The Department of the Treasury, Treasury’s Financial Crimes Enforcement Network and seven federal financial regulators (including the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Securities and Exchange Commission) on April 30, 2003 jointly issued final rules implementing Section 326 of the USA PATRIOT Act. The regulations apply to banks and trust companies, savings associations, credit unions, securities brokers and dealers, mutual funds, futures commission merchants and futures introducing brokers.

In July 2002, Treasury announced proposed rules implementing Section 326, which were to be effective October 25, 2002. However, in October 2002, the Treasury Department issued a press release advising all financial institutions that they would not be required to comply with Section 326 or the proposed rules until final implementing regulations were issued and became effective.

The final rules require that financial institutions develop a Customer Identification Program (CIP) that implements reasonable procedures to:

  • Collect identifying information about a customer opening an account;
  • Verify the customer’s identity;
  • Maintain records of the information used to verify identity; and
  • Determine whether a customer appears on any list of suspected terrorists or terrorist organizations.

In addition, the meanings of “customer” and “account” have been further defined.

The final rule also contains a provision that permits a financial institution to rely on another regulated U.S. financial institution to perform any part of the financial institution’s CIP.

The rules are effective June 9, 2003, but financial institutions will have until October 1, 2003 to comply.

Judy Scheiderer