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FDIC Federal Register Citations

September 5, 2002

Executive Secretary
Attn: Comments/OES
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429

Re: Proposed Regulations pursuant to Section 326 of the USA PATRIOT Act

Dear Sir or Madam:

These comments on the proposed regulations relating to customer identification published pursuant to Section 326 of the USA PATRIOT Act (the "Proposal") are made on behalf of the Connecticut Bankers Association, a trade association representing eighty financial institutions of various sizes throughout the state of Connecticut. We are generally supportive of the Proposal's effort to establish a reasonable and practical approach for the identification of financial institution customers. We have noted below, however, some areas where we feel that the procedures set forth in the Proposal are not practicable for financial institutions.

1. Definition of Customer. The definition of customer includes "any signatory on the account at the time the account is opened, and any new signatory added thereafter." We believe that the requirement to verify the identity of all signatories on a business account is both unworkable and unnecessary. Over the course of the life a business or other organization, a variety of officers, agents and other employees may be given signature authority over the account. These signatories often change periodically as the officers or employees of the organization change. In many cases, the signatories are never present in the financial institution. To verify the identity of every signatory using procedures that require documentation or other verification of identity woudl be impractical at best and, in some cases, impossible. Moreover, such verification is not necessary because there will be verification of the person responsible for the account. Thus, the identity of the business will be verified, and the business will in turn be responsible for knowing to whom it has given signature authority. In the case of suspicious activity regarding the account, the account owner, whose identity has been  verified, will be responsbile for the suspicious activity, and will be able to identify each of the signatories on the account as necessary.

A second aspect of the definition of customer that is impracticable is the inclusion of the definition of "any person seeking to open a new account." In some cases, the persons seeking to open an account will be denied the account for any one of a variety of
reasons. We believe that it would be better to include only those persons who are in fact allowed to open an account.

2. Limited Exception. We believe that there should be clarification that an account can be opened for an infant without a social security number for the infant. Often, when a baby is born, parents or other relatives seek to open a deposit account for the infant, even before the parents have applied for a social security number for the infant. Under the proposal, it appears that the "infant" is not a customer because the infant does not seek to open the account, nor is the infant a signatory on the account. However, the account would typically be opened in the name of the infant, with an adult serving as the custodian. It would be helpful to have clarification that the Proposal is not intended to prohibit opening an account for an infant before the social security number application has been processed.

The limited exception also requires that a copy of the application for the taxpayer identification number be retained. In some cases a copy may not be available when the customer comes to the financial institution to open the account. We suggest that the account holder be given a brief period of time to provide the financial institution with a copy of the application for the taxpayer identification number, after which time the account will be closed if the copy of the application is not provided.

3. Record Retentions Issues. We believe that the five-year record retention period is longer than is necessary and will prove extremely costly to financial institutions. We suggest reducing this period to two to three years. We also suggest that the requirement to obtain a copy of identifying documents be eliminated. It is adequate to record the identifying number and type of document. Keeping copies raises issues under the Equal Credit Opportunity Act as well as certain state laws.

In addition to the issues discussed above relating to the indentification procedures we also
want to comment on the of the regulation and the effective date. We believe the regulations adopted pursuant to Section 326 should apply to money services businesses as well as other financial institutions. Not including money services businesses within the scope of such regulations will leave a serious gap in coverage that will allow persons seeking to hide their identities an opportunity to legally avail themselves of many financial services without the scrutiny they should receive.

With regard to the effective date, we understand that the statute requires an October 25 effective date. However, financial institutions will require some time period to become compliant with the final regulations when they are issued. We therefore recommend that the final regulations be made effective on a voluntary basis as of October 25, 2002, with compliance becoming mandatory six months later.

Thank you for your consideration of these comments.

Fillis W. Stober
Tyler Cooper & Alcorn, LLP
Hartford, CT
(on behalf of Connecticut Bankers Association)

Last Updated 09/11/2002 regs@fdic.gov

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