**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***

***Today's Action:***

The U.S. Treasury, the Financial Crimes Enforcement Network and the
federal financial regulators today 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 and is today announcing a final rule incorporating 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