Banks to Determine if You’re Laundering Money

Citizens face the scruntiny of banks to determine if they may be a terrorist, or perhaps, just simply laundering money.

When opening a new bank account or renting a safety deposit box, questions will be ask about other accounts you may have, your tax status, and the source of your funds.


“To deter and punish terrorist acts in the United States and around the world, to enhance law enforcement investigatory tools, and for other purposes.” — From the Patriot Act, Congress, Oct. 24, 2001

The anti-money-laundering provisions of the Patriot   Act are about to be noticed by consumers who open new accounts with   financial institutions. Even if you have a checking account with   a bank and you decide to open an IRA or a savings account with the   same bank, you can expect to be asked some prying questions that   may make you uncomfortable.

Banks, savings associations, credit unions, brokerages  and mutual funds are expected to comply with the provisions.

Background checking Here is what is required when a new account is opened:

A. The institution must verify the identity   of any person seeking to open an account by obtaining customer identification   that includes:

  1. Name
  2. Date of birth
  3. Address
  4. Identification number — a taxpayer identification number for American citizens or a government-issued document for noncitizens.

B. The institution must maintain records of   the information used to verify the person’s identity.

Originally, the regulations required financial institutions   to keep a photocopy of whatever document was used for identification.   That rule has been changed; they will only have to keep a written   record of the document.

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

Those provisions may seem fairly harmless, but Boston-based   Dalbar, a financial industry consulting firm, says institutions   have the ability to ask much more intrusive questions should they   decide it’s necessary.

For instance, Dalbar says institutions   could include questions about:

  • Other accounts with links to the customer
  • Nature of the customer’s business and occupation
  • Name and address of employer
  • Customer’s wealth
  • Source of customer’s income
  • Customer’s tax status
  • Source of customer’s funds used to open account
  • Customer’s investment objective

“The regulations require a   very limited amount of documentation: a valid drivers license or   passport for a foreigner, valid street address and date of birth.   They’ll also check the suspect database,” says Charles O’Neill   of Dalbar.

“But elsewhere in the regulations it’s stated   very clearly that the institution has an obligation beyond those   requirements. The institution is still responsible for knowing their   customers.”

O’Neill says how much scrutiny you’re subjected to   could depend, in part, on the nature of your transactions and the   amount of money.





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