Topic: Customer Identification Program (CIP)
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An individual from Argentina would like a business loan to purchase an office building here in the U.S. The loan would be secured by a mortgage on the building, as well as by some funds that will be wired to us from Argentina. Are there any BSA concerns with making a loan to such a customer?
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Before engaging in a transaction with a foreign national, your bank should first check the Office of Foreign Assets Control (OFAC) database to ensure that the individual and his business are not specially designated nationals that your bank would be prohibited from dealing with. In addition, the FFIEC’s BSA/AML Examination Manual includes a concise description…
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Some of our customers have a Matricula Consulate card issued by Mexico and an Individual Taxpayer Identification Number (ITIN) issued by the IRS. Should we have them sign the W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) or W-9 (Request for Taxpayer Identification Number and Certification)? What about a customer who presents a Matricula Consulate card but does not have an ITIN?
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We recommend using the W-9 form for customers who are resident aliens and the W-8BEN form for nonresident aliens. The W-9 form itself states that it may be used by a U.S. citizen “or other U.S. person.” A “U.S. person” includes “an individual who is a U.S. citizen or U.S. resident alien.” On the other…
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We sometimes have customers who want to add an older teenager who is a minor to an account. Can a minor have joint ownership in a joint account, such as with a parent? Could the bank exercise a right of setoff in the parent’s other accounts for the minor’s overdrafts on the joint account? What identification should we require from the minor establishing a joint account with their parent?
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Yes, a minor can hold an account in joint ownership with another party, such as a parent. The Illinois Banking Act permits banks to open accounts for minors, “and the rules and regulations of such bank . . . shall be as binding upon such minor as if such minor were of full age and…
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We understand the statutory trusts are subject to the beneficial ownership provisions of FinCEN’s Customer Due Diligence Rule. How can we identify when a trust is a statutory trust? Will it be apparent from the trust documents?
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We recommend incorporating a question into your account opening questionnaires and customer due diligence (CDD) procedures to require your customers to identify whether they are a statutory trust (also called a “business trust”). Statutory trusts are a special type of entity that can engage in business or other activities. Unlike ordinary trusts, statutory trusts are…
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We were recently told that the Customer Due Diligence (CDD) rule requires us to obtain beneficial ownership certification when a legal entity customer’s certificate of deposit or loan is renewed, even when there is no change to account. Is that true? Is there any chance that this requirement may be challenged in the future?
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Yes, until FinCEN issues clarifying guidance on this point, CD and loan renewals should be considered “new accounts” under the CDD rule for the purpose of obtaining beneficial ownership certifications. The CDD rule’s identification and certification requirements regarding beneficial ownership apply each time a “new account” is opened for a legal entity (unless the customer…
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We have a large business customer (ABC Group) that would like to open non-interest bearing escrow accounts for its clients without giving us the clients’ W-9 forms. Can we do that? If so, should we use the customer’s tax identification number (TIN) to open the accounts and title the accounts as ABC Group, agent for John Doe Client? Can the customer sign one master signature card for all the escrow accounts?
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Yes, we believe you may open the escrow accounts without requiring the TIN of your customer’s clients. The Customer Identification Program (CIP) rules require the customer’s TIN. Through interagency guidance, the federal banking regulators have clarified that the person establishing the escrow account is the customer for CIP purposes. Consequently, we believe it is appropriate…
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When we open memorial/benefit accounts, we ask that an individual open the account in his or her name. We have an engagement letter that our lawyer drafted several years ago stating that the bank has no duties, responsibilities or obligations other than to accept the deposits and requiring the individual to hold the bank harmless for the consequences of any action or inaction that the bank takes in regard to the account. Is that the correct way to handle these accounts?
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When opening memorial and benefit accounts, we believe it is a best practice to ask the individuals establishing the accounts to obtain separate EINs to avoid a number of potential problems. For example, using a separate EIN with the memorial fund’s name in your account records should help to avoid confusion for IRS reporting and…
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One of our business customers is a law firm that is opening an office in another state. The law firm established a new LLC for the new office in the other state, and the LLC wants to open a checking account at our bank. Our account opening procedures require us to check that business customers have appropriate business registrations in place. Does the foreign LLC need to register in Illinois, even if it will not be transacting business in Illinois?
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Whether a foreign LLC is “transacting business” in Illinois and therefore required to register with the Secretary of State is a highly fact-specific question, particularly with respect to a multi-state law firm; notably, this question also raises tax issues in some states. Fortunately, this is a question for the law firm and not for your…
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What is required under the Customer Identification Program (CIP) rules for a user of a business credit card? We have been getting push back from the employee users of business credit cards because they do not want to provide their name, address, date of birth, and driver’s license number. Are we required to obtain this information from them?
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No, we do not believe that the CIP rules require your organization to collect identifying information for every individual who uses a business credit card. However, we believe that your bank is permitted to obtain identifying information from such individuals in certain situations described below. The CIP rules require that you collect certain identifying information…