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FDIC Federal Register Citations

September 6, 2002

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/OES
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
RIN 1506-AA31
Comments@fdic.gov

Communications Division, Third Floor
Office of the Comptroller of the Currency
250 E Street, SW
Washington, DC 20219
Attention: Docket No. 02-11
regs.comments@occ.treas.gov

RE: Section 326 of the USA PATRIOT Act

Dear Sir or Madam:

This letter is filed on behalf of Advanta Corp. ("Advanta") in response to the joint notice of proposed rulemaking regarding "Customer Identification Programs for Banks, Savings Associations, and Credit Unions" (67 Fed. Reg. 48290) implementing Section 326 of the USA Patriot Act (31 U.S.C. § 5318(l)) published by the Department of Treasury's Financial Crimes Enforcement Network ("FinCEN"), the Office of the Comptroller of the Currency, The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union Administration (hereinafter "the Agencies").

                                                     Statement of Interest

Advanta is a highly focused financial services company which has been providing innovative financial solutions since 1951. Advanta leverages its first-class direct marketing and information based expertise to develop state-of-the-art data warehousing and statistical modeling tools that identify potential customers and new target markets. Over the past five years, it has used these distinctive capabilities to become one of the nation's largest issuers of MasterCard business credit cards to small businesses.

Advanta is the parent company of Advanta Bank Corp., an industrial loan corporation organized under the laws of the state of Utah with its principal executive offices located in Salt Lake City and insured by the FDIC, and Advanta National Bank, a national banking association with its headquarters in Wilmington, Delaware.

                                                  General Policy Comments

Advanta strongly supports the public policy goals of the USA PATRIOT Act which, among other things, requires that financial institutions of all types implement reasonable procedures to verify the identity of prospective customers. We are grateful that the proposed regulation reflects that many accounts are opened via the phone, the Internet, or through the mail.

We do, however, believe that the proposal is over-broad in its application to credit card and time deposit accounts that pose little systemic national security risk. We are also concerned about the real world, operational impact of a number of specific requirements in the proposed regulations and urge the Agencies to reconsider the proposal.

                                                 Specific Policy Comments

Applicability to Credit Cards and Definition of "Customer"

Advanta urges the Agencies to reconsider the applicability of the proposal to credit cards. We note that the General Accounting Office's recently released Report to Congress on the money laundering risks posed by credit cards analyzed Suspicious Activity Reports (SARs) only to find next to no evidence of potential money laundering using credit cards. [See GAO Report No. 02-670, July 2002 at page 3]

If the Agencies chose to continue to apply the regulations to credit card products, we urge that the definition of "customer" be reexamined. The proposal broadly defines "customer" to include a "signatory" (defined only in the accompanying analysis). This includes millions of authorized users of business and consumer credit cards -- especially since it includes individuals with signing authority over a corporate account.

In the case of a business credit card, or indeed any form of commercial account, because of frequent personnel changes, the proposed rule's requirement to obtain identifying information about all persons who have some ministerial authority to sign on behalf of the business will trigger a never ending compliance burden. We believe that, since the account belongs to the person or entity primarily responsible for the debts incurred, i.e., the account holder, it is more appropriately the account holder who should be the sole and proper party to be subject to the customer identification process.

The proposed rule defines "customer" as any person seeking to open a new account. We are pleased that the definition of "customer" does not include a person merely "seeking information about an account." However, we urge the Agencies to clarify what is meant by "seeking to open a new account" when that account involves an extension of credit. We suggest that the Agencies follow existing regulatory procedure requirements such as the Equal Credit Opportunity Act with respect to individuals who submit an application for credit. Therefore, we recommend that, with respect to credit accounts, a person "seeking to open a new account" be defined as a person who has submitted an application.

                                    Reliance on Third Party Service Providers

Advanta urges that the Agencies permit reliance on third parties or affiliates to perform the customer identification program -- especially in the case of brokered deposits where other money managers open accounts at financial institutions. As drafted, the proposal requires a duplicative verification process. Similarly, we suggest that where a customer has different account relationships with different affiliates or sister banks, the customer identification process need only be undertaken once.

Effective Date

Although Section 326 states that the Rule must be effective by October 25, 2002, this timeframe is unrealistic -- particularly in light of already scheduled year-end demand on management information technology such as the preparation of year-end statements.

The proposed record keeping requirements with respect to copying and storing the identifying information provided by the customer will impact significantly financial institutions' operations and data storage facilities. More time is needed to implement the necessary changes.

Additionally, financial institutions will need time to amend their formal Bank Secrecy Act policies and anti-money laundering compliance programs -- especially in light of seeking approval by from their boards of directors. Finally, more time will be needed to develop compliance education programs and training for front-line customer service personnel.

Advanta urges the Agencies to delay implementation for 12 months.

                                                                *   *   *

The foregoing comments deal with select key provisions, and we urge the Agencies to carefully consider the comment letters filed on behalf of the trade associations which represent our interests, in particular, the Consumer Bankers Association and the Delaware Bankers Association.

Thank you for the opportunity to comment on this important issue.

Sincerely,
Frank M. Salinger
Advanta Corporation
Wilmington, DE

Robert W. Cardwell
Advanta Bank Corp.
Spring House, PA

 

Last Updated 09/06/2002 regs@fdic.gov

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