31 C.F.R. §103.121(a)(2)
Definition of “bank”
1. Is the CIP rule applicable to a bank’s foreign
subsidiaries?
No. The CIP rule does not apply to any part of the bank located
outside of the United States. Nevertheless, as a matter of safety
and soundness, banks are encouraged to implement an effective CIP
throughout their operations, including in their foreign offices,
except to the extent that the requirements of the rule would conflict
with local law.
31 C.F.R. § 103.121(a)(3)
Definition of “customer”
1. Who is the “customer” when an account is
opened by an individual who has power-of- attorney for a competent
person who is the named owner of the account?
The CIP rule provides that a “customer” generally is
“a person that opens a new account.” 31 C.F.R. §
103.121(a)(3)(i)(A). When an account is opened by an individual
who has power-of-attorney for a competent person, the individual
with a power-of-attorney is merely an agent acting on behalf of
the person that opens the account. Therefore, the “customer”
will be the named owner of the account rather than the individual
with a power-of-attorney over the account. By contrast, an individual
with power-of-attorney will be the “customer” if the
account is opened for a person who lacks legal capacity. 31 C.F.R.
§ 103.121(a)(3)(i)(B)(1).
2. Is a person who becomes co-owner of an existing deposit
account a “customer” to whom the CIP rule applies?
Yes, a person who becomes the co-owner of an existing deposit account
is a “customer” subject to the CIP rule because that
person is establishing a new account relationship with the bank.
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3. Is a new borrower
who is substituted for an existing borrower through an assumption
of a loan a “customer” to whom the CIP rule applies?
Yes, a new borrower who is substituted for an existing borrower through
an assumption of a loan
is a “customer” because the new borrower is establishing
a new account relationship with the bank.
4. The CIP rule requires a bank to verify the identity of
each “customer.” Under the CIP rule, a “customer”
generally is defined as “a person that opens a new account.”
If a pension plan administrator chooses to remove a former employee
from the plan pursuant to section 657(c) of the Economic Growth and
Tax Relief Reconciliation Act of 2001 (EGTRRA), it is required by
law to transfer these funds to a financial institution. In addition,
an administrator of a terminated plan may remove former employees
that it is unable to locate, by transferring their benefits to a financial
institution. Would a plan administrator or the former employee be
a bank “customer” where funds are transferred to a bank
and an account established in the name of the former employee, in
either of these situations?
In either situation, the administrator has no ownership interest
in or other right to the funds, and therefore, is not the bank’s
“customer.” Nor would we view the administrator as acting
as the customer’s agent when the administrator transfers the
funds of former employees in these situations. A customer relationship
arises and the requirements of the rule are implicated when the former
employee “opens” an account. While the former employee
has a legally enforceable right to the funds that are transferred
to the bank, the employee has not exercised that right until he or
she contacts the bank to assert an ownership interest. Thus, in light
of the requirements imposed on the plan administrator under EGTRRA,
as well as the requirements in connection with plan terminations,
the former employee will not be |