Compliance Center: Members Wanting to Open Accounts Without Providing Any Taxpayer Identification Number

It seems like every few years there is a resurgence of online information purportedly telling people that they do not have to provide the SSN when opening an account with a financial institution. For some reason these seem to tend to come around during election years.

These sites typically have detailed instructions on how one would go about it, snippets of law on regulation they are using to support their belief, and even forms to provide a financial institution that state you are violating their rights if you don’t open an account for them.

While it may seem a bit intimidating when a MSR or branch manager is presented with a Constructive Notice, they are attempting to get you to do something that is a clear violation of FinCEN’s BSA requirements under the U.S.A. Patriot Act.

A look at one of the websites that has an article on how to open an account at any bank without using SSN is fairly interesting. Besides the numerous spelling errors in the article, the site that hosts it clearly has disclosures that it is from an outside unknown author and they do not provide legal advice.

Further the article, Constructive Notice, and Bank Notice make multiple references to 31 CFR part 103.  FinCEN moved part 103 into chapter X back in March of 2011, so the citations are outdated. But the main argument the author uses to support his assertion is from 31 CFR 103.28.

Before concluding any transaction with respect to which a report is required under Sec. 103.22, a financial institution shall verify and record the name and address of the individual presenting a transaction, as well as record the identity, account number, and the social security or taxpayer identification number, if any, of any person or entity on whose behalf such transaction is to be effected.

The wording from 31 CFR 103.28 is now found in 31 CFR 1010.312 which does contain the “if any,” verbiage… but the author misses that the Identification Required is actually the requirement when completing the reports of transactions in currency and not your account opening Customer Identification Program.

The requirement for account opening is found in 31 CFR 1020.220 which requires a financial institution to obtain at account opening:

(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, there is no “if any” in obtaining the identification number for a U.S. person.  You are required to obtain the taxpayer identification number.

If after explaining to the potential member that you are unable to open the account for them unless they provide you with their taxpayer identification number they are threatening you with legal action, or reporting you to that attorney general’s office or State representative, it may be in the credit union’s interest to contact your legal counsel.  

Compliance Question of the Week

How do I verify the identity of a non-U.S. person or an undocumented individual who has no driver’s license or passport?

According to the Bank Security Act, Customer Identification Program (CIP) allows verification of identity by either documentary or non-documentary methods. You are required to get an identification number but the number does not necessarily have to be a taxpayer identification number if the individual is a non-U.S. person. The identification number can be an alien identification number or other government identification number from the individual’s country of residence. Additionally, if you can confirm that that the individual has applied for a TIN and that you can get the TIN within a reasonable period of time after the account is opened, you can open the account with an identification number.

Related Links

31 CFR 1020.220 (a)(2)(i)-(iii)

Legal Briefs

National Credit Union Administration (NCUA)

Registration for the NCUA’s CUSO Registry Webinar is now open. Interested CUSOs and credit unions can register here

Consumer Financial Protection Bureau (CFPB)

The CFPB announced a number of steps they are taking to improve access to checking accounts. These steps include a letter to financial institutions, urging them to offer and promote accounts that do not allow overdrafts, issuing a bulletin to financial institutions regarding the information they report on checking accounts, alerting consumers to ways they can access their checking account history and dispute items, and guides that aid consumers in managing their checking accounts.  

CFPB Director Cordray delivered prepared remarks at a Field Hearing on Checking Account Access. Corday’s speech covered the amount of unbanked households in the nation, the reasons why individual choose not to have accounts, and how the CFPB can help address these issues. 

CFPB Director Cordray delivered prepared remarks at the Financial Literacy and Education Commission Meeting. The remarks focused on the tools that the CFPB has developed to help consumers better manage their money as well as tools developed to help college students understand financial aid and paying for college tuition.

The CFPB announced that it will be holding a webinar on TRID and Construction Lending on Tuesday, March 1, 2016. Credit unions can register for the webinar here

Federal Reserve Board (FRB)

The FRB released its progress report on its strategies for improving the U.S. Payment System.

The FRB released its most current G.19 Consumer Credit Report.

The February issue of FedFocus is now available. 

Financial Crimes Enforcement Network (FinCEN)

FinCEN published a notice for request and comments on proposed revisions to the Currency Transaction Report (CTRs) form. The CTR has not been updated since 2011 and FinCEN is proposing changes that would address some concerns, including updates to accommodate shared branching transactions. Comments are due on April 4, 2016.

Federal Housing Finance Administration (FHFA)

The FHFA announced that it has implemented an independent dispute resolution process for resolving repurchase disputes. This program enables lenders to submit their disputes through a neutral third party and is available for loans delivered to Fannie Mae and Freddie Mac on or after January 1, 2016.

Federal Housing Administration (FHA)

The FHA announced that it issued a new multifamily handbook, which combines all FHA Multifamily underwriting policies into a single manual. 

Internal Revenue Service (IRS)

The IRS and U.S. Treasury released a statement asking financial institutions to encourage consumers to use direct deposit for tax refunds for the 2016 tax-filing season.

Federal Deposit Insurance Corporation (FDIC)

The FDIC released its Winter 2016 Supervisory Insights Journal. This issue highlights cybersecurity, marketplace lending, and a regulatory and supervisory roundup. 

Department of Defense (DoD)

The DoD has announced that it will extend requests for direct access to its Defense Manpower Data Center (DMDC) through February 15, 2016. Credit unions can request access to this database by sending an email to dodhra.dodc-mb.dmdc.mbx.mla@mail.mil.  

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of February 03, 2016. The last update prior to this was February 01, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News.