RSK.IQ Question of the Week 9/25/17

Verifying the Identity of a Foreign Signatory to a Business Account

Issue/Inquiry

A business entity wants to open a deposit account with the Bank, and provides a certificate of formation along with the EIN. The individual who will be the authorized signer is not a U.S. citizen and is only able to provide an IRS Individual Taxpayer Identification Number (“ITIN”) for himself, a Maryland driver’s license, and Mexican passport. The Bank believes that possession of an ITIN does not authorize a non-citizen to work in the U.S., and that an individual would need a work visa or SSN that was issued for “work purposes only”. How can the Bank verify that a non-resident alien is here in the United States lawfully?

Response Summary

The Bank is not required by the CIP Rule to verify the identity of an individual signatory on the account, but the Bank may require such in its CIP. Documents which would verify the identity of a Lawful Permanent Resident include a properly endorsed foreign passport or an unexpired I-551 Permanent Resident Card.  An ITIN can be issued by the IRS to individuals who are not eligible for a SSN, but they must provide proof to the IRS of identity and foreign status. IRS does not check immigration status and may issue an ITIN on the basis of a birth certificate or a MCAS or Cedular. However, these documents are not as reliable as other documentation and may be possessed by someone in the United States illegally. In this case, the individual is in possession of an ITIN, a U.S. driver’s license, and a Mexican passport, which are much more reliable and indicative of his being in this country legally.

Response Detail

Under the Customer Information Program (“CIP”) Rule of the USA PATRIOT Act, a “customer” is generally “a person that opens a new account.” That means that the customer, for CIP purposes, will be the named owner of the account, rather than an individual who is an authorized signatory but has no ownership interest in the account. In this case, the CIP Rule would require the Bank to verify the identity of the business opening an account, but not for an authorized signer. 31 CFR §103.121(a)(3)(i); FFIEC, FAQs: Final CIP Rule.

The CIP Rule, however, only establishes minimum CIP standards. Each financial institution is required to develop risk-based verification procedures to ensure that it has a reasonable belief that it knows each customer’s identity. 31 CFR §103.121(b); FFIEC, FAQs: Final CIP Rule.

If the Bank’s CIP requires it to verify the identity of the authorized signer of a business account, it will have to obtain the following information for the individual:

  • Name
  • Date of birth
  • A residential or business street address
  • Identifying number

The CIP Rule requires a financial institution’s CIP to have procedures for verifying the identity of the person, using the identifying information obtained at account opening. The institution does not have to establish the accuracy of every element of identifying information obtained, but must do so for enough information so that it can form a reasonable belief it knows the true identity of the person. 31 CFR §103.121(b)(2)(i); FFIEC, FAQs: Final CIP Rule.

For an individual who is a non-citizen but a Lawful Permanent Resident (“LPR”), the following documents will verify that status:

  • I-94 cards or a foreign passport endorsed with “Processed for I-551 as Temporary Evidence of Admission for Lawful Permanent Residency” or the term “Resident Alien.” The LPR will only have an I-94 card until U.S. Citizenship and Immigration Services (“USCIS”) processes the I-551 card (four to six months after application)
  • An unexpired Permanent Resident Card (formerly known as a “green card) form I-551
  • An unexpired Conditional Resident Alien Card – I-551
  • An unexpired Re-Entry Permit – form I-327
  • A private bill enacted by the United States Congress indicating permanent resident status

When the individual is a foreign citizen who may or may not be in the country legally, the documentation available to validate his identity will not be the same as that which would be obtained from a Resident Alien or a Foreign National who has a valid visa to live or visit in the U.S. It would also be unlikely that such a person would have a U.S. driver’s license, a Social Security Number (“SSN”), or a W-8 BEN.

An ITIN probably indicates that the person is in the United States legally, but this may not necessarily be the case.

The ITIN is issued by the IRS to individuals who are not eligible to get a SSN but must furnish some type of taxpayer identification number. In order to obtain it, an individual must provide proof to the IRS of identity and foreign status. This can be accomplished with either an original valid passport or at least two of the following documents, at least one of which must have a photo of the individual:

  • U.S. Citizenship and Immigration Services photo identification
  • Visa issued by U.S. Department of State
  • U.S. driver’s license
  • U.S. military identification card
  • Civil birth certificate
  • National identification card
  • U.S. state identification card
  • Foreign passport
  • Foreign driver’s license
  • Foreign military identification card
  • Foreign voter’s registration card
  • Medical records (valid only for dependents under six years of age)
  • School records (valid only for dependents under 14 years of age)

Our understanding is that the IRS does not check immigration status before issuing an ITIN. An illegal immigrant will probably not be able to provide several of the verification documents, such as a visa or U.S. driver’s license, but conceivably such a person could offer a civil birth certificate and a Matricula Consular de Alta Seguaridads (“MCAS”) or Cedula de Identidad (“Cedular”), and obtain an ITIN in that manner. An MCAS or Cedular is an identification document issued by Mexico or various Central American governments, but are often subject to forgery and may not be reliable for identification purposes, even when officially issued. For that reason, an ITIN does not in itself indicate if the person to whom it has been issued is in this country legally.

In this case, however, the individual is able to produce not only an ITIN, but also a Maryland driver’s license and a Mexican passport. These documents are much more reliable than an MCAS or a Cedular, and their issuance to the individual is more indicative of his being in this country legally.

In order to have obtained a Maryland driver’s license, the individual would have had to have provided the Maryland Department of Transportation, Motor Vehicle Administration with the following documentation:

  • IRS ITIN
  • Proof of filing of Maryland Income Taxes for the preceding two years
  • Current foreign passport
  • Two residency documents, such as copies of a residential lease, utility bill, or bank statement

Such a document should provide substantial verification under the Bank’s CIP of the individual’s identity.

As for non-documentary methods of verifying identification, the Bank’s CIP may provide for contacting the person after the account is opened, independently verifying documentary evidence through CIP software solutions, checking references with other financial institutions, or obtaining a financial statement. CIP software solutions can be a particularly valuable non-documentary means of verifying identification. Comparing the identifying information provided by the customer against fraud and bad check databases can determine whether any of the information is associated with known incidents of fraudulent behavior (negative verification). Comparing the identifying information with information from a trusted third-party source, such as a consumer reporting agency, can confirm compatible associations (positive verification). A foreign citizen who is in this country illegally may not show up on the databases ordinarily used for CIP verification.

This entry was posted on Monday, September 25th, 2017 at 6:00 am and is filed under RSK.IQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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