Don't Make Banks Save Paper IDs

By Sorcher, Alan E. | American Banker, August 8, 2003 | Go to article overview

Don't Make Banks Save Paper IDs


Sorcher, Alan E., American Banker


The Treasury Department has finalized rules to implement the USA Patriot Act that increase the effectiveness of the financial services industry's anti-money-laundering efforts by imposing comprehensive, rigorous customer-identification procedures.

Firms must verify a customer's identity through a government-issued photo ID (for example, driver's licenses or passports) or other methods (credit bureau checks, public databases).

These requirements are part of a series of unprecedented regulations that securities firms, banks, and other financial institutions have worked with the federal regulators to implement quickly over the past 18 months. As a result, we are all more effective in detecting and deterring money laundering. We are very proud of our efforts.

Unfortunately, some say the customer ID verification rule (section 326) of the Patriot Act is flawed. Some think that the Treasury needs to go one step further and require institutions to keep actual paper copies -- yes, paper -- of documents used to verify identity.

This requirement was omitted because it would have been unnecessarily burdensome to the industry and of limited benefit to law enforcement. Instead, the rule says a firm that verifies a customer through a government-issued ID must note the type of document relied upon, any identification number contained in it, the place and date of issuance, and the expiration date.

Armed with this key, law enforcement will be able to track down a suspect as well as with a copy of a photo ID.

The Treasury got it right in adopting a flexible approach that allows institutions to determine when it is appropriate to verify a customer using a document and or by other methods, such as electronically searching a public database. …

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