On May 9, 2003, the United States Department of Treasury, the Financial Crimes Enforcement Network and the federal financial regulators announced final regulations implementing customer identification and verification requirements under Section 326 of the USA PATRIOT Act. The rule requires that financial institutions develop a Customer Identification Program (CIP) that implements reasonable procedures to: (1) collect identifying information about customers opening an account; (2) verify that the customers are who they say they are; (3) maintain records of the information used to verify their identity; and (4) determine whether the customer appears on any list of suspected terrorists or terrorist organizations.

In July 2003, the Treasury Department initiated a 30-day comment period to seek inquiry about certain provisions of the final rules implementing Section 326 of the USA PATRIOT Act. The Treasury Department sought information regarding two specific provisions: (1) whether financial institution should be required to retain photocopies of identification documents used to verify customers’ identities; and (2) whether financial institutions should be prohibited from accepting foreign government issued identification documents other than passports as an acceptable form of identification. The notice of inquiry, which was published in the Federal Register, ended on July 31, 2003. 

After sorting through over 34,000 comments, the Treasury Department determined that there was no new information presented that was not considered prior to issuing the final rules. Therefore, the Treasury decided to not seek changes to the final rules to prohibit acceptance of foreign issued identification documents, such as consular IDs, or to require that financial institutions maintain photocopies of identification documents.

The final breakdown of the comments received included an overwhelming response to not change the regulations. Of the total 34,602 comments, 10,704 weighed in on the photocopy issue, while 23,898 commented on the identification card issue. Of those commenting, 89.0% were in favor of no change on the photocopy issue and 82.73% were in favor of no change on the identification card issue.

The Treasury Department concluded that security concerns about the acceptance of foreign issued identification documents were handled through the risk-based approach taken by the final rules and the ability to notify financial institutions if concerns arise with specific identification documents. The Treasury Department decided that the financial institutions needed some leeway in the way they identify and verify the identity of their customers. The final rules allow the financial institutions flexibility, while also holding them accountable for the effectiveness of their customer identification programs.

In addition, the Treasury Department concluded that the maintenance of photocopies in all cases did not provide a security benefit that justified the additional record-keeping burden. The final rules implementing Section 326 require that financial institutions maintain records of the steps taken to verify identify. While these records may include photocopies of identification documents, the financial institutions are not required to keep these documents as part of the customer’s file.

The Treasury Department expects all financial institutions covered by the customer identification regulations to have their customer identification program drafted and approved by October 1, 2003 as scheduled. The following financial institutions are covered under the rule: banks and trust companies, savings associations, credit unions, securities brokers and dealers, mutual funds, and futures commission merchants and futures introducing brokers.