Federal Deposit
Insurance Corporation

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

Dear Executive Secretary:

This letter is in response to FIL-92-2002, which requests comments on a proposed rule that would require financial institutions to establish written procedures to verify the identities of new account holders. The Customer Identification Program (CIP) is to be board approved, and incorporated into the bank's existing anti-money laundering (BSA) program. Southern Bank and Trust Company is an $860M state non-member bank located throughout Eastern North Carolina's rural communities.

Section 103-121(b)(2)(i) - Information Required

The proposed requirement to obtain the name, physical and mailing addresses, date of birth, and identification number for each, signatory on an account is neither reasonable nor practicable; most especially in the case of business accounts (some of which change officers frequently throughout the year). Additionally, does this requirement include guarantors, attorneys-in-fact or other such individuals?

Maintaining this information for signors (guarantors, attorneys-in-fact, etc..), as well as owners of an account, will require thousands of dollars for system programming enhancements. Finally, signors (guarantors, attorneys-in-fact, etc..) who have no other relationship with the bank will find this requirement both intrusive and impractical.

Section 103.121(b)(3) - Recordkeeping

The proposed regulation requires certain recordkeeping procedures be included in a bank's Customer Identification Program. Most banks already maintain a record of the identifying information provided by the customer in one form or another; however, it is not common practice to keep photocopies of these documents on file.

Many institutions have implemented imaging programs to maintain documentation in lieu of the actual paper forms. Photocopies of driver's licenses, or other forms of identification, do not image well. Much of the information contained is illegible, rendering the document virtually useless. The alternative is maintaining a paper file. Regardless of how the data is preserved, it will likely be a large expense for most institutions. The proposed requirement that the evidence of documentation used to verify the identity of customers should be retained for five years after the date the account is closed is excessive and will increase recordkeeping costs.

Congress created the Equal Credit Opportunity Act because of a fear that banks were discriminating on a prohibited basis in the credit process. Although the regulation does not require questions regarding race and sex, the collection of this data (copy of photo identification) for all account types will likely only perpetuate the fear the law was enacted to allay. In addition, experience in collecting HMDA data has shown that consumer's find the notation of race and sex intrusive of their privacy. With identity theft becoming more prevalent in today's society, individuals are apprehensive about sharing more information than they feel is necessary for the situation.

Section 103.121(b)(5) -Customer Notice

The proposed regulation states that customers will be required to comply with the identity verification procedures "after being given adequate notice". The section goes on to state that notifying customers may be done orally or in writing; however, it does not refer to a required amount of time by which banks must notify customers of the identity verification procedure changes (if any), prior to implementation. Does "adequate notice" refer only to the oral or written notice itself, or does it also apply to time of notification?

In conclusion, we are not comfortable with the requirements of sections 103.121(b)(2)(i) and 103.121(b)(3) of the proposed regulation, discussed above, as we believe they will ultimately place undue burden on banks through additional monitoring and costly system programming expenses with little tangible benefit. Finally, consideration should be given to extending the effective date for implementing all of the requirements of this proposal. It is highly unlikely that most financial institutions will be able to draft a Customer Identification Program, train personnel, revise documents, and re-program systems to comply with the proposed changes, prior to October 26, 2002.

Thank you, for considering the effects this proposal will have on the banking industry by providing the opportunity to comment. I would be happy to discuss any of my comments further, and can be contacted at (919) 658-7475.

Sincerely,