The material used in this text has been drawn from sources believed to be reliable. Every effort has been made to assure the accuracy of the material; however, the accuracy of this information is not guaranteed. The laws are often changed without prior notice from the government. Opening Deposit Accounts Online2016manual is sold with the understanding that the publisher and the editor are not engaging in the practice of law or accounting. We are not responsible for the actions of your company's employees.

The text is designed to address most deposit account documentation issues. However, you will wish to consult your attorney when you are unsure of an answer.

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INSTRUCTOR

Deborah Crawford is the President of gettechnical inc, a Virginia-based firm, specializing in the education of banks and credit unions across the nation. Her 27+ years of banking and teaching experience began at Hibernia National Bank in New Orleans. She graduated from LouisianaStateUniversity with both her bachelor's and master’s degrees. Deborah's specialty is in the deposit side of the financial institution where she teaches seminars on regulations, documentation, insurance and Individual Retirement Accounts.

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TABLE OF CONTENTS

Unit #1 CIP and CDD COMPONENTS

CUSTOMER IDENTIFICATION PROGRAM (CIP): BSA REQUIREMENTS

CIP COMPLIANCE the big picture

IS IT AN ACCOUNT OR CUSTOMER AS DEFINED IN CIP?

ACCOUNT

CUSTOMER

THE INFORMATION

INFORMATION REQUIRED BY CIP

WORKSHEET ON INFORMATION

DOCUMENTARY AND NONDOCUMENTARY VERIFICATION

THE DOCUMENTS

EXPANDED IDENTIFICATION FOR NONRESIDENT ALIENS (NRA)

WORKSHEET ON DOCUMENTS

WORKSHEET ON DOCUMENTS FOR BUSINESS AND ENTITY

ACCOUNTS

NONDOCUMENTARY VERFICATION

LACK OF VERIFICATION—CIP PROCEDURES

CLOSING AN ACCOUNT SOME SUGGESTIONS

CUSTOMER NOTICE FOR CIP

BSA EXAM ISSUES ON CUSTOMER DUE DILIGENCE

SAMPLE business CUSTOMER PROFILE WORKSHEETS

EXAMPLES OF HIGH RISK CUSTOMERS FROM BSA EXAM MANUAL YOU WILL NEED ENHANCED DUE DILIGENCE QUESTIONS FOR THIS GROUP

EXAMPLE: NONRESIDENT ALIENS ENHANCED DUE DILIGENCE

BSA EXAM MANUAL: EXPANDED EXAMINATION OVERVIEW AND PROCEDURES FOR PERSONS AND ENTITIES – NONRESIDENT ALIENS AND FOREIGN INDIVIDUALS OVERVIEW

SAMPLE PERSONAL CUSTOMER IDENTIFICATION WORKSHEET

SAMPLE OF ENHANCED DUE DILIGENCE FOR HIGH RISK CUSTOMER: MONEY SERVICE BUSINESS QUESTIONNAIRE

OVERVIEW: PUTTING IT ALL TOGETHER

WORKSHEET ON PERSONAL ACCOUNTS

WORKSHEET BUSINESS ACCOUNTS

GUIDELINES ON IDENTITY THEFT DETECTION, PREVENTION, AND MITIGATION

WORKSHEET FOR IDENTITY THEFT PREVENTION PROGRAM

EXAMPLES OF RED FLAGS

Unit #2 Signature Cards, Federal Regulations and W-9 Issues

SIGNATURE CARDS: OVERVIEW

SIGNATURE CARDS: FLOW CHART #1

SIGNATURE CARDS: FLOW CHART #2

FEDERAL REGULATIONS

NOTES OVERVIEW: SSN, EIN OR ITIN

OVERVIEW: TAXPAYER IDENTIFICATION NUMBERS

FLOWCHART: REGULAR OWNERSHIP

FLOWCHART: FIDUCIARY

FIDUCIARY ACCOUNTS

CONTRACT AND DISCLOSURE CHECKLIST

Unit #3 Products and Funding the Account

PRODUCTS

FUNDING THE ACCOUNT

Unit #4 Risk

BSA/AML PROGRAM

AFTER GATHERING THE INFORMATION ASSIGN RISK

HIGH INTENSITY DRUG TRAFFICKING AREAS

PUBLICATION 519

Unit #5 Other Compliance Issues

THE UNIFORM ELECTRONIC TRANSACTIONS ACT (UETA)

THE ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT (E-SIGN ACT)

AUTHENTICATION IN AN INTERNET BANKING ENVIRONMENT

overview opening accounts online

Why open accounts online?

It is the future. Most large financial institutions allow you to open accounts online and make things very easy for the hardworking public. Many American now do all their shopping and banking without ever entering an institution, it is important to find a way to bank the internet market.

To open bank accounts online you will have to think out the various compliance issues and hire a really good web design company to help you build it.

Unit # 1 CIP and CDD

Unit #2 Signature Cards, Federal Regulations, and W-9 Issues

Unit #3 Products and Funding

Unit #4Risk

Unit #5 Other Regulatory Issues

Many of the online systems have some kind of introductory page. These vary in order and in conversational style but eventually the same units as above have to be accomplished. It is pretty standard but not a compliance issue to tell the customer what the steps they will walk through will be. Many of the online financial institutions do not open accounts for retirement, business or nonresident aliens on line. These will be decisions that you make before you begin. Also one CIP requirement is to give the notice requiring the information from the customer because of the Patriot Act. The online systems frequently put it on the opening page or on the signature card contract. It seems to fit nicely in the beginning where we explain what we will need and why.

SIGN ME UP!

OPEN A BANK ACCOUNT TODAY!

ETC.

These are the steps that must be completed to open your online bank account:

  1. Tell us about yourself
  2. Confirm your identity
  3. Complete the contract
  4. Customize and fund your account

Stop application or Continue

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

Unit #1 CIP and CDD COMPONENTS

CUSTOMER IDENTIFICATION PROGRAM (CIP): BSA REQUIREMENTS

1.Overview

The regulations are added to the Bank Secrecy Act in an attempt to deter terrorism and money laundering. These regulations require all financial institutions to implement a Customer Identification Program. Identify the customer once at the beginning of the relationship.

2.Purpose

The regulations must contain certain requirements. At a minimum the regulations must require financial institutions to implement reasonable procedures for

  • Verifying the identity of any person who opens an account to the extent reasonable and practicable;
  • Maintaining records of the information used to verify the person’s identity, including name, address, and other identifying information; and
  • Determining whether the person appears on any lists of known or suspected terrorists of terrorist organizations provided to the financial institution by any government agency.

CIP COMPLIANCE the big picture

Information Required

(Prior to opening an account)

+

Verification through documents

(Reasonable time after opening account*)

+

Nondocumentary verification

(Reasonable time after opening account*)

+

326 Government List Check

+

Recordkeeping

+

Customer Notice

=

CIP COMPLIANCE

*Some banks require documents and nondocument verification before accounts is opened. You must follow your CIP.

IS IT AN ACCOUNT OR CUSTOMER AS DEFINED IN CIP?

1

Opening Deposit Accounts ONLINE 2016

© gettechnical inc

ACCOUNT

1.Account

“Account means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.”

“Account does not include:

  1. A product or service where a formal banking relationship is not established with a person, such as check-cashing, wire transfer, or sale of a check or money order;
  2. An account that the bank acquires through an acquisition, merger, purchase of assets, or assumption of liabilities; or
  3. An account opened for the purpose of participating in an employee benefit plan established under the Employee Retirement Income Security Act of 1974.”

Key points:

“Business relationship” was deleted from the final definition to exclude the bank’s own business dealings in the operation of the bank.

The new revised definition now has a list of what is included. The new definition also has a list of what is excluded such as sales of money orders, wires, etc. These already have recordkeeping requirements.

Also, the new definition excludes any accounts acquired through merger, acquisition, purchase of assets, or assumption of liabilities from any third party. These transfers are not initiated by the customer and therefore do not constitute an account.

The new definition excluded accounts of employee benefit plans since these come generally from payroll deductions and are not high risk for money laundering and terrorism.

CUSTOMER

“Customer means:

i)A person that opens a new account; and

ii)An individual who opens a new account for:

  1. An individual who lacks legal capacity, such as a minor; or
  2. An entity that is not a legal person, such as a civic club.”

“Customer does not include:

i)A financial institution regulated by a Federal functional regulator or a bank regulated by a state bank regulator;

ii)A person described in 31 CFR X; or These are Phase I Exemptions

iii)A person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of the person.” (To do this you had to grandfather existing customers 10-1-2003 in your policy).

Verification of identification will not be required for existing customers of a bank if the bank has a reasonable belief that it knows the identity of the customer.

The new definition does not include Phase I exemptions—government entities, business traded on the stock exchanges, their subsidiaries, financial institutions

The new definition “a person that opens a new account” would not require the bank to look through trust, escrow, or similar accounts to verify the identities of beneficiaries and instead would only require the bank to identify the named accountholder.

In the case of brokered deposits, the “customer” will be the broker that opens the deposit account.

The final rule provides that “customer” means “an individual who opens a new account for (1) an individual who lacks legal capacity, such as a minor; or (2) an entity that is not a legal person, such as a civic club.”

The final rule took out signatories as customers but stated on risk based assessment of a new account, a bank may need to take additional steps to verify the identity of the customer by seeking information about individuals with ownership or control over the account in order to identify the customer. You will have to address situations when you will take additional steps to verify the identity of the customer.

CIP has many exemptions on businesses but this only applies to their domestic operations

THE INFORMATION

*To open an account for a nonresident alien. CIP says ITIN, Passport or other such number. W-8BEN instructions require an ITIN on an interest-bearing account.

INFORMATION REQUIRED BY CIP

(i) Customer information required.

(A) Ingeneral. The CIP must contain procedures for opening an account that specify the identifying information that will be obtained from each customer. Except as permitted by paragraphs (b) (2) (i) (B) and (C) of this section, the bank must obtain, at a minimum, the following information from the customer prior to opening an account:

(1) Name;

(2) Date of birth, for an individual;

(3) Address, which shall be:

(i) For an individual, a residential or business street address;

(ii) For an individual who does not have a residential or business street address, an Army Post Office (APO) or Fleet Post Office (FPO) box number, or the residential or business street address of next of kin or of another contact individual; or

(iii) For a person other than an individual (such as a corporation, partnership, or trust), a principal place of business, local office, or other physical location; and

(4) Identification number, which shall be:

(i) For a U.S. person, a taxpayer identification number; or

(ii) For a non-U.S. person, one or more of the following: a taxpayer identification number; passport number and country of issuance; alien identification card number; or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.

Note to paragraph (b) (2) (i) (A) (4) (ii): When opening an account for a foreign business or enterprise that does not have an identification number, the bank must request alternative government-issued documentation certifying the existence of the business or enterprise.

(B) Exception for persons applying for a taxpayer identification number. Instead of obtaining a taxpayer identification number from a customer prior to opening the account, the CIP may include procedures for opening an account for a customer that has applied for, but has not received, a taxpayer identification number. In the case, the CIP must include procedures to confirm that the application was filed before the customer opens the account and to obtain the taxpayer identification number within a reasonable period of time after the account is opened.

Here is what you will need to open an account online today:

Have the following ready for each person to be listed on the account:

Social Security Number (You will have to make a decision on whether to opennonresident alien accounts online. You could refer the customer to an 800 phone number or to a local branch)

Driver’s license or state-issued identification

E-mail address (You can send disclosures electronically or have a package sent to the customer afterwards and have them sign and send back.)

Your bank information and routing numbers

Home address (Physical address)

Birth date

If a nonresident alien, a Green Card or complete passport and on interest bearing accounts an ITIN number (If you decide to bank nonresident aliens online because of the high risk status)

Email address

After completing the application we will mail you a packet containing the account acceptance form and other important information concerning your account. You should receive this within 10 business days.

You will need to sign the forms and get them back to us in a postage-paid envelope.

Are you an existing customer of ABC Bank? Remember much less to do if an existing customer.

Yes

No

Don’t forget your FDIC logo!

ContinueCancel

WORKSHEET ON INFORMATION

CIP PROFILE PERSONAL ACCOUNTS
COMPLETE CIP PROFILE FOR EACH OWNER OR FIDUCIARY ON ACCOUNT (SOME BANKS MAY REQUIRE ONE ON EVERY SIGNER)
CUSTOMER NAME
(AS IT APPEARS ON PRIMARY IDENTIFICATION)
PHYSICAL ADDRESS
DATE OF BIRTH
SSN OR ITIN
(IF NO SSN OR ITIN, PASSPORT NUMBER OR OTHER IDENTIFICATION NUMBER)

Some points to remember:

You will need this information on every owner of the account.

If you are going to allow agents or authorized signers you will need to check state law issues. Some banks require CIP on signatories too. You will need to identify signatories if that is your policy. Because of the higher risk of online bank accounts, you may wish to have information on every person that touches the account. These decisions are risk based decisions and are made individually by your financial institution.

You can also ask for a mailing address if different than the physical address. Some people still like mail to go to a P. O. Box number for many reasons.

If you plan to send electronic disclosures and confirmation you may ask for an email address.

CIP PROFILE BUSINESS ACCOUNTSCOMPLETE CIP PROFILE
IF YOUR BANK REQUIRES INFORMATION ON ALL SIGNERS THEN USE PERSONAL SHEET ABOVE
BUSINESS NAME OR DBA NAME
(AS IT APPEARS ON GOVERNMENT ISSUED DOCUMENT)
PHYSICAL ADDRESS
SSN OR EIN
Sole Proprietors and Single member LLCs may use SSN of the owner

Some points to remember in opening business accounts:

Your customer is the business. However some banks require CIP on all signatories. If this is your policy your screens with have to allow the individuals with control over the business to be identified. It seems that you might want some information on the owners for identification purposes down the road. Whether or not you run full CIP is up to your CIP policy.

You will be getting EINs or SSNs depending on the business type. Again here if the business is a non US business you may want them to call the 800 number or go to a local branch.

Many banks do not open business accounts online unless it is an existing customer. Business accounts are higher risk. Sometimes on the screen you will see a screen that says “If this is a business account, call 1-800-XXX-XXXX”.

DOCUMENTARY AND NONDOCUMENTARY VERIFICATION

Customer Verification. The CIP must contain procedures for verifying the identity of the customer, using information obtained in accordance with paragraph (b) (2) (i) of this section, within a reasonable time after the account is opened. The procedures must enable the bank to form a reasonable belief that it knows the true identity of each customer. These procedures must be based on the bank’s assessment of the relevant risks, including those presented by the various types of accounts maintained by the bank, the various methods of opening accounts provided by the bank, the various types of identifying information available, and the bank’s size, location, and customer base. At a minimum, these procedures must contain the elements described in this paragraph (b) (2).