CIP FAQs – Who is the “customer” for purposes of escrow accounts?

Compliance > BSA > FinCEN FAQs - CIP
Q:  Who is the “customer” for purposes of escrow accounts?
 
A:  An escrow account is an account generally established for the deposit of funds that are to be paid to a specified party on the fulfillment of escrow conditions or returned.  If a bank establishes an account in the name of a third party, such as a real estate agent, who is acting as escrow agent, then the bank’s customer will be the escrow agent.  If the bank is the escrow agent, then the person who establishes the account is the bank’s “customer.”   For example, if the purchaser of real estate directly opens an escrow account and deposits funds to be paid to the seller upon satisfaction of specified conditions, the bank’s customer will be the purchaser.  Further, if a company in formation establishes an escrow account for investors to deposit their subscriptions pending receipt of a required minimum amount, the bank’s customer will be the company in formation (or if not yet a legal entity, the person opening the account on its behalf).  “A bank will not be required to look through trust, escrow, or similar accounts to verify the identities of beneficiaries and instead will only be required to verify the identity of the named accountholder.”  See 68 FR 25090, 25094 (May 9, 2003).  However, the CIP rule also provides that, based on the bank’s risk assessment of a new account opened by a customer that is not an individual, the bank may need “to obtain information about” individuals with authority or control over such an account, including signatories, in order to verify the customer’s identity.  See 31 C.F.R. § 103.121(b)(2)(ii)(C).  (April 2005)
 

ADDITIONAL INFORMATION
This FAQ was excerpted from the Interagency Interpretive Guidance on CIP Requirements that can be found at the following link:  https://www.fincen.gov/sites/default/files/guidance/faqsfinalciprule.pdf
 

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