Why do I need to provide my social security on merchant application

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)

merchant application customer identification

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.

14 thoughts on “Why do I need to provide my social security on merchant application

  1. I have recently had a credit card which I established in 1983, ask for my drivers
    license, while making a purchase. I did not have a second thought and complied. Well….I did not receive my credit card statement this month and was
    actually called by the card company to tell me I was delinquent. What happened was the merchant scanned my license and took away the address on file and replaced it with the physical 911 address on my license. I have never received mail at my home therefore the correspondence was returned.
    Is this legal ….would I not have been notified my mailing address was being changed? When I approached the retail merchant I was told that due to the Patriot Act it (the store), was required to change the address. This is the most absurd thing I have ever heard. If that was the case the government could save money by closing all the Post Offices down and only relying on rural delivery.
    I work with the public everyday with a utilty company and we require drivers license to confirm identity only we do not require that be the mailing address on file otherwise…there would be a lot of undeliverable bills. Please clarify this
    for me, I have cancelled a credit card which I established 27 years ago and I feel it was due in part to miscommunication or lack of understanding. Thank
    you in advance.

    Karen Thompson

  2. I’m with you Karen- it’s the most absurd thing I’ve ever heard.

    First, the elements of the Patriot Act referred to above are not relevant to your story. A business applying for a merchant account has no relationship to your situation. There are similar rules when a consumer APPLIES for a credit card.

    Second, what happened to you?
    You don’t say whether this is a private label card (store brand card) or a Visa or Mastercard. That could make a difference as to what happened at the counter. For Visa, Mastercard etc, ONLY THE ACCOUNT OWNER can make changes to a customer credit card account. A merchant should have no record of who the card issuing bank is on any given transaction, nor should they be able to contact the card issuing bank to make changes. A merchant cannot require a drivers license simply to process a credit card. They can require a drivers license to verify the identity of a person such as to release a car at an auto repair shop, or in certain rental situations.

    If this occurred with a store brand credit card (no visa or mastercard logo) I have no idea what their rules are, but you should have a information on that. In any case, this is clearly an incident that I would document what happened and send it in writing to the company.

  3. Pingback: What do I need to open a retail merchant account? | credit card processing

  4. i am trying to get set up as a credit card processor for my Corporation. I do not understand why the credit card company is requiring my corporation information as well as my personal information. Whats the point of being incorporated?

  5. Shellie- I feel exactly the same way. Unfortunately, this is the way financial institutions have chosen to comply with the regulations. Is it the quickest, easiest way. If there’s ever any pushback later, they can always say “Hey, the USA issued the Social Security number and we verified it was valid!”
    In my experience, it’s been effective to a certain point. Foreigners call all the time wanting to set up merchant accounts but with the Social Security number and actual site visit to verify the business location it’s gotten a lot harder for the criminals.

  6. My daughter worked at Party City about a year ago and was paid through a pre-paid Visa card. When she quit last year, there was still a balance remaining of approximately $175. Throughout the year, she has used it and even used it just two weeks ago. Today she tried using it and it was declined. When she called the 1-800 number, someone from India answered and told her that it was put on hold due to the Patriot Act and that before they could release the hold on the card, she would need to fax over a copy of two forms of identification (drivers license & social security card)! She already provided that when she started working at Party City! Does this seem right?

  7. Sorry, susan but that’s off topic. My specialty is the merchant side of things. The Indian answering doesn’t surprise me. The situation does seem unusual. I recommend looking up the card issuing bank on the internet. The issuing bank should be on the back of the card. Contact the support number listed there. You could also call back the number you called again and ask for a supervisor to ask more detailed questions.
    You do need to present that information to open a bank account in the US. What happened at Party City has no relation to the card since there is a financial instituion involved in the actual card issuance. Good Luck. Feel free to post what happens back here.

  8. Is there any way to open an bank account in the US with out using SS to identify you? I find it appalling, and total undermining everything Roosevelt intended for SS.

  9. Sorry for the double post, but maybe with my passport or something? Out of principal Id rather not comply, by using SS to identify me. All the banks keep requiring it, and saying its becuase of the patriot act, and the social security act, and privact act of 72′ are irrelevant therefore. Even though theyve been requiring it well before the patriot act at banks. I just dont understand why voter registration, drivers license, and passport wouldnt work. Why use social security for something it was never intended for? Seems very sneaky to misguide SS to what it has become….a national ID #.

  10. I think they require an individual to provide an SS # when applying for a business account so they’ll have someone they can hold responsible if your business should default on the loan / account balance. The Patriot Act gives them the legal excuse and opportunity to do so, face it folks the banks have us by the balls. I recently noticed that my business account info, credit balance, has started to show up on my personal credit report. When I contacted them, I was told that they have the right to link your business and personal account info due to the Patriot Act. Why bother to incorporate if I can’t be protected under the same laws of the big corporations and lending institutions… Total BS if you ask me…

  11. Why is it necessary to provide the last four digits of my sodial security number when checking
    on the status of my existing credit card account. I only want to check on my balance, account activity and amount and due date. I have asked if I could provide any other form of Identification
    (mother’s maiden name, pet’s name, elementary school/high school attended, etc…..but was
    told that only my SSN would be acceptable! Our social security numbers were never intended
    to be used for identification purposes! It is understandable for payroll purposes by an employer,
    and possibly for medical records, but why credit card companies and banks??

  12. I work for a church in North Carolina. We are simply trying to set up an online pay option for things such as tithes, special events, etc. The one merchant org that works best with our online app we use is requiring a SS#. How do we go about submitting or qualifying for an excemption?

  13. I’m confused by your question. As stated above, if you’re opening a merchant account, you need to provide an SS# . where you collect money – paypage or anywehere else- and how much you collect, is irrelevant.

  14. @scott Non-proftis are exempt. Non-profits complete merchant applications the same as regular merchants EXCEPT where it asks for the social security number, the merchant enters the federal tax ID in the social security number field. IRS 501(3)c certification must also be provided. Please note that for-profit companies cannot do the same thing. The shareholder / signor must add the social security number, not their federal tax ID.

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