FDIC Federal Register Citations

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

RE: Transactions and Customer Identification Programs - Section 326

Dear Sir or Madam:

We wish to thank the Director for the opportunity to comment on the regulations proposed by the Department of Treasury, as published in the Federal Register on July 23, 2002, to implement Section 326 of the USA Patriot Act.

We are a $300 million community bank with two offices in the Minneapolis area. Our primary market is the small business owner; with very limited retail traffic as compared to other banks our size. We have a high concentration of large dollar accounts, thus lowering the number of actual account relationships. This allows us the opportunity to get to know who our customers are.

Currently, we require a government issued photo ID from all individuals seeking to open a consumer account. In the case of deposit accounts, we record the information from the ID, but do not retain a copy. With respect to consumer loan transactions, ID is looked at for identity purposes, but the information is not recorded or retained.

With respect to our business accounts, we require a copy of the Articles of Incorporation, a Certificate of Incorporation issued by the State of Minnesota and a tax ID number. If a tax ID number is being applied for, we request a copy of the application.

It would appear that we are already performing many of the requirements outlined in the proposal and we appreciate the agencies' attempt to reduce the ability of criminals to utilize the banking systems in their activities. We do, however, have some concerns regarding the proposal in its current form.

The proposal clearly states that final regulations must be effective by October 25, 2002. However, this proposal was not published until July 23 with a comment period until September 6th. Even if the agencies are able to review all of the comments received in a timely manner, it will be difficult for them to release any final rule until very close to the October 25th deadline. This poses a problem for us in that there will not be sufficient time to put our procedures in place. We do not feel there would be sufficient time to present our final policy to the Board of Directors as they only meet on a monthly basis. Also, we will need to determine procedures for the increased record keeping requirements, conduct employee training on the new procedures and develop comprehensive procedures for comparing the new accounts against government lists. This will include purchasing and installing new software. While we can anticipate much of the proposal will remain the same, many of these tasks cannot be performed until we see the final regulation. Our proposal would be that immediately following the issuance of the final regulation, announce that compliance with the final regulations will not be mandatory until XX days after their publication in the Federal Register. We feel that 30 to 60 days beyond the final issuance date would be appropriate so as not to carry the final compliance date beyond the end of the year.

We would also like to comment on the definition of customer outlined in Section 103.121(a)(3), specifically relating to signatories. While we currently obtain proper ID from customers, both consumer and business, looking to open accounts, we do not get ID from individuals being added solely as a signer on a business account. An individual can be a signer on an account, but not necessarily an owner of the account. This is generally spelled out in the corporate resolution obtained at the time the account is opened. With a very high concentration of business accounts, we are frequently updating signature cards and resolutions as employee turnover occurs with our business customers. Requiring the collection of name, address, date of birth and a tax ID number for individuals being added solely as a signer presents extra operational burdens. Oftentimes, the individual being added is not present when the request is made. A principal of the company frequently makes the request and any necessary paperwork is sent with them for completion. We do not feel that requiring this information from signers on business accounts, as these individuals do not control the account, fulfills the primary purpose of this proposal, but rather poses unnecessary operational burdens. We feel that by obtaining the required identification information on the primary owners of accounts is an effective enough tool to mitigate money-laundering attempts. Our proposal would be to limit the verification information to only owners of accounts and to not include all signatories.

Finally, we are requesting further clarification of the customer notification rules outlined in Section 103.121(b)(5). Simply leaving the notification options open to the discretion of each financial institution leaves too much room for misinterpretation. There would be no way to objectively determine if this criterion were being met. Also, in order for better customer acceptance, there needs to be consistent communication coming from every institution. Oral disclosure would be the least desirable choice since it would be impossible to verify compliance, wording of the "disclosure" would vary among employees, and it would potentially generate follow-up questions from confused customers. We are proposing a written posting be placed in a location where it would likely be seen by customers prior to opening or requesting a change to an account. To maintain consistency between all institutions, we suggest the agencies develop some type of model language to be used on all disclosures, with the financial institution having the option to add any appropriate language. We do not suggest instituting a separate disclosure for each customer to be given out at the time of account opening or updating.

Overall, we are pleased with the proposal and feel that it will not only be a means to fight anti-money laundering, but also identity theft and account fraud. Again, we appreciate this opportunity to comment on the proposed regulations. We hope that our concerns will be addressed prior to finalization of the regulation. We look forward to reviewing any revisions to the proposed regulations resulting from comments made by the public and the financial community.

Sincerely,

Melissa K. Swenson
Compliance Officer
Fidelity Bank
7600 Parklawn Avenue
Edina, MN 55435

cc: Minnesota Bankers Association
American Bankers Association