Email #5

MEMBER IDENTIFICATION PROGRAM

Congress passed the USA PATRIOT Act mandating a customer (member) identification program at financial institutions shortly after the terrorist attacks in 2001. The intent was to have you confirm the identity of each person or entity who opens a new deposit or loan account. The requirement became effective in 2003, so now every account ties to an actual person or entity in order to make sure that accounts are not owned by non-existent entities or fraudulent names that might be a front for terrorist financing and money laundering schemes. 


Individual Identification

The basic premise of the MIP requirement is pretty simple -- a credit union collects four pieces of information on each potential member or borrower. 

  • (Full Legal) Name
  • Physical Address
  • Tax Identification Number*
  • Date of Birth 

Once those are collected, each must be verified using documentary and/or non-documentary methods (more on that below) until the credit union establishes a "reasonable belief" of the person's identity. The information is then retained for a period of at least five years. Copies of the items you use for verification are not required if you note the details on your account card or loan application. Credit unions are discouraged from photocopying military IDs or having copies of photo IDs in a loan file, so noting the details can be especially useful in those situations.

 

Entity Identification

For entities, a credit union must verify the entity itself exists, generally with documentation from the Secretary of State or IRS, and can also choose to verify the individuals associated with the entity. Since it is optional to include individual verification with entities, make sure you find out what your credit union policy requires. Entities would include business, trust, and organization accounts. We will discuss the Beneficial Ownership rule that includes business verification in lesson #6 this week.

 

*Non-U.S. Citizens

If you are opening an account for a person who does not have a U.S. taxpayer identification number (TIN), you have the option to accept any one (or more) of the following:

  • a passport number with country of issuance;
  • an alien identification card number; or
  • the number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photo or similar safeguard.

 

With a more diverse population moving into our state or looking for financial services, now is a good time to review your policies and procedures to ensure they provide your credit union with the direction and flexibility needed to assist all members with obtaining credit union services.


Evolving Program 

Hopefully your MIP program has evolved since 2003, just like your credit union. Many credit unions started with a fairly rigid policy and have found more success over the years by being more flexible and offering options when desired documents are not readily available. The regulation itself provides many options for possible documents and verification methods, as described below. If you find places that your program might need other adjustments as your products and services transition, be sure to discuss them with your supervisor or BSA compliance officer.


When you encounter unusual situations for identification or verification, look to your policy for answers first. You can also view the FAQ document that FinCEN released in 2004. It covers many of them and lays out the expectations for such things as minor accounts, fiduciary relationships (i.e. POA), and more. With some of the housing challenges in Montana, homeless individuals might need to be served. There are options to use an address of a family member or known individual, again, if your policy allows it.


It is also reasonable to tie your identification process back to your risk level with the account. There are also current challenges with driver's license renewal appointments and timelines, so using a second method verification may be easier than requiring an unexpired ID for some of your members. This is one area that many policies have evolved in the last twenty years. It helps ensure consumers who need financial services can get them.

VERIFICATION OPTIONS

Documentary

An "unexpired government-issued ID" is the description many credit unions have in their policy for a preferred method of identification.


That might include the following. 



  • Driver's License
  • Passport
  • State Identification Card
  • Tribal ID
  • Military ID


If the employee does not feel they have a "reasonable belief" of the member's identity after viewing a documentary method, they can ask for an additional piece of ID or move to non-documentary methods to reach the standard. 

 

You are not required to use an unexpired ID, but be prepared to do additional verification if you are given an ID that has expired. With the limited hours and closures of many local driver license renewal offices in our state in the last few years, it makes sense to consider adding some policy flexibility here. Credit unions also serve underserved populations that need financial services and don't always have standard or preferred documents.

Non-Documentary

Don't let the word fool you, many of the options for "non-documentary" methods of verification involve documents. A credit union may choose to use one (or more) of the following as secondary identification to reach comfort in verifying the member or entity. 


  • Credit Report
  • Tax Documents
  • Public Databases
  • W-2 or Paystub
  • Student ID
  • Birth Certificate
  • Social Security Card
  • Concealed Weapons Permit
  • Vehicle Registration
  • Contacting References (i.e. previous financial institution)
  • Resources (e.g. tax bill)
  • Articles of Incorporation
  • Assumed Business Name Registration
  • IRS EIN Registration
  • Trust Abstract

The state of Montana has a list what they require to get a drivers license on their REAL ID site. It might be useful if you are looking to update your policy.

Accepting Tribal IDs


Montana requires that "a tribal identification card be treated the same as a Montana identification card for identification purposes." You can visit the Montana Tribal ID cards website for details on each of the ones issued or use this tribal ID poster. It might be worth a visit to see what details you can find so you are familiar with tribal IDs before they are presented to you.

MEMBER NOTICE

The credit union must provide a notice to members explaining that you will request certain information to verify their identity when they open an account. It can be posted in the lobby, on your website, or with loan applications as long as it is seen prior to account opening. The model regulatory language reads as follows:

 

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.


Think about where you've seen the notice in your work area, especially if you have any responsibility for opening accounts. It is not required to be at each teller window, but it should be near the area where accounts are opened, so a lobby notice or placard by the teller line may suffice, but you might need it on member service or loan desks too if accounts are opened in those areas or offices.


Note: Some vendors sell a notice with updated verbiage to reflect the 2018 beneficial ownership requirement. FinCEN did not change the model notice, so you are still in compliance with the original language above. While the newer language is more explanatory, it is not the model that provides you safe harbor, so we don't recommend using it at this time.

Next Topic

MEMBER DUE DILIGENCE

Access the 2023 BSA email series archive on our Compliance Training Tools page after each email sends. You'll also find other BSA and compliance training webinars and materials.

Donya Parrish, VP Risk Management | donya@mcun.coop | 406-459-3497