

FinCEN’s Customer Identification Program (CIP) requirements for non-U.S. persons include the collection of (among other things) either a customer’s “taxpayer identification number; passport number and country of issuance; alien identification card number; or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.” Consequently, a bank may open an account for a non-U.S. person without an SSN or ITIN, provided that the bank collects one of the other listed items.

While we are not aware of any federal or Illinois law that expressly prohibits a policy of refusing to open accounts based on the nonresident alien status of a person, some courts or regulators still could consider such a policy to constitute unlawful discrimination. In the context of lending, state and federal law prohibit discrimination on the basis of national origin. The official commentary to Regulation B notes that denying credit based on a person’s citizenship status “is not per se discrimination based on national origin,” but that simply means that denying credit based on citizenship is not automatically discriminatory. On the other hand, Regulation B does expressly permit a lender to consider a borrower’s “status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment.”

We recommend documenting your legitimate business reasons for refusing to open accounts for nonresident aliens, such as excessive BSA/AML risk and the risks of obtaining repayment on loans made to non-U.S. citizens living outside of the country. The FFIEC’s BSA/AML manual acknowledges the heightened risks of nonresident aliens (NRAs), stating that “banks may find it more difficult to verify and authenticate an NRA accountholder’s identification, source of funds, and source of wealth, which may result in BSA/AML risks,” and “[t]he NRA’s home country may also heighten the account risk, depending on the secrecy laws of that country.”

Regarding due diligence, the FFIEC’s BSA/AML manual contains a section providing guidance on conducting enhanced due diligence for non-U.S. persons, which we have linked to in the resources below.

For resources related to our guidance, please see:

  • FinCEN CIP Regulations, 31 CFR 1020.220(a)(2)(i)(A) (“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, which shall be: (i) For an individual, a residential or business street address . . . and (4) Identification number, which shall be: . . . (ii) For a non-U.S. person, one or more of the following: A taxpayer identification number; passport number and country of issuance
  • Illinois Human Rights Act, 775 ILCS 5/4-102 (“It shall be a civil rights violation for any financial institution, on the grounds of unlawful discrimination, to: . . . (A) Deny any person any of the services normally offered by such an institution.”)
  • Illinois Human Rights Act, 775 ILCS 5/1-103(Q) (“‘Unlawful discrimination’ means discrimination against a person because of his or her actual or perceived: race, color, religion, national origin, ancestry, age, sex, marital status, order of protection status, disability, military status, sexual orientation, pregnancy, or unfavorable discharge from military service as those terms are defined in this Section.”)
  • Illinois Human Rights Act, 775 ILCS 5/1-103(K) (“‘National origin’ means the place in which a person or one of his or her ancestors was born.”)
  • Regulation B, 12 CFR 1002.6(b)(1) (“Except as provided in the Act and this part, a creditor shall not take a prohibited basis into account in any system of evaluating the creditworthiness of applicants.”)
  • Regulation B, 12 CFR 1002.6(b)(7) (“A creditor may consider the applicant’s immigration status or status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment.”)
  • Regulation B, Official Interpretations, Paragraph 6(b)(7), Comment 2 (“A denial of credit on the ground that an applicant is not a United States citizen is not per se discrimination based on national origin.”)
  • FFIEC BSA/AML Manual, Risks Associated with Money Laundering and Terrorist Financing, Nonresident Aliens and Foreign Individuals—Overview (“Banks may find it more difficult to verify and authenticate an NRA accountholder’s identification, source of funds, and source of wealth, which may result in BSA/AML risks. The NRA’s home country may also heighten the account risk, depending on the secrecy laws of that country. Because the NRA is expected to reside outside of the United States, funds transfers or the use of foreign automated teller machines (ATM) may be more frequent. The BSA/AML risk may be further heightened if the NRA is a politically exposed person (PEP).”)
  • FFIEC BSA/AML Manual, Assessing Compliance with BSA Regulatory Requirements, Private Banking Due Diligence Program (Non-U.S. Persons)—Overview (“The nature and extent of due diligence conducted on private banking accounts for non-U.S. persons will likely vary for each client depending on the presence of potential risk factors. More extensive due diligence, for example, may be appropriate for new clients; clients who operate in, or whose funds are transmitted from or through, jurisdictions with weak AML controls; and clients whose lines of business are primarily currency-based (e.g., casinos or currency exchangers). Due diligence should also be commensurate with the size of the account. Accounts with relatively more deposits and assets should be subject to greater due diligence. In addition, if the bank at any time learns of information that casts doubt on previous information, further due diligence would be appropriate.”)