CBA Publications >> CBA Regulatory Compliance Bulletin >> Vol 2003 No.10
September 22, 2003

Vol 2003 No. 10 September 22, 2003

Treasury Declines to Amend Section 326 Rules

The Department of the Treasury announced the results of its "notice of inquiry" that would have amended the customer identity program ("CIP") requirements of Section 326 of the USA PATRIOT Act even before they became effective in October. The notice sought comment on whether financial institutions should be required to retain photocopies of identification documents, and whether they should be prohibited from accepting certain forms of foreign identification.

After reviewing over thirty thousand comments, Treasury decided not to change the final rule. The rule, issued in May, required financial institutions only to maintain certain information included in identification documents. A financial institution's board is responsible for approving the CIP that includes procedures designed to enable the institution to form a reasonable belief that it knows the true identity of the customer. The risk-based procedures do not require, as a matter of course, obtaining a copy of the identification used.Treasury also declined to prohibit outright reliance on specific identifying documents issued by foreign governments. It reaffirmed the risk-based approach outlined in the final rule, which allows financial institutions to exercise discretion to meet the identification and verification requirements of Section 326.

The agency added that when an institution decides to accept a particular form of identification, it must assess risks associated with that document and take whatever reasonable steps that may be required to minimize that risk. From time to time, federal regulators may notify the industry of problems with specific documents, which will require institutions to take appropriate steps to address those risks. One tangible result of the ruling is that the Metricula Consular cards will likely to continue to be accepted by banks.

In coming to this ruling, it is revealing that the Treasury announced an exact count of the number of letters for and against each proposal, including the percentage of "no votes" (89.90% as to the photocopy requirement and 82.73% as to the foreign ID requirement) carried out to two decimal points. This graphically confirms, sadly, that the public comment process is becoming less about the triumph of ideas and reason and more about votes.

If you have any questions about this ruling, you may contact Leland Chan, CBA General Counsel at 415-284-6999 x214.