John B. Whalen Estate Planning Law Blog on Lawyers.com

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The USA PATRIOT Act virtually overhauled the account-opening process.

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Section 326 of the USA PATRIOT Act required that the Treasury Department establish minimum standards with which financial institutions must strictly comply in order to open new accounts.  Most notably, it implemented the Customer Identity Program (C.I.P.) rules.

The Joint Final Rule begins with the minimum steps for a C.I.P., and then allows each financial institution to develop its own C.I.P., which must be written and approved by the institution's Board of Directors, by building upon those steps.

The four minimum steps to a C.I.P. are verifying identities, keeping records, comparing lists, and notifying customers.

• Verifying Identities ~ This step is a two-pronged procedure - the customer provides identifying items and the financial institution validates those identifying items.  To satisfy the first prong, the customer (whether an individual or an entity) must provide three essential pieces of identifying items - name, address, and identification number (with a fourth requirement, date of birth, also required of individuals).  To satisfy the second prong, a financial institution's C.I.P should specify by what methods (whether documentary proof and/or non-documentary confirmation) it will use to validate the customer's identifying information.
• Keeping Records ~ The C.I.P rules contain a bifurcated record-keeping system.  The identifying information (i.e., name, address, and identification number, and, with individuals, date of birth) must be kept for five years after the account is closed, and all other information must be kept for five years after the record is made.
• Comparing Lists ~ The C.I.P must include procedures for determining whether a customer appears on any list of known or suspected terrorist organizations issued by the federal government.
• Notifying Customers ~ Every institution must provide customers with adequate notice that they are requesting information to verify their identities.  This notice can be either given to the customers on an individual basis, such as a handout, or on a collective basis, such as a placard displayed in the bank.