The US Patriot Act created new regulations for the finance industry regarding customer identification. As a result, when you complete a merchant application, the officer signing must also provide identifying information, in many cases, that application requests your social security number. The act itself does not specifically require a social security number.
What it requires:
The rule requires that financial institutions develop a Customer Identification Program (CIP) that implements reasonable procedures to:
1) Collect identifying information about customers opening an account
2)Verify that the customers are who they say they are
3)Maintain records of the information used to verify their identity
4)Determine whether the customer appears on any list of suspected terrorists or terrorist organizations
Collecting information:
As part of a Customer Identification Program (CIP), financial institutions will be required to develop procedures to collect relevant identifying information including a customers name, address, date of birth, and a taxpayer identification number for individuals, this will likely be a Social Security number. Foreign nationals without a U.S. taxpayer identification number could provide a similar government-issued identification number, such as a passport number.
Verifying identity:
A CIP is also required to include procedures to verify the identity of customers opening accounts. Most financial institutions will use traditional documentation such as a drivers license or passport. However, the final rule recognizes that in some instances institutions cannot readily verify identity through more traditional means, and allows them the flexibility to utilize alternate methods to effectively verify the identity of customers.
Final Regulations Implementing Customer Identity Verification Requirements under Section 326 of the USA PATRIOT Act (PDF download)
Original press release is below:
April 30, 2003
JS-335
Treasury and Federal Financial Regulators Issue Final
Patriot Act Regulations on Customer Identification
The Department of the Treasury, the Financial Crimes Enforcement Network, and the seven federal financial regulators today issued final rules that require certain financial institutions to establish procedures to verify the identity of new accountholders.
The rules announced today were developed jointly by the Treasury Department, Treasury Financial Crimes Enforcement Network, and the seven federal functional regulators, including the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission.
These regulations are part of the Administrations continuing work to implement the USA Patriot Act and prevent money laundering, terrorist financing, identity theft, and other forms of fraud while also providing financial institutions the flexibility they need to effectively implement the rules.
These final regulations implement section 326 of the USA PATRIOT Act, which directs that regulations be issued requiring that financial institutions implement reasonable procedures to (1) verify the identity of any person opening an account; (2) maintain records of the information used to verify the persons identity; and (3) determine whether the person appears on any list of known or suspected terrorists or terrorist organizations.
The regulations apply to banks and trust companies, savings associations, credit unions, securities brokers and dealers, mutual funds, futures commission merchants, and futures introducing brokers.
Institutions subject to the final rules will be required to establish a program for obtaining identifying information from customers opening new accounts. The regulations will require that institutions implement procedures for collecting standard information such as a customers name, address, date of birth and a taxpayer identification number (for U.S. persons, typically a social security number and for non-U.S. persons, a similar number from a government-issued document).
A financial institutions program is also required, among other things, to contain procedures to verify the identity of customers within a reasonable period of time. Many financial institutions may rely on examining standard identification such as a drivers license or passport. However, the final rule gives financial institutions the flexibility to implement procedures to verify identity in other ways appropriate to their individual circumstances.
Financial institutions will have until October 1, 2003, to come into full compliance Publication of the final rules in the Federal Register is expected to occur later this week.
###
UPDATE SEPTEMBER 1
The signor on a new merchant application must provide a social security number with all processors I personally know of. Signors for 501 (c)3 Non-profits and public corporations may qualify for exceptions.
Essentially, this precludes non-citizens from getting US merchant accounts. Here’s the US Government rule on getting Social Security Numbers For Noncitizens.
