Q: A loan and a time deposit are each an “account” for purposes of the CIP rule. How do the requirements of the CIP rule apply to a loan that is renewed, or a certificate of deposit that is rolled over?
A: The CIP rule applies to a “customer,” generally, “a person that opens a new account.” 31 C.F.R. § 103.121(a)(3)(i). (Emphasis added.) “Account” means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. 31 C.F.R. § 103.121(a)(1)(i). For purposes of the CIP rule, each time a loan is renewed or a certificate of deposit is rolled over, the bank establishes another formal banking relationship and a new account is established. However, the rule provides that the term “customer” does not include a person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of the person. 31 C.F.R. § 103.121(a)(3)(ii)(C). In each of these cases, the customer has an existing account. Therefore, as long as the bank has a reasonable belief that it knows the person’s true identity, the bank need not perform its CIP when a loan is renewed or certificate of deposit is rolled over. However, if a new customer is added to the loan or deposit account, the bank would need to satisfy the CIP rule with respect to that new
account relationship. (January 2004)