Compliance with Customer Identification Program (CIP)

Compliance with Customer Identification Program (CIP)

There is no federal or state law or regulation that restricts banks from providing financial products to customers because the customer is not a U.S. Citizen of legal permanent resident. Under federal law, alienage is merely one factor among many used to verify enough information to confirm the true identity of the customer.  For instance, the Federal Financial Institutions Examination Council (“FFIEC”) provides uniform principles and standards to offer guidance for federal regulators.  The FFIEC annually publishes the Bank Secrecy Act/Anti-Money Laundering Examination Manual for Money Services, which contains a compliance program called the Customer Identification Program (“CIP”), as required by section 326 of the USA PATRIOT Act, 31 U.S.C. § 5318.

Pursuant to CIP, institutions providing financial services, including banks, must have a written policy in place to enable them to form a reasonable belief that they know the true identity of each customer.  The goal behind this requirement is to prevent the funding of terrorism both inside and outside of the United States.  According to the Bank Secrecy Act/Anti-Money Laundering Examination Manual, a bank’s CIP must contain account-opening procedures detailing the identifying information that must be obtained from each customer.  At a minimum, the bank must obtain the following information from each customer before opening an account: 1) name, 2) date of birth, 3) address, and 4) identification number (e.g., Social Security number, taxpayer identification number or an alien identification number.  The bank’s procedure must also describe when it will use documents, non-documentary methods, or a combination of both.  Federal banking agencies expect that banks will review an unexpired government-issued form of identification from most customers.  The identification must include evidence of the customer’s nationality or residence and bear a photograph or similar safeguard.

Compliance with the CIP is to ensure that a bank verify enough information to form a reasonable belief that it knows the true identity of the customer.  “Opening an account” and a financial services “customer” for purposes of the Bank Secrecy Act/Anti Money Laundering Examination Manual for Money Services includes an individual who has applied for a loan application.