Topic: Customer Due Diligence (CDD)
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How can we comply with customer identification program (CIP) and customer due diligence (CDD) beneficial ownership requirements when purchasing shares of participation loans, sometimes years after their origination? We typically wait ninety or more days before receiving Bank Secrecy Act-related documentation, which we sometimes do not receive at all.
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We do not believe that FinCEN’s CIP and CDD beneficial ownership requirements apply when purchasing a participation interest in loans that have already been originated, but we recommend confirming this conclusion after sharing all relevant information and documents with your bank counsel. FinCEN’s CIP regulations require banks to obtain certain information from a customer before…
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Our customer due diligence form asks for a customer’s job title, place of employment, and length of employment. Are we required to collect this information, and is it necessary for both consumer and business accounts?
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No, we do not believe you must ask for a customer’s job title, place of employment, and length of employment before opening a consumer or business account, but we believe it is common to collect this information for certain customer risk profiles and for purposes of filing suspicious activity reports (SARs) and currency transaction reports…
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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?
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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…
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For Customer Identification Program (CIP) purposes, how should we describe a person’s occupation if they are a stay-at-home mom? We believe FinCEN prefers the term “homemaker,” but we typically use “stay-at-home mom.” “Occupation” also appears as a field on items such as FinCEN’s Currency Transaction Report (CTR), and we want to make sure we are using the correct terminology.
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We recommend setting a policy or procedure to ensure that you are using the terms “homemaker” and “stay-at-home parent” consistently for all customers who fit those labels and are not otherwise employed. Additionally, you should monitor such customers’ activities and “pay particular attention” if they “continually make large cash deposits,” as suggested in FinCEN’s guidance…
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How should we title an account for a general partnership that obtained an assumed name certificate from the county in the name of two unmarried individuals and a business? They did not present partnership papers or an employer identification number (EIN). Should we require partnership papers and an EIN to title the account in the assumed business name, or can we open the account in the name of the individuals doing business as (DBA) the assumed name and use one of the individual’s social security numbers? Also, would the partners have been required to present a partnership agreement to the county to obtain the assumed name certificate?
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We recommend requiring an EIN to open a partnership account, since the IRS requires partnerships to obtain an EIN for purposes of filing partnership tax returns. Whether you should require the partnership to present a partnership agreement or other documentation depends on your bank’s customer identification program (CIP), which should specify what documentation you need…
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In Illinois, can the sole member of a limited liability company (LLC) change the LLC’s ownership or add an additional member at any time without notifying their bank? We are concerned about our potential liability if a sole member of an LLC adds a member without notifying us and doesn’t wish to allow them to make transfers between a personal account and the business account using internet banking.
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Under the Illinois Limited Liability Company Act, a single-member LLC may agree to admit new members at any time. We are not aware of any laws or regulations that would require an LLC to notify their bank whenever they add a new member. However, you may require your customers to provide such notification if they…
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We have an account for a corporation that has been on our records for many years. We recently learned that this corporation (Customer, Inc.) was merged and consolidated into another corporation years ago, and the acquiring corporation subsequently opened a limited liability company (LLC) with a similar name (Customer, LLC). We have maintained the original account and have been accepting checks made payable to the name of the original corporation, the new LLC, and the acquiring corporation. Obviously, some of these checks are wrongly endorsed. Could we request that someone with authority provide us with a statement that would allow this practice to continue without recourse? Additionally, do we need to go through the process of closing and reopening a new account for this customer and conduct Bank Secrecy Act due diligence again? And, could this practice potentially present an issue with filing future Suspicious Activity Reports (SARs)? Finally, is it possible for a tax identification number to remain the same after a merger? We currently only have an Employer Identification Number (EIN) on file from the original corporation and are not sure whether this would be the same for the LLC.
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Yes, we believe it is possible to enter into a written agreement with the new LLC that would protect you from liability for the incorrectly endorsed checks (that have been endorsed in the name of the original corporation, presumably by an individual identified by the original corporation as its authorized signer). However, an agreement between…
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We’re looking for a new due diligence form for new and existing customers that our frontline staff can use. Can you recommend a template?
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We have two customer information forms in our forms library that are linked in our resources. We also have made a request to our Compliance Division Advisory Committee for a sample customer due diligence form and will send you any submissions we receive. Also, included in our resources are a bank’s customer due diligence form…
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We have a corporate customer that was wholly owned by an individual who died. The corporation now is owned by that individual’s estate, which is being probated. For beneficial ownership purposes, we plan to list the vice president of the corporation under the “control prong.” For the “ownership prong”, can we list the estate as the beneficial owner? Should we obtain identifying information on the estate’s executor?
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In our view, it would be prudent to list the executor of the estate as a beneficial owner of the corporation and to obtain the executor’s identifying information, although you are not required to do so. FinCEN’s customer due diligence (CDD) rule generally requires a financial institution to collect information about each individual who owns…