Your bags are packed, flight is on time, and thanks to that recent blizzard you’re more than ready to escape the cold and find your private haven on the beach. There is only one issue… you forgot your Driver’s License. It’s safe to say that no amount of smooth talking in the world will get you past the TSA Agent. Every day thousands of people go through that same security checkpoint, and every day the mantra applies: no identity verification, no entry. The same can be said when opening a new account. Due to regulations such as The USA Patriot Act, and FINRA Rules 3110 (Customer Account Information) and 2110 (Know Your Customer) customer identity certification is pertinent to the opening of a new account. Essentially, the Independent Broker Dealer is taking on the same role as the TSA Agent; they are verifying that you are in fact you.
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, in short the USA Patriot Act, was signed on October 26, 2001 by President Bush. In accordance with the Patriot Act, financial institutions are required to verify the identity of individuals engaging in financial transactions. As a result, the Customer Identification Program was born. Customer Identification Programs (CIPs) help the government fight money laundering activities and the funding of terrorism.
CIP requires financial institutions, (i.e. Independent Broker Dealers, Commercial Banks, Investment Companies) to have new account opening procedures which state the verification process and proprietary data required. At a minimum there are four items which a financial institution must collect from its new customer:
- Date of Birth – for an individual
- CIP Rules require a physical address to be listed as the legal address (home or business)
- An alternate address can be used for the mailing address
- The only exception to the physical address requirement is if a client is part of the military, an Army Post Office Box (APO) or Fleet Post Office Box (FPO) may be listed
- Identification Number
- Entity – Tax Identification Number (TIN)
- Individual – Social Security Number
Additional information, aside from the above mentioned criteria, may be requested at the discretion of the financial institution in which you are opening an account. Once the new account is submitted for review, the Broker Dealer will then verify the client’s information through a third party, such as Equifax and MIS. If the Broker Dealer is unable to verify the required information (namely, the four items listed above) then additional documentation may be requested. This is when the TSA reference comes into play. If an address is unverifiable, then a copy of a client’s Driver’s License or current utility bill would be sufficient documentation to reasonably believe the client is whom they claim to be. If a client is unable to provide the requested documentation then the firm may not open the account or carry out the transaction.
Just like the security process at the airport, the Customer Identification Program is designed to ensure the safety of the consumer. Without the cooperation of the financial institution, and more importantly the customer, verification of one’s identity would not be possible. My suggestion, when getting ready to open an account, is to have your identification ready! Now go enjoy those sunny beaches.
From independent financial advisors to the executive team, the people at Summit make the difference. For more information on Summit Brokerage Services, visit www.joinsummit.com or contact us at (800) 354-5528.