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Customer Identification Programs

By Michael Zeldin, Michael Shepard and Piero Molinario

Section 326 of the USA PATRIOT Act requires financial institutions to implement a written Customer Identification Program (CIP) that is appropriate for the size and type of business and that includes minimum requirements. The CIP is intended to enable the institution to form a reasonable belief that it knows the true identify of each customer. The CIP must include account opening procedures that specify the identifying information to be obtained from each customer. It must also include reasonable and practical risk based procedures for verifying each customer's identity.

During the CIP rule comment period, regulators, industry groups and bankers debated actively whether the final rule should be made retroactive to cover existing as well as future customers, or prospective to cover only customers taken on after the final rule took effect. Most bankers and industry groups favored a prospective application because implementing CIP would create significant burdens requiring changes to policy and procedures, IT systems, internal controls, and other processes. They also argued that requiring banks to modify existing customers' identification information would be overly burdensome, unreasonable, and unproductive.

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