Volume 2, Issue 23

Posted on 10/29/2014

CIP FAQs Issued by FinCen

Who is the "customer" when an account is opened by an individual who has power-of- attorney for a competent person who is the named owner of the account?

 

The CIP rule provides that a "customer" generally is "a person that opens a new account." 31 C.F.R. § (1020.100(c)(1)(i)). When an account is opened by an individual who has power-of-attorney for a competent person, the individual with a power-of-attorney is merely an agent acting on behalf of the person that opens the account. Therefore, the "customer" will be the named owner of the account rather than the individual with a power-of-attorney over the account. By contrast, an individual with power-of-attorney will be the "customer" if the account is opened for a person who lacks legal capacity. 31 C.F.R. § (1020.100). (January 2004)

 Is a person who becomes co-owner of an existing deposit account a "customer" to whom the CIP rule applies?

 

Yes, a person who becomes the co-owner of an existing deposit account is a "customer" subject to the CIP rule because that person is establishing a new account relationship with the bank. (January 2004)

 

Does the CIP rule prohibit a minor from opening an account?

 

No, the CIP rule does not bar a minor from opening an account. It merely states that the bank's "customer" is the individual who opens the account for an individual who lacks legal capacity, such as a minor. In other words, if a parent opens an account for a minor, the bank's customer is the parent. If, however, a minor opens the account, then the minor is the bank's customer. For example, where a bank sends its employees to elementary schools so that students may open savings accounts as part of a program to promote financial literacy, a student opening an account is the bank's customer. In this situation, as for all customers, the bank should get the name, address, date of birth, and taxpayer identification number of the student. Since verification procedures are risk-based, banks can use any reasonable documentary or nondocumentary method to verify a student's identity. In this case, the bank might verify a student's identity using a student identification card or by having the student's teacher confirm the student's identity. (April 2005)

 

Who is the "customer" for purposes of trust accounts? Does it make a difference whether the bank or a third party is trustee for the trust?

 

In the case of a trust account, the "customer" is the trust whether or not the bank is the trustee for the trust. "A bank will not be required to look through trust, escrow, or similar accounts to verify the identities of beneficiaries and instead will only be required to verify the identity of the named account holder." See 68 FR 25090, 25094 (May 9, 2003). However, the CIP rule also provides that, based on the bank's risk assessment of a new account opened by a customer that is not an individual, the bank may need "to obtain information about" individuals with authority or control over such an account, including signatories, in order to verify the customer's identity. See 31 C.F.R.  (1020.220(a)(2)(ii)). For example, in certain circumstances involving revocable trusts, the bank may need to gather information about the settlor, grantor, trustee, or other persons with the authority to direct the trustee, and who thus have authority or control over the account, in order to establish the true identity of the customer. (April 2005)

 

Who is the "customer" for purposes of escrow accounts?

 

An escrow account is an account generally established for the deposit of funds that are to be paid to a specified party on the fulfillment of escrow conditions or returned. If a bank establishes an account in the name of a third party, such as a real estate agent, who is acting as escrow agent, then the bank's customer will be the escrow agent. If the bank is the escrow agent, then the person who establishes the account is the bank's "customer." For example, if the purchaser of real estate directly opens an escrow account and deposits funds to be paid to the seller upon satisfaction of specified conditions, the bank's customer will be the purchaser. Further, if a company in formation establishes an escrow account for investors to deposit their subscriptions pending receipt of a required minimum amount, the bank's customer will be the company in formation (or if not yet a legal entity, the person opening the account on its behalf). "A bank will not be required to look through trust, escrow, or similar accounts to verify the identities of beneficiaries and instead will only be required to verify the identity of the named account holder." See 68 FR 25090, 25094 (May 9, 2003). However, the CIP rule also provides that, based on the bank's risk assessment of a new account opened by a customer that is not an individual, the bank may need "to obtain information about" individuals with authority or control over such an account, including signatories, in order to verify the customer's identity. See 31 C.F.R. (1020.220(a)(2)(ii)). (April 2005) 

 

The Office of Foreign Assets and Control

Your OFAC compliance program will be examined with BSA. The connection between BSA and OFAC begins with safety and soundness. How will your OFAC program do? Are you ready to answer some tough examination questions? Join Debbie Crawford for a webinar on November 7th and review what should be in an OFAC Compliance Program. She will discuss the officer responsible for OFAC and how to go from a "hit" to a "match" and what to do in the action steps in between. You will learn how OFAC impacts BSA, ACH and other issues in your organization. For more information or to register for this webinar, click here

 

Bankers eCampus Webinar CD Sale!

We have many webinars in our Webinar Catalog that are available for purchase. These webinars on CD are an excellent and cost-effect way to build your training library. Now through December 31st, use the discount code YEAREND14 and receive a 10% discount on any purchase from our webinar library. For more information or to view the catalog, click here.

 

Volume 2, Issue 22

Posted on 10/23/2014

Release of Consolidated Non-SDN Data Files and Upgrade to Sanctions List Search
In order to make it easier to comply with OFAC's sanctions regulations, the office is now offering all of its non-SDN sanctions lists (including the Non-SDN Palestinian Legislative Council List "NS-PLC List," the Part 561 List, the Non-SDN Iran Sanctions Act List "NS-ISA List," the Foreign Sanctions Evaders List "FSE List," and the Sectoral Sanctions Identifications List "SSI List,") in a consolidated set of data files "the Consolidated Sanctions List."  These consolidated files comply with all of OFAC's existing data standards.  While the consolidated sanctions list data files are not part of OFAC's list of Specially Designated Nationals and Blocked Persons "the SDN List,"  some of the records in these consolidated files may also appear on the SDN List. Click here for information about the Consolidated Sanctions List.    
 
The goal of this consolidation effort is to reduce the number of list-related files that must be downloaded in order to maintain an automated sanctions screening program. In the future, if OFAC creates a new sanctions list where the action required of a U.S. person does not necessarily entail blocking, the office will add the new data associated with that list to these consolidated data files if appropriate.   Another goal of this effort is to ensure that all sanctions list records are included in OFAC's Sanctions List Searchtool.  As of this announcement, all of OFAC's lists are now available in Sanctions List Search. 

The Office of Foreign Assets and Control

Your OFAC compliance program will be examined with BSA. The connection between BSA and OFAC begins with safety and soundness. How will your OFAC program do? Are you ready to answer some tough examination questions? Join Debbie Crawford for a webinar on November 7th and review what should be in an OFAC Compliance Program. She will discuss the officer responsible for OFAC and how to go from a "hit" to a "match" and what to do in the action steps in between. You will learn how OFAC impacts BSA, ACH and other issues in your organization. For more information or to register for this webinar, click here

 

Safeguarding Consumers' Financial Security

The President signed a new Executive Order directing the government to lead by example in securing transactions and sensitive data.  The new BuySecure Initiative will provide consumers with more tools to secure their financial future by assisting victims of identity theft, improving the Government's payment security as a customer and a provider, and accelerating the transition to stronger security technologies and the development of next-generation payment security tools. The key actions that were announced on October 17, 2014 were as follows:

  • Moving to more secure payment systems
  • Preventing identity theft
  • Supporting credit score transparency
For more information or to read the release in its entirety, click here

Education and training are key to minimizing the risk of becoming a victim of identity theft. Join Susan Wind on October 28th to learn what your financial institution needs to know about identity theft and who is a target. For more information about this webinar, click here.

 

Volume 2, Issue 21

Posted on 10/8/2014

Cyber Crimes: Is Your Financial Institution Prepared?
2014 has been a challenging year for major companies, credit card vendors and financial institutions due many security breaches taking place.  Are the networks secure? How do the bad guys obtain so much personal information on millions of victims?  Who is going to pay for the millions of dollars lost each year?   Join Susan Wind for "Cyber Crimes: What Your Financial Institution Needs to Know" on October 22nd to learn the answers to these questions and many more! This webinar will introduce you to the latest scams that target financial institution. Learn about the upcoming changes for 2015 (chips and pins replacing the stripes) for using credit cards in this country. For more information, to register for this webinar or to pre-purchase the CD, click here

FinCEN Issues Administrative Ruling on the Application of FinCEN Regulations to Currency Transporters, Including Armored Car Services

The Financial Crimes Enforcement Network (FinCEN)  issued an administrative ruling on the application of FinCEN regulations to currency transporters, including armored car services. The Ruling discusses the evolution in services that some currency transporters provide and the circumstances under which they must register with FinCEN as money transmitters and comply with the relevant aspects of the Bank Secrecy Act (BSA). 

 

The Ruling contributes to a regulatory initiative by FinCEN to address ongoing concerns about transnational criminal organizations exploiting the lack of transparency in the movement of cash across the U.S./Mexico border via armored car services and other currency transporters as a means to launder their criminal proceeds.  Previously, FinCEN issued guidance to currency transporters on the correct and complete way to file the Report of International Transportation of Currency or Monetary Instruments (CMIR) (FIN-2014-G002) and a  Geographic Targeting Order (GTO), requiring enhanced BSA reporting at two ports of entry along the U.S./Mexico border. For more information or to read this ruling in its entirety, click here

 

IRS Warns Financial Institutions of Scams Designed to Steal FATCA-Related Account Data

The Internal Revenue Service issued a fraud alert for international financial institutions complying with the Foreign Account Tax Compliance Act (FATCA).  Scam artists posing as the IRS have fraudulently solicited financial institutions seeking account holder identity and financial account information.

 

The IRS does not require financial institutions to provide specific account holder identity information or financial account information over the phone or by fax or email.  Further, the IRS does not solicit FATCA registration passwords or similar confidential account access information.

 

These fraudulent solicitations are known as "phishing" scams.  These types of scams are typically carried out through the use of unsolicited emails and/or websites that pose as legitimate contacts in order to deceptively obtain personal or financial information.
 
Financial institutions or their representatives that suspect they are the subject of a "phishing" scam should report the matter to the Treasury Inspector General for Tax Administration (TIGTA) at 800-366-4484, or through TIGTA's secure website. Any suspicious emails that contain attachments or links in the message should not be opened, and the email should be forwarded to phishing@irs.gov.

More information on prior alerts and scams can be found on IRS.gov.

Volume 2, Issue 20

Posted on 10/1/2014

Tricky Insurance Issues on Joint Accounts

1. Definition. Joint accounts are deposits held in the names of two or more persons.


2. Insurance Limit. All shares that each co-owner owns in joint accounts at one bank are added together and insured up to $250,000, separately from deposits held in other ownership categories, if all of these conditions are met:

  • Each co-owner must be a natural person
  • The co-owners must have equal withdrawal rights to the account(s)
  • Each co-owner must personally sign the account signature card

Personal signatures are not required if the account is a certificate of deposit, a negotiable instrument, or is established by an agent.

 

Important!

 

A.  Be careful not to confuse joint accounts with "in trust for," "payable on death," and other revocable trust accounts. Although revocable trust accounts may be owned jointly by two or more persons, they are not insured as joint accounts.
 

B.  Deposit accounts owned by a partnership or corporation are not insured as joint accounts even though more than one partner or corporate official may have signed the account signature card. Deposits owned by partnerships, corporations and unincorporated associations are insured in another insurance category.

 

C.  Co-owners do not need to be related to qualify for joint account coverage.

 

Example: 
Helen and Jack Smith have one joint account, a CD, at Plymouth Bank and Trust for $500,000. The account is fully insured since each owner's share of joint accounts at the bank is covered for $250,000 or a total of $500,000 for both co-owners.

 

3. Rearranging Names or Account Titles Does Not Increase Coverage. The insurance coverage of joint accounts is not increased by rearranging the owners' names or by changing the styling of their names. Similarly, the use of "or," "and," or "and/or" to separate the names of co-owners in multiple joint account titles does not affect the amount of insurance coverage provided. For example, an account titled "Husband and Wife" will not be insured separately from an account titled "Wife or Husband."

 

4. Mixed Conjunctions. It is important to be consistent in the use of conjunctions (either the use of "and" or the use of "or") when opening joint accounts with three or more depositors. The names in the account title should be connected consistently by the use of "and" or the use of "or." As an example, an account titled, "John Jones and Sally Jones and Mary Jones" is appropriate. An account titled, "John Jones or Sally Jones or Mary Jones" is also appropriate. Mixing "and" with "or" in the same account title for accounts with three or more depositors can create confusion whether the depositors have equal withdrawal rights.

 

An account titled, "John Jones or Sally Jones and Mary Jones" suggests that Sally and Mary must act together to withdraw funds and therefore may not have equal withdrawal rights with John. Remember, to qualify for deposit insurance coverage in the joint account category, all depositors must have equal withdrawal rights.

 

5. Jointly Owned Deposits Held by an Agent  or Custodian. 

 Deposits held by an agent for joint account owners will be insured under the joint account category if the recordkeeping requirements for fiduciary accounts are met. For example, deposits held in escrow by a real estate agent for a husband and wife who are buying a house are added to any other joint accounts owned by the husband and wife at the same bank. 

 
Ten Reasons Your Account Holder May Not Be Insured
Knock, Knock on your door and the FDIC/NCUSIF is there to take over your institution. You are in shock and so are the account holders and the other employees. Now you begin thinking about all those signature cards in pending files, the documents to support trusts and business accounts. How good are your deposit records? Your customer's insurance may depend on your own procedures in opening and documenting accounts. If you have signature cards not signed, if they are not signed "personally," if they do not meet the test of each kind of ownership, your customer may not be insured. This program reviews the key components of insurance but from a different perspective and puts those new accounts procedures into a different light. We will also cover the changes to FDIC insurance disclosures for TAG, Dodd-Frank and other issues. While this is a low risk for most financial institutions, it is one of those "must attend" programs. This webinar is now available in our webinar library. For more information or to purchase this webinar, click here.

Do you have a question or topic that you would like to see addressed in our monthly newsletter? If so, email us and let us know. Send questions and/or topic suggestions to info@bankersecampus.com.