(1) In general. A broker-dealer must establish, document, and maintain a written
Customer Identification Program (“CIP”) appropriate for its size and
business that, at a minimum, includes each of the requirements of
paragraphs (a)(1) through (a)(5) of this section. The CIP must be
a part of the broker-dealer’s anti-money laundering compliance program
required under 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 broker-dealer to form
a reasonable belief that it knows the true identity of each customer.
The procedures must be based on the broker-dealer’s assessment of
the relevant risks, including those presented by the various types
of accounts maintained by the broker-dealer, the various methods of
opening accounts provided by the broker-dealer, the various types
of identifying information available and the broker-dealer’s size,
location and customer base. At a minimum, these procedures must contain
the elements described in this paragraph (a)(2).
(i) (A) Customer
information required. The CIP must contain procedures for opening
an account that specify identifying information that will be obtained
from each customer. Except as permitted by paragraph (a)(2)(i)(B)
of this section, the broker-dealer 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 a next of kin or 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, a passport number and 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 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 customer 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 customer
opens the account and to obtain the taxpayer identification number
within a reasonable period of time after the account is opened.
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(ii) Customer verification. The CIP
must contain procedures for verifying the identity of each customer,
using information obtained in accordance with paragraph (a)(2)(i)
of this section, within a reasonable time before or after the customer’s
account is opened. The procedures must describe when the broker-dealer
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 broker-dealer
relying on documents, the CIP must contain procedures that set forth
the documents the broker-dealer will use. These documents may include:
(1) For an individual, an 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 a trust instrument.
(B) Verification through non-documentary methods. For a broker-dealer
relying on non-documentary methods, the CIP must contain procedures
that set forth the non-documentary methods the broker-dealer 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;
or obtaining a financial statement.
(2) The broker-dealer’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 broker-dealer is not
familiar with the documents presented; the account is opened without
obtaining documents; the customer opens the account without appearing
in person at the broker-dealer; and where the broker-dealer is otherwise
presented with circumstances that increase the risk that the broker-dealer
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 broker-dealer’s
risk assessment of a new account opened by a customer that is not
an individual, the broker-dealer will obtain information about individuals
with authority or control over such account. This verification method
applies only when the broker-dealer 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 broker-dealer cannot form a reasonable
belief that it knows the true identity of a customer. These procedures
should describe:
(A) When the broker-dealer should not open
an account;
(B) The terms
under which a customer may conduct transactions while the broker-dealer
attempts to verify the customer’s identity;
(C) When the broker-dealer should close an
account after attempts to verify a customer’s identity fail; and
(D) When the broker-dealer
should file a Suspicious Activity Report in accordance with applicable
law and regulation.
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(3) Recordkeeping. The CIP must include procedures for making and
maintaining a record of all information obtained under procedures
implementing 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 a customer under paragraphs (a)(2)(ii)(B) and (C)
of this section; and
(D)
A description of the resolution of each substantive discrepancy discovered
when verifying the identifying information obtained.
(ii) Retention of records. The broker-dealer
must retain the records made under paragraph (a)(3)(i)(A) of this
section for five years after the account is closed and the records
made under paragraphs (a)(3)(i)(B), (C) and (D) of this section for
five years after the record is made. In all other respects, the records
must be maintained pursuant to the provisions of 17 CFR 240.17a-4.
(4) Comparison with government lists. The CIP
must include procedures for determining whether a customer appears
on any list of known or suspected terrorists or terrorist organizations
issued by any Federal government agency and designated
as such by Treasury in consultation with the Federal functional regulators.
The procedures must require the broker-dealer 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
also must require the broker-dealer to follow all Federal directives
issued in connection with such lists.
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(5) (i) Customer notice. The CIP must include procedures
for providing customers with adequate notice that the broker-dealer
is requesting information to verify their identities.
(ii) Adequate notice. Notice is adequate if
the broker-dealer generally describes the identification requirements
of this section and provides such 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 upon
the manner in which the account is opened, a broker-dealer may post
a notice in the lobby or on its Web site, include the notice on its
account applications or use any other form of oral or written notice.
(iii) Sample notice. If appropriate, a broker-dealer
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 another financial institution. The CIP may include procedures specifying when the broker-dealer
will rely on the performance by another financial institution (including
an affiliate) of any procedures of the broker-dealer’s CIP, with respect
to any customer of the broker-dealer that is opening an account or
has established an account or similar 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 regulated
by a Federal functional regulator; and
(iii) The other financial institution
enters into a contract requiring it to certify annually to the broker-dealer
that it has implemented its anti-money laundering program, and that
it will perform (or its agent will perform) specified requirements
of the broker-dealer’s CIP.
