knows the true identity of the customer.
Other Considerations: As we noted above, Section
326 requires cross checking account holder and/or requester names
against all government lists of known or suspected terrorist organizations,
which are also known as Restricted or Denied Party Lists. No later
than October 1, 2003, financial institutions will be required to
screen their customer accounts against a new watch list, which is
currently referred to as the Section 326 List. The Department of
the Treasury will create and provide a “Section 326 List”
for this purpose. The final rules also include record-keeping procedures
to document how you verified identity, and a procedure for providing
customers with adequate notice that the financial institution is
requesting information to verify their identities. The notice may
be given individually by copies, or in a way reasonably designed
to ensure that the customer is able to view the notice, such as
in a lobby sign. There is sample language in the regulation.
Prudent Precautions
by Mary Beth Guard, Esq.
Imagine my surprise when I opened the mail today and found a "Confirmation
of Change of Address" from my mortgage company. I didn't know
I had moved!
In fact, I hadn't. And I certainly had not requested a change of
address on my account. My mind started racing, thinking of horrid
possibilities. Was someone trying to steal my identity? Was someone
trying to hijack my credit? Cause me inconvenience or harm?
I immediately called the bank and alerted them to the problem. They
quickly determined that a typo had resulted in the erroneous address
change. A transposition of account numbers placed another customer's
new address on my loan account. It was a relief to know this all
was because of simple human mistake, rather than a deliberately
fraudulent act.
But what if my bank had not sent the written confirmation of change
of address? When - or how - would the problem have been caught and
corrected? What if this had been a deposit account, rather than
a loan account? What if this had been a true case of identity theft
or other fraud? A first class stamp and a simple form letter can
quickly lead to exposure of a
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con artist's
crooked scheme.
You can't totally prevent fraud. But taking prudent precautions to
try to guard against fraud may help your bank minimize its loss. As
a lawyer, I urge you to think in terms of "How would this situation
look or sound to a jury in the event the customer suffers harm and
sues the bank? Will they believe we acted appropriately?" By
taking a few easy - and inexpensive - precautions, you could avoid
litigation or at least significantly improve your position at trial.
Let's say the bank receives a letter that simply says, "Please
change the address on my checking account, #2468 to 45 Cherry St.,
Anytown, NY 12429." You process the address change. Later you
learn that the account holder never authorized the change. Instead,
it was sent by the customer's creepy ex-boyfriend who wanted to see
who she was writing checks to. The customer sues the bank, alleging
negligence and breach of contract. You are chosen to testify on the
bank's behalf to defend the bank's actions.
"We received the request and we promptly acted upon it,"
you say. "Did you attempt to verify with the customer that it
was a valid, legitimate request?" asks the plaintiff's counsel.
At that point, which of the following answers would you prefer to
give?
"Well, no. We didn't. I guess we just assumed that if someone
was requesting a change of address on an account, it would be the
customer."
"Of course we took steps to verify the request was legitimate.
We have very strict procedures that govern customer address changes.
First, we compared the name of the person requesting the change with
the name of the owner on the account. Second, we compared the signature
on the letter with the customer's signature on the signature card.
Third, we sent a letter out to the customer's old address, as well
as the purported new one, confirming the address change."
See the difference?
Here are some additional prudent precautions:
When you open an account for a corporation, send
a letter to the registered service agent listed on the corporate documents,
noting that an account has been opened in the name of the corporation,
by whom, and the date. Thank them for their business and note who
to call if they have questions. If the account was
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