FDIC Federal Register Citations

Attention: Comments/OES/Section 326 Comment Letter

We are a bank with $875 million in assets with 13 offices all located within one county. We estimate that our approximately 82,338 accounts reflect relationships with 42,710 individuals. We have less than 500 customers who are not U.S. Persons as currently defined by the Internal Revenue Service.

On consumer accounts, our current identification requirements consist of requiring a government issued photo ID on at least one of the signatories. We record the information from the ID, but do not retain a copy. On business or entity accounts, our documentation requirements relative to the identification consist of requiring a copy of a "Doing Business As" certificate from the state or county or calling the Secretary of State to verify the existence of the entity, as appropriate. We do not obtain identification from signatories on entity accounts.

The clear language of the USA Patriot Act indicates these regulations are to be effective October 25, 2002. However, this proposal was not published until July 23 and the comment period does not end until September 6. Even in the agencies spend very little time reviewing and discussing the comments received, the best case scenario is that final regulations will be issued very close to their effective date.

The conclusion reached in the proposal, that the new requirements have a minimal effect on small institutions, is obviously not true in our case. The regulations will greatly increase the amount of identification we must obtain. It will be necessary for us to write procedures; determine how the information can be stored, but still be available to all of our offices and draft amendments to our existing BSA policy for the board to approve at a regularly scheduled meeting. We cannot complete any of these tasks until we see the final regulation. Having advance knowledge of exactly how much time we will have is important to our ability to perform the task well.

Suggestion : Immediately after this comment period ends, announce that compliance with the final regulations will not be mandatory until?? Days after their publication in the Federal Register.

A number of regulations require banks to post public notices on their premises. Generally, these requirements are very specific and compliance can be evaluated objectively. While the proposal's flexibility is intended to benefit the banks, its lack of an objective standard introduces a probability that individual examiners will feel comfortable imposing their personal opinion concerning a notice's adequacy. Oral disclosure would be the worst choice for the bank as it would be impossible to verify compliance; the wording of the "disclosure" would vary greatly between employees and it is the method most likely to generate a series of follow-up questions by the customer. Also, no purpose is served by leaving the specific wording of the notice to individual institutions, but it should be permissible for them to add additional information to any model language that might be provided.

A timing/placement requirement might be: "The notice is to be posted where it would most likely be seen by a customer prior to opening or requesting a change to an account."

There will be customer resistance to the identification requirements. The more consistent the disclosure method, the more obvious that the regulations required by law, the more readily the regulations will be accepted as a routine part of opening a bank account.

A model notice might read: " in order to prevent the use of the U.S. banking system in terrorist and other illegal activity, federal regulations require all financial institutions to obtain, verify, and record identification from all persons opening new accounts or being added as signatories to existing accounts. This institution cannot waive these requirements. -U.S. Treasury"

Suggestion: Establish specific, objective criteria in the final regulations for the content and timing of the required notice to customers, including model language deemed to be in compliance with the regulation.

Another topic of question is opening accounts over the internet and telephone. We currently provide these options to existing customers and to the general public. Although most of the people that open accounts over the internet and phone are existing customers of our institution, some are not. The procedure mentions that institutions can simply run a credit report on the customer to verify the identification. How will we retain a copy of the identification if we are not required to see it?

Suggestion: Please clarify whether opening accounts over the internet and telephone is going to be in compliance with Section 326. If we will be required to alter our internet and telephone account opening procedures, please clarify the documentation that we are required to retain.

If we are required to retain a copy of a photo ID of any person that opens an account at our institution, this will include our loan accounts. We are concerned about the discrimination issues involved in this situation. If loans are included in this regulation, how will we prevent access to this information?

Suggestion: Please address the discrimination issue with loan personnel having access to copies of photo Ids. If loans are going to have a different procedure, please clarify this also.

One last concern that our institution has with Section 326, is that most of our customers expect to transact business immediately after opening their account. In order to be practical, most identification procedures should be performed before opening the account and should not hinder the customer from using the account. If we are still checking the validity of the information provided after the account opening is complete, are we expected to not allow any activity until we are completely finished with our verification procedures? This will likely cause customer service issues for our institution.

Suggestion: Please create a clear sequence of events to guide institutions to understanding the verification process and the order of required events. Please pay special attention to the use of the new account by the customer and when it should be allowed.


Catherine DeGiacinto
Retail Banking Assistant
The Bank of Edwardsville
330 West Vandalia
Edwardsville, IL 62025