The USA PATRIOT Act (Act) established new and enhanced measures to prevent, detect, and prosecute money laundering and terrorism, generally through amendments to the Bank Secrecy Act (BSA).¹ For the most part, the measures directly affecting banking organizations are implemented through regulations issued by the U.S. Department of the Treasury (31 CFR Part 103). However, the regulation implementing the requirements of section 326 of the Act for banking organizations was issued jointly by the U.S. Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), together with the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration.

Since the issuance of these regulations, the Federal Reserve and the other federal banking agencies have been working together to update their BSA examination procedures. This SR letter notifies supervisory staff and domestic and foreign banking organizations supervised by the Federal Reserve that new BSA procedures have been developed for examining the customer identification programs that are required by section 326 of the Act.

As described in more detail in the attached examination procedures and in SR letter 01-29, section 326 of the Act, which is codified in the BSA at 31 U.S.C. 5318(l), requires financial institutions, such as banks, savings associations, and credit unions, to have customer identification programs that include measures to:

• Require certain information to be obtained at account opening (for individuals the information would generally include name, address, tax identification number, and date of birth);
• Verify the identity of new accountholders within a reasonable time period;
• Ensure that a banking organization has a reasonable belief that it knows each customer's identity;
• Maintain records of the information used to verify the person's identity; and
• Compare the names of new customers against government lists of known or suspected terrorists or terrorist organizations.

A customer identification program is an important component of a financial institution's overall anti-money laundering and BSA compliance program.

The Federal Reserve has worked on an interagency level to develop the attached BSA examination procedures to evaluate the compliance of banking organizations with this new regulation. The procedures are designed to help banking organizations implement the new BSA requirements and to facilitate a consistent supervisory approach among the federal banking agencies.² The examination procedures allow supervision staff to tailor the examination scope according to the reliability of a banking organization's compliance management system and the level of risk assumed by the organization. Where relevant, the examination procedures incorporate interagency guidance provided in the form of the frequently asked questions document on customer identification program rules that was released by the Federal Reserve in SR letter 04-2.

The Federal Reserve will be incorporating these procedures into an update to its overall BSA/Anti-Money Laundering examination procedures. In addition, as other provisions of the Act are implemented through new regulations additional procedures may be issued in a similar format.

Reserve Banks are asked to distribute this SR letter and the attached examination procedures on customer identification programs to the domestic and foreign banking organizations supervised by the Federal Reserve in their districts as well as to supervisory and examination staff. Questions may be addressed to Bridget M. Spaniel, Senior Special Anti-Money Laundering Examiner, (202) 728-5827, or Bridget M. Neill, Manager, Anti-Money Laundering Policy and Compliance Section, (202) 452-5235.

Attachment:

Bank Secrecy Act Examination Procedures for Customer Identification Programs (628 KB PDF)

Cross References:

SR 01-29, SR 04-2