Section 326 of the USA Patriot Act: Identification and Verification Procedures for Financial Institutions
Identification and Verification
Section 326 of the USA Patriot Act mandates financial institutions to establish minimum standards for identifying and verifying individuals opening or modifying accounts (https://home.treasury.gov/system/files/246/staterule.pdf). This entails obtaining, verifying, and recording personal information, including name, address, date of birth, and other identifying details.
Purpose
The primary objective of Section 326 is to aid the United States government in combating terrorism financing and money laundering (https://www.federalregister.gov/documents/2016/08/25/2016-20219/customer-identification-programs-anti-money-laundering-programs-and-beneficial-ownership). By implementing these procedures, financial institutions contribute to the prevention of illegal activities.
Customer Information
Financial institutions are required to collect specific information from customers, such as name, physical and mailing addresses, date of birth, and other identifying details (https://www.nbcbanking.com/patriot-act/). They may also request identification documents, such as driver’s licenses, and make copies or record information from them.
Legal Entity Accounts
Section 326 applies not only to individual accounts but also to legal entity accounts (https://www.federalregister.gov/documents/2016/08/25/2016-20219/customer-identification-programs-anti-money-laundering-programs-and-beneficial-ownership). In such cases, financial institutions must obtain identifying information for each individual with beneficial ownership of 25% or more, as well as for one individual with significant managerial control.
Key Facts
- Identification and Verification: Section 326 of the USA Patriot Act requires financial institutions to establish minimum standards for the identification and verification of individuals who apply to open an account. This means that when someone wants to open a new account or make changes to an existing account, the financial institution must obtain, verify, and record information that identifies the person.
- Purpose: The purpose of Section 326 is to assist the United States government in its efforts to combat terrorism financing and money laundering activities. By implementing these identification and verification procedures, financial institutions can contribute to the fight against these illegal activities.
- Customer Information: Financial institutions are required to collect various pieces of information from customers, including their name, physical address, mailing address, date of birth, and other identifying details. They may also ask to see the customer’s driver’s license or other identification documents and make copies or record information from them.
- Legal Entity Accounts: In addition to individual accounts, Section 326 also applies to legal entity accounts. Financial institutions must obtain identifying information for each individual with beneficial ownership of 25% or more in the legal entity, as well as one individual with significant managerial control.
References:
- Customer Identification Programs, Anti-Money Laundering Programs, and Beneficial Ownership
- Patriot Act
- State Rule
FAQs
What is the purpose of Section 326 of the USA Patriot Act?
Section 326 of the USA Patriot Act aims to assist the United States government in combating terrorism financing and money laundering activities by requiring financial institutions to implement customer identification and verification procedures.
What types of information are financial institutions required to collect under Section 326?
Financial institutions are required to collect various pieces of information from customers, including their name, physical address, mailing address, date of birth, and other identifying details. They may also ask to see the customer’s driver’s license or other identification documents and make copies or record information from them.
Does Section 326 apply to legal entity accounts?
Yes, Section 326 applies not only to individual accounts but also to legal entity accounts. In such cases, financial institutions must obtain identifying information for each individual with beneficial ownership of 25% or more, as well as for one individual with significant managerial control.
What are the penalties for violating Section 326?
Financial institutions that fail to comply with Section 326 may face civil penalties, including fines and other enforcement actions.
How does Section 326 impact customer privacy?
Section 326 requires financial institutions to collect and retain certain customer information, which may raise concerns about customer privacy. However, financial institutions are required to implement appropriate safeguards to protect customer information from unauthorized access or disclosure.
What are some examples of beneficial ownership?
Beneficial ownership refers to the individuals who ultimately own or control a legal entity. Examples of beneficial ownership include individuals who own 25% or more of the shares in a company, or individuals who have the power to make significant decisions on behalf of the entity.
What is the difference between beneficial ownership and legal ownership?
Legal ownership refers to the individuals or entities whose names appear on the legal documents of a company or other legal entity. Beneficial ownership, on the other hand, refers to the individuals who ultimately own or control the entity, regardless of whether their names appear on the legal documents.