USA PATRIOT Act of 2001, Section 326
Customer Identification Program (CIP) Policy

Introduction:

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept And Obstruct Terrorism Act (USA PATRIOT Act of 2001) was signed into law by President Bush on October 26, 2001.

This Act was created in response to the terrorists’ attacks of September 11, 2001. By passing this Act, Congress gives regulatory powers to the Treasury Department in order to enforce the new laws, penalties and procedures created as a result of the Act. The primary purpose of the Act is to expand the regulatory framework designed to protect the United States financial system from illegal misuse (such as money laundering,), including the financing of terrorism.

Fortuitously, this new regulation will also aid in the fight against identity theft.

This Act has also been referred to as the “Know Your Customer” rule.

In order for the Treasury department to do their job with regards to the PATRIOT Act, they must rely on the IRS in administering the Bank Secrecy Act (BSA) and the IRS’s partnership with the Financial Crimes Enforcement Network (FinCEN), as well as work closely with the Office of Foreign Asset Control (OFAC). Together, these agencies along with the Patriot Act serve to strengthen the U.S. defense against illegal financial activities such as money laundering.

Section 326 of the USA PATRIOT ACT requires financial institutions to create and comply with a Customer Identification Program (CIP). The government provides flexibility in the law so that we can create our own CIP that is appropriate for our business. There are 4 important components of Section 326:

  1. Identify Your Customer
  2. Verify the Identification/Recordkeeping
  3. Compare the identity to the government terrorist list (OFAC list)
  4. Provide Notice to the Customer (Disclosure that we verify their identity)

Definitions:

FinCEN was created in 1990. It is also a part of the Treasury department and has regulatory responsibility as well as law enforcement authority. FinCEN has great expertise in money laundering and financial crimes. They are experts at analyzing the data collected through BSA and other sources, including “intelligence” in their fight against this unique type of crime.

OFAC – The Office of Foreign Asset Control, An office of the Treasury Department. OFAC administers and enforces economic and trade sanctions against targeted foreign countries, terrorist organizations and international narcotics traffickers, in compliance with foreign policy and national security goals.

Bank Secrecy Act – BSA was implemented by the government to aid in the fight against drug trafficking, money laundering and other crimes. The intention of the law is to prevent banks/financial services providers from becoming used as intermediaries or to hide the transfer or deposits of money used for criminal activity.

Customer Identification Program Coordinator

MMCI designates Sandra D. Gausch (Sandie) as coordinator of this program.