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Opening Deposit Accounts Online 2016 1

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Opening Deposit Accounts Online: CIP, CDD and Other Compliance Issues 2016

The material used in this text has been drawn from sources believed to be reliable. Every effort has beenmade to assure the accuracy of the material; however, the accuracy of this information is notguaranteed. The laws are often changed without prior notice from the government. The publisher andthe editor are not engaging in the practice of law or accounting. We are not responsible for the actionsof your company's employees.

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Instructor Deborah L Crawford • Debbie is the President of

Gettechnical Inc, a Virginia based training company. Her combined banking and training experience began in 1984 and she is a deposit side expert. She received her Bachelors and Masters degrees from Louisiana State University.

• If you have any questions just call 1‐800‐354‐3051 or email us at [email protected].

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OVERVIEW OPENING ACCOUNTS ONLINE

• Why open accounts online?

• It is the future. Most large financial institutions allow you to open accounts online and make things very easy for the hardworking public. Many American now do all their shopping and banking without ever entering an institution, it is important to find a way to bank the internet market.

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Why are we doing this?

• Develop new business

• Develop new cheaper ways to open accounts

• Getting ready for a new generation of customers

• To make it easier for existing customers

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Do a risk assessment

On New Service

Change Overall financial

institution Risk Assessment for

AML

How will we accomplish CIP

and CDD?

How will we comply with all other federal regulations?

Any UDAAP issues?

Introduce new product or service

Introducing a new service Start here!

Service Risk Assessment: Online Account Opening

Pros

• Enable Customer to open account or make loan from anywhere

• Cost is significantly less

• Quicker to open

• Stay competitive

Cons

• Easier for identity theft

• Joint owners could open accounts with other people information

• Less transparency

• Different CIP/CDD

• Lack of customer interaction

• More BSA risk

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To open bank accounts online you will have to think out the various compliance issues and hire a really good web design company to help you build it.

• Unit # 1 CIP and CDD

• Unit #2 Signature Cards, Federal Regulations,

• and W‐9 Issues

• Unit #3 Products and Funding

• Unit #4 Risk

• Unit #5 ODP, UDAAP and other miscellaneous issues

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LET THE CUSTOMER KNOW THE ORDER

Many of the online systems have some kind of introductory page.

These vary in order and in conversational style but eventually the same units as above have to be accomplished. It is pretty standard to tell the customer what the steps they will walk

through will be.

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SIGN ME UP!OPEN A BANK ACCOUNT TODAY!

ETC. These are the steps that must be completed to open your online bank

account:Tell us about yourselfConfirm your identity Complete the contractCustomize and fund your account

Start application or Continue

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CIP NOTICE

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that

identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth, and other

information that will allow us to identify you. We may also ask to see your driver’s license or other identifying

documents.

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FDIC OR NCUSIF LOGO

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Unit #1 CIP and CDD COMPONENTS

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CUSTOMER IDENTIFICATION PROGRAM (CIP): BSA REQUIREMENTS

PurposeThe regulations must contain certain requirements. At a minimum the regulations must require financial institutions to implement reasonable procedures for

– Verifying the identity of any person who opens an account to the extent reasonable and practicable;

– Maintaining records of the information used to verify the person’s identity, including name, address, and other identifying information; and

– Determining whether the person appears on any lists of known or suspected terrorists of terrorist organizations provided to the financial institution by any government agency.

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WHAT DO WE HAVE TO DO TO COMPLY WITH CIP?

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Information Required(Prior to opening an account)

+Verification through documents

(Reasonable time after opening account*) +

Nondocumentary verification(Reasonable time after opening account*)

+326 Government List Check

+Recordkeeping

+ Customer Notice

=CIP COMPLIANCE

Information Required(Prior to opening an account)

+Verification through documents

(Reasonable time after opening account*) +

Nondocumentary verification(Reasonable time after opening account*)

+326 Government List Check

+Recordkeeping

+ Customer Notice

=CIP COMPLIANCE

CIP COMPLIANCE: the big picture

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What about the documents?

Is there a 326 list?

There is more than one road to Rome…

Open Accounts‐‐ All online? Or partially on line?

Option One:

Partial—You can do documentary verification

Finish the account at the branch

Finish the account afterwards with paperwork

sent to the customer

Option Two:

Complete online opening of accounts—nondocumentary

verification only

Complete opening and funding all accomplished

online

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WHO DO WE CIP?

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CIP DEFINITIONSCIP DEFINITIONS

ACCOUNTIs it a deposit account or safekeeping account where the customer signed a contract? Make sure you count Certificates of Deposit

ACCOUNTIs it a deposit account or safekeeping account where the customer signed a contract? Make sure you count Certificates of Deposit

CUSTOMERDoes this customer have an existing account with the bank?

Is this customer exempt?If no, then needs CIP.

If yes, still have to do Customer Due DiligenceIf it is an existing account we have much less work to do and much less risk for CIP purposes.

CUSTOMERDoes this customer have an existing account with the bank?

Is this customer exempt?If no, then needs CIP.

If yes, still have to do Customer Due DiligenceIf it is an existing account we have much less work to do and much less risk for CIP purposes.

IS IT AN ACCOUNT OR CUSTOMER AS DEFINED IN

CIP?

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Account

• “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. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.”

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Customer

Customer means:

• A person that opens a new account; and

• An individual who opens a new account for:

– An individual who lacks legal capacity, such as a minor; or

– An entity that is not a legal person, such as a civic club.”

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Customer

Customer does not include:

• A financial institution regulated by a Federal functional regulator or a bank regulated by a state bank regulator;

• A person described in 31 CFR X; or These are Phase I Exemptions except subsidiaries

• 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.” (To do this you had to grandfather existing customers 10‐1‐2003 in your policy).

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How did your financial institution define customer?

• Just the owner?Customer

Narrow Definition

• Owner

• and

• Signers?

Customer

Broad

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REQUIRED INFORMATION ON THOSE YOU DEFINED AS CUSTOMER

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Information RequiredInformation Required

Name (As it appears on Primary Identification)

Name (As it appears on Primary Identification)

Date of birth if individualNot required on business

Date of birth if individualNot required on business

Identification Number (US Person versus Non Us Person*)

Identification Number (US Person versus Non Us Person*)

Residential or business address of customer

You can obtain next of kin or business address

Residential or business address of customer

You can obtain next of kin or business address

Step One: THE INFORMATION

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Here is what you will need to open an account online today:

Have the following ready for each person to be listed on the account:

Social Security Number (You will have to make a decision onwhether to do non resident alien accounts online. You could referthe customer to an 800 phone number or to a local branch) Driver’s license or state-issued identification E-mail address (You can send disclosures electronically or have a

package sent to the customer afterwards and have them sign and send back.) Your bank information and routing numbers Home address (Physical address) Birth date If a non resident alien, a Green Card or complete passport and on

interest bearing accounts an ITIN number (If you decide to bank nonresident aliens online because of the high risk status) Email address

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After completing the application we will mail you a packet containing the account acceptance form and other important information concerning your account. You should receive this within 10 business days.

You will need to sign the forms and get them back to us in a postage‐paid envelope.

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If you use follow-up packet

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Are you an existing customer of ABC Bank? Remember much less to do if an existing customer.

– Yes

– No

Don’t forget your FDIC/NCUSIF logo!

Continue Cancel

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Existing customers may be exempt

If an existing customer…

• You can have them log in with pass code and then pass security questions

• Use email to verify

• On business accounts—new, existing or exempt?

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Some points to remember:

• You will need this information on every owner of the account.

• If you are going to allow agents or authorized signers you will need to check state law issues. Some banks require CIP on signatories too. You will need to identify signatories if that is your policy. Because of the higher risk of online bank accounts, you may wish to have information on every person that touches the account. These decisions are risk based decisions and are made individually by your financial institution.

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Some points to remember:

• You can also ask for a mailing address if different than the physical address. Some people still like mail to go to a P. O. Box number for many reasons.

• If you plan to sent electronic disclosures and confirmation you may ask for an email address.

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Some points to remember in opening business accounts:

• Your customer is the business. However some banks require CIP on all signatories. If this is your policy your screens with have to allow the individuals with control over the business to be identified. It seems that you might want some information on the owners for identification purposes down the road. Whether or not you run full CIP is up to your CIP policy.

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Some points to remember in opening business accounts:

• You will be getting EINs or SSNs depending on the business type. Again here if the business is a non US business you may want them to call the 800 number or go to a local branch.

• Many banks do not open business accounts online unless it is an existing customer. Business accounts are higher risk. Sometimes on the screen you will see a screen that says “If this is a business account, call 1‐800‐XXX‐XXXX>

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STEP TWO: DOCUMENTARY AND NONDOCUMENTARY VERIFICATION

Verification through documents:For a bank relying on documents, the Customer Identification Program must contain procedures that set forth the documents that the bank will use. These documents may include:• For an individual, unexpired government‐issued identification

evidencing nationality or residence and bearing a photograph or similar safeguard, such as a driver’s license or passport; and

• For a person other than an individual (such as corporations, partnerships, or trust), documents showing the existence of the entity, such as certified articles of incorporation, a government‐issued business license, partnership agreement, or trust instrument.

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DOCUMENTARY AND NONDOCUMENTARY VERIFICATION

CONTINUED…Verification through nondocumentary

methods:• For a bank relying on nondocumentary methods, the CIP

must contain procedures that describe the nondocumentary methods the bank will use.

1) These methods may include contacting a customer; independently verifying the customer’s identity through the comparison of information provided by the customer with information obtained from a consumer reporting agency, public database, or other source; checking references with other financial institutions; and obtaining a financial statement.

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DOCUMENTARY AND NONDOCUMENTARY VERIFICATION2) The bank’s nondocumentary procedures must address

situations where an individual is unable to present an unexpired government‐issued identification document that bears a photograph or similar safeguard; the bank is not familiar with the documents presented; the account is opened without obtaining documents; the customer opens the account without appearing in person at the bank; and where the bank is otherwise presented with circumstances that increase the risk that the bank will be unable to verify the true identity of a customer through documents.

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DOCUMENTARY AND NONDOCUMENTARY VERIFICATION

Additional verification for certain customers.

• The CIP must address situations where, based on the bank’s risk assessment of a new account opened by a customer that is not an individual, the bank will obtain information about the individuals with authority or control over such account, including signatories, in order to verify the customer’s identity. This verification method applies only when the bank cannot verify the customer’s true identity using the verification methods described in paragraphs (b)(2)(ii)(A) and (B) of this section.

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THE DOCUMENTS

• It has always been due diligence to require two forms of identification such as one primary and a secondary piece of identification to prevent fraud and money laundering at new accounts.

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Some thoughts about how to handle the documents:

• First, it was never required that you use documents to verify identity. It does appear that many online banks require document numbers and use this information to confirm identification. So you do not have to “see” documents. Most banks in their normal account opening procedures that are face‐to‐face do require looking at the identification.

• Some copy the documents and some record the documents. It also gives you an opportunity to resolve discrepancies. So if you change your practice for online bank accounts you will need to amend CIP policy to address how you open accounts online.

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• Second, if you open accounts online and mail out a package to the customer to sign in so many days then you can request the identification on both the personal accounts and business accounts be sent in at that time. Or you can rely on nondocumentary verification as long as your write this into your BSA policy change from normal account opening procedures.

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THE DOCUMENTS

• Third, you may do the application part online and still require the customer to visit a branch for the final piece. If you open accounts online, in this manner the actual opening is still done at a branch and the funding so it is easy to have the customer bring copies of his or her identification.

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This has been the scenario when face-to-face. You could build your CIP for one policy online and another face-to-face.

Are you opening this account for just yourself?

Yes, if yes will you name a beneficiary or beneficiaries on this account?

No

If no, is this account joint or a custodial account?JointCustodial

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Enter your information:

Legal First Name:Middle Initial:Legal Last Name:Suffix:Citizenship: Select Citizenship statusSocial Security Number:Date of birth:Identification: Select type ( You can have them copy this and send it to you if you give them a package to sign and send back to you)

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Other information:E-mail address:Mailing address Line 1:Mailing address Line 2:City:State: Select StateZip Code:Primary Phone Secondary Phone or Cell Phone:

Check here if your permanent address is the same as your mailing address

Have you lived at your current address more than two years?YesNo

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Citizenship information:

Are you a US Citizen? Yes No

If you are not a US Citizen, what is your tax status?Resident alienNon resident alien

Employment Information

EmployerAddressTelephone Job description

Banking and Account Information:

Source of IncomePurpose of Account

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• Use the ID Checking Guide to help with these types of identification. There is also an international version for Mexico Driver’s Licenses and other countries.

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Enter the joint owner information: (Same for custodians, authorized signers, business signers if you run CIP on business signers)

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NONDOCUMENTARY VERFICATION• Recognizing that some accounts are opened by telephone, by mail, and over the

Internet, the final rules asked that you take that into consideration when writing your policy.

• You must address the situation where you will open an account for some one not appearing at your bank.

Types of nondocumentary verification include:

• Check systems, telecheck, credit reports• Customer telephone call • Letter of welcome • Site visit• Previous bank reference • Verification of employment • whitepages.com• google.com• Secretary of State‐ online

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If you do not use a follow-up process like mailing a packet, the nondocumentary verification becomes critically important

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Business Accounts

• You can get permission to download documents from secretary of state’s website.

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Personalized Identification Verification

The questions below are based on information from an external credit reporting agencies. This does not affect your credit score in any way.

Your credit report indicates that your have a mortgage loan opened in or around October 2001. Which institution is it with?

Have the online applicant choose between several credit providers

Your mortgage payment is in the following parameters?

Give different ranges of payments and have online customer check a box.

Your credit file also indicates a car loan. Who is the bank this loan is with?Have the online applicant choose between several credit providers

Your car payment is in the following parameters?

Give different ranges of payments and have online customer check a box.

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LACK OF VERIFICATION—CIP PROCEDURES

The CIP must include procedures for responding to circumstances in which the bank cannot form a reasonable belief that it knows the true identity of a customer. These procedures should describe:

– When the bank should not open an account;

– The terms under which a customer may use an account while the bank attempts to verify the customer’s identity;

– When the bank should close an account, after attempts to verify a customer’s identity have failed; and

– When the bank should file a Suspicious Activity Report in accordance with applicable law and regulation.

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CLOSING AN ACCOUNT: SOME SUGGESTIONS

• Stick to your policy

• It is generally much easier to get information before the account is opened than after. If you stick to your policy on identification prior to opening account then it is easier on your financial institution in the long run.

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CLOSING AN ACCOUNT: SOME SUGGESTIONS

• If you took a risk‐based approach and allowed the customer a time frame to get all the information to you, and he or she failed to meet the time frame then you should notify them in writing preferable certified mail that within a stated time period the account will be closed. This varies depending on your bank and location. You probably want to notify them twice before the account is actually closed.

• This is really going to be important for online banking customers. If part of your CIP, is that the customer will provide us with copies of his or her identification and that he or she has a certain number of days to return the paperwork in an envelope then you will have to go back and close if they do. So this may also go into your account agreement.

• CIP gives us a “reasonable time after opening account” to receive our documentary or nondocumentary verification. You then have to have procedures in place to close. These can be completely different than your face‐to‐face rules.

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CHECK OFFICE OF FOREIGN ASSETS CONTROL (OFAC)

• Remember to check OFAC

• Block and freeze assets after confirming with OFAC the identity of the person

• OFAC wants us to get the money

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BSA EXAM ISSUES ON CUSTOMER DUE DILIGENCE

• The cornerstone of a strong BSA/AML compliance program is the adoption and implementation of comprehensive CDD policies, procedures, and processes for all customers, particularly those that present a high risk for money laundering and terrorist financing. The objective of CDD procedures should be to enable the bank to predict with relative certainty the types of transactions in which a customer is likely to engage.

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BSA EXAM ISSUES ON CUSTOMER DUE DILIGENCE

CDD policies, procedures, and processes are critical

to the bank because they can aid in:

• Detecting and reporting unusual or suspicious transactions that potentially expose the bank to financial loss, increased expenses, or reputational risk.

• Avoiding criminal exposure from persons who use or attempt to use the bank’s products and services for illicit purposes.

• Adhering to safe and sound banking practices.

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ENHANCED DUE DILIGENCE FOR HIGH-RISK CUSTOMERS

• Purpose of the account.• Source of funds and wealth.• Beneficial owners of the accounts, if applicable.• Customer’s (or beneficial owner’s) occupation or type of business.• Financial statements.• Banking references.• Domicile (where the business is incorporated).• Proximity of the customer’s residence, place of employment, or place of

business to the bank.• Description of the customer’s primary trade area and whether international

transactions are expected to be routine.• Description of the business operations, the anticipated volume of currency

and total sales, and a list of major customers and suppliers.• Explanations for changes in account activity.

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FFIEC BSA EXAM MANUAL YOU WILL NEED ENHANCED DUE DILIGENCE QUESTIONS FOR

THIS GROUP

HIGH RISK ON THE BSA EXAM• Private Banking • Trust and Asset Management Services • Nonresident Aliens and Foreign Individuals • Politically Exposed Persons • Embassy and Foreign Consulate Accounts • Non‐Bank Financial Institutions • Professional Service Providers • Non Governmental Organizations and Charities• Business Entities (Domestic and Foreign) • Cash‐Intensive Businesses

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NONRESIDENT ALIENS

ENHANCED DUE DILIGENCE

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Risk MitigationBanks should establish policies, procedures, and processes that provide for sound due diligence and verification practices, adequate risk assessment of NRA accounts, and ongoing monitoring and reporting of unusual or suspicious activities. The following factors are to be considered when determining the risk level of an NRA account:

• The account holder’s home country. • The types of products and services used. • Forms of identification. • The source of wealth and funds. • Unusual account activity.

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Risk Mitigation

• NRA customers may request W‐8 status for U.S. tax withholding. In such cases, the NRA customer completes a W‐8 form, which attests to the customer’s foreign and U.S. tax‐exempt status. While it is an Internal Revenue Service (IRS) form, a W‐8 is not sent to the IRS, but is maintained on file at the bank to support the lack of any tax withholding from earnings

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Risk Mitigation

• The bank’s Customer Identification Program (CIP) should detail the identification requirements for opening an account for an NRA. The program should include the use of documentary and nondocumentary methods to verify a customer. In addition, the Patriot Act amended the BSA to require special due diligence for private banking accounts for non‐U.S. persons, including those held for PEPs or senior foreign political figures.

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EXPANDED IDENTIFICATION FOR NONRESIDENT ALIENS (NRA)

• You can keep to a very narrow Customer Identification Program (CIP). You can say no passport no account. This makes things very simple for the bank. However depending on your market, you may want to write into your BSA/CIP policy a specific policy for non resident aliens.

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• CIP is your bank’s decision based on your risk profile. Your market may dictate a more liberal approach to non resident aliens. You might just list all of the forms of identification you will accept and require two with one of them with picture, description and signature.

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Unit #2: Signature Cards, Federal Regulations and W-9

Issues

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SIGNATURE CARDS: OVERVIEW

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Most signature cards have five basic components:Typically you will move to an electronic record/contract but the requirements will still be there to address…

What types of ownership online?

• Single Party

• Single Party with Agent

• Single Party with POD and Agent

• Multiple Party WROS—Not as Tenants in Common

• Multiple Party WOROS—Tenants in Common

• Multiple Party—Tenants By Entirety

• POAs on any of these accounts

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• UTMA

• Multiple Party With Minors

• Minors Alone

• Farm Service Accounts

• Child Actor Trusts

• Social Security Accounts

• VA Accounts with a Fiduciary

• Estate Accounts

• Funeral Home Accounts

• Formal Trust Accounts

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• Sole Proprietorship Accounts

• General Partnerships

• Limited Liability Partnerships

• Limited Partnerships

• Limited Liability Limited Partnerships

• Professional Limited Liability Partnerships

• Limited Liability Company

• Professional Limited Liability Company

• Corporation

• Agents, Escrow, IOLTA, 1031 Exchange Accounts

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Regular Ownership

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Fiduciary

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• Transfers to Minors Account — This account cannot be opened online. It is commonlyreferred to as a “Custodian Account,” and usually is subject to a state law called theUniform Transfers (or Gifts) to Minors Act. Funds deposited to these accounts are a giftand belong to the minor. You act as the custodian of the funds and are the only personauthorized to act on the account. As custodian, you must abide by applicable law, andmust notify us in writing immediately at the time the minor reaches the age of majority,as defined by the state in which the minor resides, or, upon the death of the minor. Oncea deposit account is opened as an individual or joint..

• Trust Agreement Account — This account cannot be opened online. It is opened under alegal trust agreement and managed by one or more trustees. Legal trust documents arerequired to open this account.

Here’s how one bank handles it…in their account agreement

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7. Power of AttorneyExcluding IRAs, you may give another person authority to make transactions on your accountby giving a power of attorney (called an “attorney in fact”). Adding an attorney in fact to youraccount cannot be done online. We may refuse to add an attorney in fact to your account ifthe power of attorney document does not meet our requirements. Once a power of attorneyis accepted, we may continue to allow your attorney in fact to make deposits, withdrawals orother transactions until the death of the account

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Where is the property? What law governs?

• 28. Special State Provisions And Disclosures. The following provisions apply to accounts in the states indicated and supplement the other terms and conditions of this Agreement. In the event the following provisions conflict with the other terms and conditions of this Agreement, the following provisions shall control with respect to accounts in the states indicated.

• Texas Account Disclosures. These additional rules apply to accounts in Texas depending on the form of ownership and beneficiary designation, if any, specified in the account records. The following provisions may supplement or supersede the other provisions of this Agreement relating to multi–party accounts. We make no representation as to the appropriateness or effect of the ownership and beneficiary designations. Single–Party Account Without P.O.D. (Payable on Death) Designation: The party to the account owns the account. On the death of the party, ownership of the account passes as part of the party's estate under the party's will or by intestacy. Single Party Account with P.O.D. (Payable on Death) Designation: The party to the account owns the account. On the death of the party, ownership of the account passes to the P.O.D. beneficiaries of the account. The account is not a part of the party's estate. Multiple–Party Account Without Right of Survivorship: The parties to the account own the account in proportion to the parties' net contributions to the account. The financial institution may pay any sum in the account to a party at any time. On the death of a party, the party's ownership of the account passes as a part of the party's estate under the party's will or by intestacy. Multiple–Party Account Without Right of Survivorship (Community Property Funds): If you have designated your account as a community property account without right of survivorship, the money in your account is the community property of the named parties who are husband and wife. The ownership of the community property account during the lifetime and after death of a spouse is determined by state law and may be affected by a will. Multiple–Party Account With Right of Survivorship: The parties to the account own the account. The financial institution may pay any sum in the account to a party at any time.

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Here is one bank’s take…

• On the death of a party, the party's ownership of the account passes to the surviving parties. Multiple–Party Account With Right of Survivorship (Community Property): Texas law allows a husband and wife to agree in writing that community property funds in an account shall become the property of the surviving spouse on the death of either spouse. If the parties to the account have community property funds and desire to have right of survivorship in those funds, they will need to select the appropriate designation on the forms establishing the account; however, you should consult your own attorney for advice regarding community property laws, including, but not limited to, formalities of the agreement creating a right ofsurvivorship in community property and the division of property at the death of either spouse. Multiple Party Account With Right of Survivorship and P.O.D. (Payable on Death) Designation: The parties to the account own the account in proportion to the parties' net contributions to the account. The financial institution may pay any sum in the account to a party at any time. On the death of the last surviving party, the ownership of the account passes to the P.O.D. beneficiaries. Convenience Account: The party to the account owns the account. The cosigner to the account may make account transactions for the party. The cosigner does not own the account. On the death of the party, ownership of the account passes as a part of the party's estate under the party's will or by intestacy. The financial institution may pay funds in the account to the cosignerbefore the financial institution receives notice of the death of the party. The payment to the cosigner does not affect the party's ownership of the account. Revocable Trust Account: The party or parties named trustee(s) to the account own the account in proportion to the party's or parties' net contributions to the account. A trustee may withdraw funds from the account. A beneficiary may not withdraw funds from the account before all trustees are deceased. On the death of the last surviving trustee, the ownership of the account passes to the beneficiary. The trust account is not part of a trustee's estate and does not pass under the trustee's will or by intestacy, unless the trustee survives all of the beneficiaries and all other trustees.

• Missouri Account Disclosures. If your account is in Missouri and is a personal account that has more than one name on it, we will treat it as a joint tenant account with right of survivorship (to the extent such accounts are recognized under applicable law) and not as an account of tenants by the entirety, unless otherwise expressly designated on the signature cardor other account records.

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• Florida Account Disclosures. If your account is in Florida and is in your name and your spouse's name, we will treat it as a joint tenant account with right of survivorship (to the extent that such accounts are recognized under applicable law) and not as an account of tenants by the entireties, unless otherwise expressly designated on the signature card or other account records.

• Tennessee Account Disclosures.With respect only to accounts established at our Tennessee branches, all joint accounts are owned by the parties as they have indicated upon the signature card for such account. Upon the death of any joint owner, the ownership of the joint account shall be vested in accordance with the form of ownership so chosen by the parties. In regards to public funds accounts, any qualified public entity of the State of Tennessee that opens a public funds deposit account shall have its deposits secured with the State of Tennessee Bank Collateral Pool established under The Collateral Pool For Public Deposits Act of 1990. A "public entity" is defined as the State of Tennessee, or any of its agencies, or any Tennessee county, Tennessee incorporated municipality and their political subdivisions, or any utility district organized under the laws of the state or interstate compact to which the state is a party. A "public funds deposit account" is defined as anyDeposit Account, Time Deposit or Certificate of Deposit a public entity opens with us.

• Louisiana Account Disclosures.With respect to joint accounts established at our Louisiana branches, we can pay to any one of the joint depositors, or their legal representative(s) (including the legal representative of the estate or succession of a deceased joint depositor), the entire balance of the joint account or any part of the balance of the joint account at any time, including after the death of any joint depositor. Each joint depositor, and his/her legal representative(s), is authorized at any time, including after the death of any joint depositor, to deposit or withdraw money from the joint account by check or item or otherwise, to close the joint account, to order electronic funds transferred to and from the joint account, to stop payment on any check or item drawn on the joint account and to enter into special agreements concerning the joint account. Upon the death of any joint depositor, we have the specific right to pay any or all of the funds on deposit in the joint account to the surviving joint depositor(s) or any one of them and we shall not incur liability to the heirs, successors, legatees or devises of any deceased joint depositor or to any surviving joint depositor for such payment.

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State law

• Most online account agreements that are out there do not address different state law issues.

• Talk to your attorney about where the property would be and how to handle various legal issues on this.

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FEDERAL REGULATIONS

1. Adverse Action—Fair Credit ReportingIf your institution uses a third party vendor to make a decision to open or not open an account, you must give the individual an adverse action notice if you decline the account based on the information provided by the third party.

2. Regulation CCYour institution must give a Regulation CC disclosure on availability to all transaction accounts both personal and business before an account is opened or a service provided. This applies to checking, NOW accounts, and savings and money market accounts tied to point of sale items.

3. Regulation DDA Regulation DD disclosure is given to all personal deposit accounts held for personal, family or household purposes. Does not apply to groups, businesses, or any accounts held in a professional or legal capacity. Like Regulation CC it must be given before the account is opened or service provided.

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FEDERAL REGULATIONS

4. Regulation EA Regulation E disclosure is given in the event of an electronic device being issued which can debit or credit a consumer’s accounts.

5. TIN ComplianceThe W‐9 and W‐8 BEN forms are used to insure TIN compliance and backup withholding for taxpayers. Use the W‐9 or similar statement on signature card for accounts with a Social Security number. Use W‐8 BEN for those without a Social Security number (foreign accounts). The W‐8 BEN is renewed every three years. See CIP chapter of manual.

6. Regulation PRegulation P disclosure gives the customer information about the bank use of their information with third parties and allows the customer to “opt out.”

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E SIGNElectronically delivering disclosures

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Privacy Deposit Agreement Certification of TINSignature Card

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Terms and Conditions

Please read the following terms and conditions and then indicate your acceptance below.

Disclosures will appear in separate pop-up blocker, please disable it before clicking on the links below.

To protect your information, your session will end automatically in XX minutes.

Please write down the application number at the top of the screen and call us at 1-800-XXX-XXXX if your application times out.

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WITHHOLDING

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Signature Card Instructions

To complete the application, you must confirm your tax status and whether or not you are subject to backup withholding by pressing the “Submit” button below.

I certify, under penalty of perjury, that:1. The number show below is my correct taxpayer identification number.2. Backup withholding

– I am subject to backup withholding because I have been notified by the Internal Revenue Service (IRS) that I am currently subject to backup withholding due to failure to report all interest and dividends on my tax return.

– I am not subject to backup withholding because: ‐I am exempt from backup withholding, or ‐I have not been notified by the IRS that I am subject to backup withholding as a result of

a failure to report all interest or dividends, or ‐The IRS has notified me that I am no longer subject to backup withholding

3. I am a U.S. Person (including a U.S. resident alien)

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What is an ITIN?

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine‐digit number that always begins with the number 9 and has a range of 70‐88 in the fourth and fifth digit. Effective April 12, 2011, the range was extended to include 900‐70‐0000 through 999‐88‐9999, 900‐90‐0000 through 999‐92‐9999 and 900‐94‐0000 through 999‐99‐9999. IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).

ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code.

Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception

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What is an ITIN used for?

•ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs).

An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

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Law governing agreement (state law issues addressed here).

CIP Disclosure

All Reg DD issues—See product unit

Legal proceedings and dispute

Credit Reports

Kinds of accounts you can open (ownership)

Joint accounts WROS versus WOROS

Facsimile Signatures

Power of attorney

Disclosures (Privacy, Regulation E, Regulation CC, TISA (Reg DD)

Amendment rights to contracts

Reg GG on Business Accounts

Contract and Disclosure Issues Checklist

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Unit #3 Products and Funding the Account

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PRODUCTS

Some thoughts about deposit products:

• Some of the online banks, offer products first and then begin the account opening process.

• We all have basically checking, savings, certificates of deposit, money market funds.

• Whether you open online or in person, you have to follow federal disclosures and rules

• At least one of the banks looked at would not open CDs online without the customer first having a checking account. If you wanted the other products and would not agree to a checking account, then the online banker was directed to an 800 number or to a branch in his or her area.

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What kinds of accounts online? Products?

“ …offers Interest Checking, Money Market, Online Savings, Certificates of Deposit, Individual Retirement Account (IRA)

Certificates of Deposit and IRA Online Savings Accounts.”

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Regulation DD (TISA for Credit Unions)

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SPECIAL ACCOUNTS HAVE SPECIAL DISCLOSURES AND APPLICATIONS

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Individual Retirement Accounts

• Must have earned income

• Do not exceed annual limits

• Year it is for

• Year turn 70 ½ cannot contribute

• Make contributions by April 15th

• Rollovers and transfers

• Distributions—Withholding

• 70 ½ RMDs

• Death Distributions—Inherited IRAs make distributions but no contributions

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Roth IRA

• Must have earned income

• What year the contribution is for

• Income restrictions and phase‐out

• Make contribution by April 15th

• Eliminates age restriction

• Qualified Distributions

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SEP• Employer sponsored plan

• Funded through Traditional IRAs

• Must cover qualifying employees

• 25% of income up annual limit

• Employer gets the deduction

• Employee does not pay taxes until withdrawn

• Required minimum distribution rules apply

• May make contributions after 70 ½

• Deadline – Tax due date plus extensions

• What year for?

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CESA

• Purpose – Save for education– $2,000 per year until 18

– May stay in account until 30—will have to track birth date

• Special needs beneficiary extends age

• Three Players:– Depositor

– Responsible party

– Designated beneficiary

• No earned income requirement

• AGI Income restrictions for depositor:

• $95‐$110 Single

• $190‐$220 Married filing joint

• $0‐$10 Married filing separate

• April 15th deadline—what tax year for

• Distributions

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HSA

• The amount the account holder, the account holder’s family members, or the account holder’s employer can contribute to the HSA depends on:

– the type of HDHP coverage he or she has, and

– age.

• If the customer can contribute up to annual limits

• What year it is for?

• Distributions

• Cannot have if do not have HDHP

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All of these…

• Application

• Name beneficiary

• Tax year considerations

• Distributions will be biggest issue

• Changing amounts

• Resolving excesses

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FUNDING THE ACCOUNT

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Funding the Account

• Most of the banks are allowing customer’s to fund the account electronically or to mail in a check.

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Funding the AccountFunding your account:

How would you like to fund your account? I would like to fund this electronically. I would like to mail in a check.

Continue

Enter your account information:

Account you are debiting:Account number ABA Routing/Transit Number

Initial Deposit Amount:

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Funding the Account

IF funding electronically, the following may help you:

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Continue Cancel

Unit #4: Assigning Customer Risk

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BSA/AML Program

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AFTER GATHERING THE INFORMATION ASSIGN RISK Customer Identification Programs (CIP) risk is related to many items. You will probably consider accounts to be high risk if they were:

Not Opened in person

Opened by non resident aliens

Opened without all documents

Opened without proper identification

Opened for a minor (What is your bank’s policy on joint accounts for identification?

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HIGH INTENSITY DRUG TRAFFICKING

AREAS

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RISK

• Non Resident Aliens

• Non government organizations

• Geographic risks

• Power of attorney

• MSBs

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Unit #5 Other Regulatory Issues

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UDAAP

• How will customer’s file complaints through your system?

• Is anything in the process or disclosures? Unfair, deceptive, misleading or abusive?

• Watch for words which could trigger complaints

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ODP

• Opt IN?

• Clear overdraft options outlined

• Order of processing of items

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GUIDELINES ON IDENTITY THEFT DETECTION, PREVENTION, AND

MITIGATION • In your financial institution’s identity theft program you are required to detect, prevent, and mitigate identity theft in connection with the opening of a covered account or any existing covered account.

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Uniform Electronic Transactions Act (UETA)

• You have to find your state version of this act. It is like the UCC it can be slightly different in every state.

• Bring varying state laws into line by regulating retention of paper items like checks and making legal electronic signatures

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E Sign Act

• Provides a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce.

• Allows use of electronic records to satisfy any statute as long as the consumer has affirmatively consented and has not withdrawn such consent.

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Authentication—multiple factor?

• Something a person knows

• Something a person has

• Something a person is

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Appendix B to Part 364—Interagency Guidelines Establishing Information Security

Standards

• Ensure the security and confidentiality of customer information;

• Protect against any anticipated threats or hazards to the security or integrity of such information, and

• Protect against unauthorized access to or use of customer information that could either result in substantial harm or inconvenience to any customer, or present a safety and soundness risk to the institution

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Some final thoughts…

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Your job…

• Present credible challenges to the new product, service or high risk customer

• Find ways to mitigate the financial institution’s and the customer’s risk

• Factor these risks into the overall risk assessment, the customer’s risk assessment and the worksheets or means used to gather information

• Fluid risk assessments keep you current and up to date.

• Don’t forget third party management

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Deborah L. Crawford

Gettechnical Inc

1‐800‐354‐3051

[email protected]

Gettechnicalinc.com

Thanks for participating!Upcoming Webinars

April 5th - Uniform Commercial Code Rules: How to Comply to Attach and Perfect Secured Transactions

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April 7th – Advanced Topics in Commercial Lending

April 11th – The Bank CEO Guide to 5 Keys to a High Performing Sales Team

April 12th – Flood Insurance Compliance Hot Spots

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