**DEPARTMENT OF THE TREASURY**

***Office of Public Affairs***

> ***September 18, 2003***

**FACT SHEET:**

***Results of the Notice of Inquiry on Final Regulations Implementing
Customer Identity Verification Requirements under Section 326 of the USA
PATRIOT Act***

***Background:***

The U.S. Treasury, the Financial Crimes Enforcement Network and the
federal financial regulators announced final rules implementing customer
identification and verification requirements under Section 326 of the
USA PATRIOT Act May 9, 2003.

Treasury published a notice of inquiry in the Federal Register July 1,
2003 initiating a 30-day comment period that concluded July 31, 2003.
The notice of inquiry sought comment on two specific issues: (1) whether
financial institutions should be required to retain photocopies of
identification documents used to verify customers' identities; and (2)
whether financial institutions should be prohibited from accepting
foreign government issued identification documents other than passports
as an acceptable form of identification.

Treasury expects all financial institutions covered by the customer
identification regulations to have their customer identification program
drafted and approved by October 1, 2003 as scheduled.

**\*\*MORE\*\***

***Foreign issued identification documents:***

*Treasury concluded that the risk-based approach taken by the final
rules, combined with the ability to notify financial institutions if
concerns arise with specific identification documents, provide an ample
mechanism to address any security concerns. There was no need to
expressly prohibit specific IDs in the regulations themselves.*

-   An effective program for identifying new customers must allow
    financial institutions the flexibility to use methods of identifying
    and verifying the identity of their customers appropriate to their
    individual circumstances. For example, some financial institutions
    open accounts via the Internet, never meeting customers
    face-to-face.

-   Rather than dictating which forms of identification documents
    financial institutions may accept, the final rule employs a
    risk-based approach that allows financial institutions flexibility,
    within certain parameters, to determine which forms of
    identification they will accept and under what circumstances.

-   However, with this flexibility comes responsibility. When an
    institution decides to accept a particular form of identification,
    they must assess risks associated with that document and take
    whatever reasonable steps may be required to minimize that risk.

-   Federal regulators will hold financial institutions accountable for
    the effectiveness of their customer identification programs.

-   Additionally, federal regulators have the ability to notify
    financial institutions of problems with specific identification
    documents allowing financial institutions to take appropriate steps
    to address those problems.

***Photocopy requirement:***

*Treasury reaffirmed its original judgment that the maintenance of
photocopies in all cases did not provide a security benefit that
justified the additional record keeping burden.*

-   The final rules implementing Section 326 of the PATRIOT Act require
    that financial institutions maintain records of the steps taken to
    verify identity, including all relevant information in an
    identification document, such as address, document number, etc.

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-   The record keeping may include photocopies of identification
    documents but does not require it. In some cases financial
    institutions, at their discretion, may find it prudent to maintain
    photocopies of identification documents.

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-   Additionally, some IDs have security features that render
    photocopies illegible, making copies useless.

***Breakdown of Comments:***

  ---------------------- ----------------------------------- ------------
  **Total Comments:**    **34602**                           

                                                             

                         **Photocopy Issue:**                 

                         Total Comments Received:            10704

                         Total Comments Requesting No Change 9623
                         to the Final Regulation:            

                         Total Percent in Favor of No        **89.90%**
                         Change:                             

                                                             

                         **Identification Card Issue:**       

                         Total Comments Received:            23898

                         Total Comments Requesting No Change 19770
                         to the Final Regulation:            

                         Total Percent in Favor of No        **82.73%**
                         Change:                             
  ---------------------- ----------------------------------- ------------

**DEPARTMENT OF THE TREASURY**

***Office of Public Affairs***

> ***April 30, 2003***

**FACT SHEET:**

***Final Regulations Implementing Customer Identity Verification
Requirements under Section 326 of the USA PATRIOT Act***

***Overview:***

On May 9, 2003, the U.S. Treasury, the Financial Crimes Enforcement
Network and the federal financial regulators announced final regulations
implementing customer identification and verification requirements under
Section 326 of the USA PATRIOT Act. These new regulations will provide
another tool to protect the U.S. financial system from money laundering,
terrorist financing, identity theft and other forms of fraud.

***Background:***

On October 26, 2001, President Bush signed into law the USA PATRIOT Act,
important legislation providing a wide range of new tools to combat
money laundering and the financing of terrorists. In July of 2002,
Treasury announced a proposed rule implementing Section 326 of the
PATRIOT Act. The final rule incorporates important changes that increase
the effectiveness of the rule while eliminating unnecessary burden on
regulated institutions.

**What it requires:**

The rule requires that financial institutions develop a Customer
Identification Program (CIP) that implements reasonable procedures to:

1)  Collect identifying information about customers opening an account

2)  Verify that the customers are who they say they are

3)  Maintain records of the information used to verify their identity

4)  Determine whether the customer appears on any list of suspected
    terrorists or terrorist organizations

**Collecting information:**

As part of a Customer Identification Program (CIP), financial
institutions will be required to develop procedures to collect relevant
identifying information including a customer's name, address, date of
birth, and a taxpayer identification number -- for individuals, this
will likely be a Social Security number. Foreign nationals without a
U.S. taxpayer identification number could provide a similar
government-issued identification number, such as a passport number.

**Verifying identity:**

A CIP is also required to include procedures to verify the identity of
customers opening accounts. Most financial institutions will use
traditional documentation such as a driver's license or passport.
However, the final rule recognizes that in some instances institutions
cannot readily verify identity through more traditional means, and
allows them the flexibility to utilize alternate methods to effectively
verify the identity of customers.

**Maintaining records:**

As part of a CIP, financial institutions must maintain records including
customer information and methods taken to verify the customer's
identity.

**Checking terrorist lists:**

Institutions must also implement procedures to check customers against
lists of suspected terrorists and terrorist organizations when such
lists are identified by Treasury in consultation with the federal
functional regulators.

**Reliance on other financial institutions:**

The final rule also contains a provision that permits a financial
institution to rely on another regulated U.S. financial institution to
perform any part of the financial institution's CIP. For example, in the
securities industry it is common to have an introducing broker -- who
has opened an account for a customer -- conduct securities trades on
behalf of the customer through a clearing broker. Under this regulation,
the introducing broker is required to identify and verify the identity
of their customers and the clearing broker can rely on that information
without having to conduct a second redundant verification, provided
certain criteria are met.

**The following financial institutions are covered under the rule:**

-   Banks and trust companies

-   Savings associations

-   Credit unions

-   Securities brokers and dealers

-   Mutual funds

-   Futures commission merchants and futures introducing brokers

**The regulations were developed jointly by:**

-   The Department of the Treasury

-   Treasury's Financial Crimes Enforcement Network

-   The Board of Governors of the Federal Reserve System

-   The Commodity Futures Trading Commission

-   The Federal Deposit Insurance Corporation

-   The National Credit Union Administration

-   The Office of the Comptroller of the Currency

-   The Office of Thrift Supervision

-   The Securities and Exchange Commission