Home / Due Diligence / Customer Identification Program Requirements – Your Customer Due Diligence Program – Part Three

Customer Identification Program Requirements – Your Customer Due Diligence Program – Part Three

Why write about Customer Identification Program (CIP) requirements? Honestly, not a lot has changed to this area for quite some time. Very true, indeed. However, it never hurts to address a few questions to ensure that no gaps may exist. And, with the upcoming beneficial ownership rule effective on May 11, 2018, it’s important to understand how your CIP procedures connect with the new rule and your overall customer due diligence program. So, let’s roll up our sleeves and get started!

We all know that our CIP is a required part of our BSA compliance programs. As a review, can you confidently answer the following questions about your CIP procedures? Do your procedures:

  • Identify information required to be obtained for customers, which includes name, address, taxpayer identification number, and date of birth for individuals?
  • Identify risk-based identity verification procedures as well as steps that address circumstances in which identity verification can’t be completed?
  • Document your organization’s reliance on another financial institution or a third party, as applicable?
  • Identify steps for checking new accounts against prescribed government lists, as applicable? We all are aware that the government list referred to in the CIP rule doesn’t yet exist, so for now use OFAC and other similar lists.
  • Provide for adequate customer notice?
  • Identify compliance with recordkeeping requirements?
  • Determine whether a Suspicious Activity Report (SAR) should be filed?

That should cover it, right? Currently, yes. However, in a nutshell, as we approach May 11, 2018, you’ll want to make sure that your CIP procedures also include the identification and verification of beneficial owners of legal entity customers. A future article will address these specific requirements. But for now, let’s look at how CIP folds into your overall customer due diligence program.

Consider your CIP as the first step in understanding your customer. This process identifies the ‘who’ and answers the question ‘who am I dealing with?’ It’s like the peeling of an onion. The first layer is to know who you’re dealing with, which is the most important layer. As you’ll see later, once we understand the who, we can then begin to peel back more layers: relative to the who, we can then identify the what, where, when, how; essentially, knowing how your customer is going to act initially and ongoing. Additional layers include identifying the natural person behind the curtain of the company (beneficial owner), and in some cases, performing a more specialized or targeted task of enhanced due diligence.

So, as you can see, your CIP procedures are very critical to your overall customer due diligence process. Now is a great time to review them and make sure they do what’s required of them so that you can build on them for what’s coming.

 

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