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FDIC Federal Register Citations

August 30, 2002

VIA FASCIMILE AND ELECTRONIC MAIL
Executive Secretary
Attention: Comments/OES
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429

RE: Proposed Regulation 12 CFR Part 326: Customer Identification Programs for Banks, Savings Associations and Credit Unions

To Whom It May Concern:

First Morris Bank and Trust (FMBT) is pleased to have the opportunity to offer comments on the recently issued rules proposal relating to Section 326 of the USA Patriot Act (Customer Identification Program). FMBT is a local community bank with eight branches in Morris County, New Jersey. Our asset size is $338 Million and we currently employ one hundred fourteen people. Since 1969, we have been providing banking and investment services to individuals and businesses throughout the county.

With regard to the proposed rules, we would like to offer the following comments and requests for clarification:

1. Section 103.121 - Definition of Customer

The first part of this section proposes to define a 'customer' as "any person seeking to open a new account". We feel that this definition is too broad, requiring the same identification requirements for those persons with whom we actually establish a relationship, as well as those who potentially seek to establish a relationship (for example: a loan applicant). As outlined in subsequent sections of the proposal, the identification requirements include photocopying driver's licenses. We are of the opinion that requesting identification from individuals who have not yet initiated an account or loan relationship is burdensome due to the record retention involved.

The second part of the definition proposes that the term 'customer' will include existing customers who would be subject to the new customer identification requirements when opening additional accounts. The identity of these customers has already been verified in accordance with our existing account opening policies and procedures. We would request that the definition be revised to accept these standard identification procedures for existing customers.

The third part of the definition proposes that a 'customer' is any signatory on an account. Many large corporations have signatories who reside out of state. We request further guidance on how to identify these signatories according to the proposed recordkeeping requirements. (For example: would a notarized copy of a form of identification be sufficient?)

2. Section 103.121(b)(3) - Recordkeeping

The proposal requires us to maintain a copy of any document used to verify identity and retain the copies for five years after the account is closed. Since the primary form of identification produced by individuals is a driver's license, we have several concerns regarding this proposed section:

a. Maintaining a copy of a driver's license in a loan file has been viewed as a potential violation of Regulation B by FDIC examiners. It is a serious concern that compliance with this proposal may be interpreted by a loan examiner as a discriminatory practice.

b. When a customer completes the government monitoring section of a real estate related loan application, purposefully providing information that differs from that on the driver's license, which data is to be reported for HMDA purposes?

c. Should the proposed definition of 'customer' be made final and require us to retain copies of identification for those who simply apply for a product:

i. Would the 5-year period for denied applicants (both for deposit and loan products) start on the date of denial or date of application?

ii. Would we be required to maintain a log of such denials for exam purposes?

d. Maintaining copies of identification received will be inefficient and cumbersome, requiring greater processing time and physical space, as our data processor does not offer an automated system to comply with the proposed requirements.

Lastly, as stated in the USA Patriot Act, compliance with the Section 326 rules will be mandatory October 26, 2002. The proposal was only issued on July 23, 2002 and is open for a 45-day comment period. This only gives the agencies approximately six weeks to review the comments and issue a final regulation, giving banks inadequate time to write and implement effective procedures to meet the requirements. We request that the agencies consider a more reasonable effective date sometime in the first quarter of 2003.

Thank you for your consideration and review of our comments.

Very truly yours,

Lisa Nienaber
Compliance Assistant

Jane Block
Vice President and
Compliance Officer

First Morris Bank and Trust
250 Madison Avenue
Morristown, NJ 07962

cc: B. Giovinazzi, President and CEO, FMBT
M. Martin, Senior Vice President, FMBT
K. Owsiany, Vice President and Auditor, FMBT
G. Dittrich, Vice President and Branch Administrator, FMBT

Last Updated 08/30/2002 regs@fdic.gov

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