Q: Should subsidiaries of a bank implement a customer identification program?
A: Yes. The Federal banking agencies take the position that implementation of customer identification programs by subsidiaries of banks is appropriate as a matter of safety and soundness and protection from reputational risks. Subsidiaries (other than functionally regulated subsidiaries) of banks should comply with the customer identification program rule that applies to the parent bank when opening an account within the meaning of 31 C.F.R. § 103.121. In addition, a number of the Federal banking agencies have separately issued rules that require certain subsidiaries of banks to conduct their activities pursuant to the same terms and conditions that apply to the conduct of such activities by the parent bank. See, e.g., 12 C.F.R. § 5.34 (OCC); 12 C.F.R. § 559.3(h) (OTS).
Some functionally regulated subsidiaries of banks are already subject to a customer identification program rule issued jointly by their functional regulator and FinCEN (i.e., 31 C.F.R. § 103.122 (broker-dealers); 31 C.F.R. § 103.131 (mutual funds); and 31 C.F.R. § 103.123 (futures commission merchants and introducing brokers)). For purposes of the requirements imposed under section 326 of the USA PATRIOT Act, functionally regulated subsidiaries are: broker-dealers, investment companies, investment advisers registered with the SEC, persons licensed to provide insurance, and any entity with respect to a financial activity that is subject to the jurisdiction of the CFTC (such as futures commission merchants, introducing brokers, commodity trading advisors, commodity pools, and commodity pool operators). See 31 U.S.C. § 5318(l)(4); 15 U.S.C. §§ 6805, 6809. Subsidiaries of banks that are functionally regulated by the SEC or the CFTC are required to comply with the applicable CIP rules issued by the SEC or CFTC, respectively, and FinCEN.
The Federal banking agencies, SEC, CFTC, Department of the Treasury, and FinCEN have worked together to create uniform rules that minimize potential conflicts or differences between the agencies’ rules. In addition, Treasury and FinCEN intend to issue customer identification program rules applicable to other types of financial institutions in the future. (April 2005)