The Federal Reserve announced it joined other banking agencies and the Financial Crimes Enforcement Network in permitting banks to obtain a Tax Identification Number from a third party rather than directly from customers.
Details: The Fed said:
The action will grant banks flexibility in how they obtain this information while ensuring that risk-based procedures continue to underpin verification of a customer's identity.
The flexibility from this action is optional.
Prior Action: FinCEN in June issued an ICBA-advocated order permitting banks to collect TIN information from third parties rather than from bank customers. The order was issued in conjunction with the FDIC, OCC, and National Credit Union Administration.
Background: Under the Customer Identification Program (CIP) rule, which was implemented in 2003 under the USA PATRIOT Act, banks are required to collect a full Tax Identification Number—generally a Social Security Number—from U.S. customers prior to opening an account.
What It Means for Community Bankers: FinCEN in June said the exemption is designed to reduce burdens for covered institutions by providing banks with greater flexibility in determining how to fulfill their regulatory obligations without presenting a heightened risk of money laundering, terrorist financing, or other illicit finance activity.
ICBA Call for Flexibility: In a comment letter to FinCEN last year, ICBA said it supports a framework that permits banks to make an independent risk-based decision to collect a partial SSN from a customer and the whole SSN from a third-party source. ICBA cited banks’ robust BSA/AML programs and partnerships with fintech service providers, noting that nonbank competitors are not subject to the same BSA regulatory requirements and oversight.