Customer Identification Program (CIP)

Financial institutions combat ID theft & optimize compliance to deter theft

According to provisions of the USA Patriot Act, all Financial Institutions ("FI") must verify the identity of individuals wishing to conduct financial transactions. Section 326 of the USA Patriot Act requires FI's to develop a Customer Identification Program (CIP) appropriate to the size and type of its business. Each FI must incorporate a CIP into their Bank Secrecy Act/Anti-money laundering compliance program.

For purposes of these regulations, a “financial institution” is not restricted only to depositor institutions such as banks and credit unions, but also includes any business that handles a “Covered Account”. This can include retail stores, any business that transfers funds or sells money orders, any business that issues credit, and businesses that handle financial accounts, such as stock brokers and securities dealers. 

 

The Customer Identification Program
(CIP)

implemented by any financial institution must include procedures for opening new accounts with specific instructions (consistent with legal and regulatory frameworks) regarding the identification information that will be obtained from each customer as well as reasonable procedures for verifying the validity of the identity of each customer. Financial institutions should conduct a risk assessment of their customer base and product offerings, and in determining the risks, consider:

Complying with (CIP)

A financial institution using documentary methods to verify a customer’s identity must have procedures that set forth the minimum acceptable documentation. The CIP must contain procedures for verifying the identity of the customer within a reasonable period of time after the account is opened. The verification procedures must use the identifying information obtained by the financial institution. An FI need not establish the accuracy of every element of identifying information obtained, but it must verify enough information to form a reasonable belief that it knows the true identity of the customer. At a minimum, they must retain the identifying information (name, address, date of birth for an individual, TIN, and any other information required by the CIP) obtained at account opening for a period of five years after the account is closed.  For credit cards, the retention period is five years after the account closes or becomes dormant.

Detect fraud, Comply with regulations and verify Id instantly

Fraud Fighter™ products enable organizations to develop a comprehensive effort to categorize risks and then provide branch or store locations with equipment intended to provide a “layered” approach designed to satisfy CIP requirements. Since the CIP Rule allows great flexibility for each institution to adopt procedures appropriate to its own size and customer base, the ability to structure a procedure that places low-cost “ID validation” equipment at the point-of-transaction, with more sophisticated “ID authentication” equipment where it will be available to resolve “Red Flag” issues is an example of an intelligently layered approach and a win-win. 

Financial institutions are able to comply with regulations, combat terrorist funding, prevent losses from ID fraud, and protect their customers all without investing large amounts into capital equipment or expensive training programs.