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)
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