(1) In general. A mutual fund must implement a written Customer Identification Program
(“CIP”) appropriate for its size and type of business that, at a minimum,
includes each of the requirements of paragraphs (a)(1) through (5)
of this section. The CIP must be a part of the mutual fund’s anti-money
laundering program required under the regulations implementing 31
U.S.C. 5318(h).
(2) Identity verification procedures. The CIP
must include risk-based procedures for verifying the identity of each
customer to the extent reasonable and practicable. The procedures
must enable the mutual fund to form a reasonable belief that it knows
the true identity of each customer. The procedures must be based on
the mutual fund’s assessment of the relevant risks, including those
presented by the manner in which accounts are opened, fund shares
are distributed, and purchases, sales and exchanges are effected,
the various types of accounts maintained by the mutual fund, the various
types of identifying information available, and the mutual fund’s
customer base. At a minimum, these procedures must contain the elements
described in this paragraph (a)(2).
(i) Customer information required.
(A) In general. The CIP must contain procedures for opening an account
that specify the identifying information that will be obtained with
respect to each customer. Except as permitted by paragraph (a)(2)(i)(B)
of this section, a mutual fund must obtain, at a minimum, the following
information 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.
*(B) Exception for persons applying for a taxpayer identification number. Instead of obtaining a taxpayer identification number from a customer
prior to opening an account, the CIP may include procedures for opening
an account for a person that has applied for, but has not received,
a taxpayer identification number. In this case, the CIP must include
procedures to confirm that the application was filed before the person
opens the account and to obtain the taxpayer identification number
within a reasonable period of time after the account is opened.
3-1726.81
(ii) Customer verification. The CIP must contain
procedures for verifying the identity of the customer, using
the information obtained in accordance with paragraph (a)(2)(i) of
this section, within a reasonable time after the account is opened.
The procedures must describe when the mutual fund will use documents,
non-documentary methods, or a combination of both methods as described
in this paragraph (a)(2)(ii).
(A) Verification through documents. For a mutual fund relying on
documents, the CIP must contain procedures that set forth the documents
that the mutual fund will use. These documents may include:
(1) For an individual, unexpired government-issued
identification evidencing nationality or residence and bearing a photograph
or similar safeguard, such as a driver’s license or passport; and
(2) For a person
other than an individual (such as a corporation, partnership, or trust),
documents showing the existence of the entity, such as certified articles
of incorporation, a government-issued business license, a partnership
agreement, or trust instrument.
(B) Verification
through non-documentary methods. For a mutual fund relying on
non-documentary methods, the CIP must contain procedures that describe
the non-documentary methods the mutual fund will use.
(1) These methods may include contacting
a customer; independently verifying the customer’s identity through
the comparison of information provided by the customer with information
obtained from a consumer reporting agency, public database, or other
source; checking references with other financial institutions; and
obtaining a financial statement.
(2) The mutual fund’s non-documentary
procedures must address situations where an individual is unable to
present an unexpired government-issued identification document that
bears a photograph or similar safeguard; the mutual fund is not familiar
with the documents presented; the account is opened without obtaining
documents; the customer opens the account without appearing in person;
and where the mutual fund is otherwise presented with circumstances
that increase the risk that the mutual fund will be unable to verify
the true identity of a customer through documents.
(C) Additional verification for certain customers. The CIP must
address situations where, based on the mutual fund’s risk assessment
of a new account opened by a customer that is not an individual, the
mutual fund will obtain information about individuals with authority
or control over such account, including persons authorized to effect
transactions in the shareholder of record’s account, in order to verify
the customer’s identity. This verification method applies only when
the mutual fund cannot verify the customer’s true identity using the
verification methods described in paragraphs (a)(2)(ii)(A) and (B)
of this section.
(iii) Lack
of verification. The CIP must include procedures for responding
to circumstances in which the mutual fund cannot form a reasonable
belief that it knows the true identity of a customer. These procedures
should describe:
(A) When the mutual fund should not open an
account;
(B) The terms
under which a customer may use an account while the mutual fund attempts
to verify the customer’s identity;
(C) When the mutual fund should file a Suspicious
Activity Report in accordance with applicable law and regulation;
and
(D) When the mutual
fund should close an account, after attempts to verify a customer’s
identity have failed.
3-1726.82
(3) Recordkeeping. The CIP must include procedures for making and
maintaining a record of all information obtained under paragraph (a)
of this section.
(i) Required
records. At a minimum, the record must include:
(A) All identifying
information about a customer obtained under paragraph (a)(2)(i) of
this section;
(B) A description
of any document that was relied on under paragraph (a)(2)(ii)(A) of
this section noting the type of document, any identification number
contained in the document, the place of issuance, and if any, the
date of issuance and expiration date;
(C) A description of the methods and the results
of any measures undertaken to verify the identity of the customer
under paragraph (a)(2)(ii)(B) or (C) of this section; and
(D) A description of the resolution
of any substantive discrepancy discovered when verifying the identifying
information obtained.
(ii) Retention
of records. The mutual fund must retain the information in paragraph
(a)(3)(i)(A) of this section for five years after the date the account
is closed. The mutual fund must retain the information in paragraphs
(a)(3)(i)(B), (C), and (D) of this section for five years after the
record is made.
(4) Comparison
with government lists. The CIP must include procedures for determining
whether the customer appears on any list of known or suspected terrorists
or terrorist organizations issued by any Federal government agency
and designated as such by the Department of the Treasury in consultation
with the Federal functional regulators. The procedures must require
the mutual fund to make such a determination within a reasonable period
of time after the account is opened, or earlier, if required by another
Federal law or regulation or Federal directive issued in connection
with the applicable list. The procedures must also require the mutual
fund to follow all Federal directives issued in connection with such
lists.
3-1726.83
(5) (i) Customer notice. The CIP must include procedures for providing
mutual fund customers with adequate notice that the mutual fund is
requesting information to verify their identities.
(ii) Adequate
notice. Notice is adequate if the mutual fund generally describes
the identification requirements of this section and provides the notice
in a manner reasonably designed to ensure that a customer is able
to view the notice, or is otherwise given notice, before opening an
account. For example, depending on the manner in which the account
is opened, a mutual fund may post a notice on its Web site, include
the notice on its account applications, or use any other form of written
or oral notice.
(iii) Sample notice. If appropriate,
a mutual fund may use the following sample language to provide notice
to its customers:
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.
(6) Reliance on other financial institutions. The CIP may include procedures specifying when a mutual fund will
rely on the performance by another financial institution (including
an affiliate) of any procedures of the mutual fund’s CIP, with respect
to any customer of the mutual fund that is opening, or has opened,
an account or has established a similar formal business relationship
with the other financial institution to provide or engage in services,
dealings, or other financial transactions, provided that:
(i) Such reliance is reasonable under
the circumstances;
(ii) The other financial institution is subject to a rule implementing
31 U.S.C. 5318(h) and is regulated by a Federal functional regulator;
and
(iii) The other
financial institution enters into a contract requiring it to certify
annually to the mutual fund that it has implemented its anti-money
laundering program, and that it (or its agent) will perform the specific
requirements of the mutual fund’s CIP.
