Identifying Non-Customers Using Bank Coin Counter

Issue/Question

The Bank asks whether it should require identification from non-customers using the coin counters at its branches. Such persons turn in a receipt generated by the coin counter and exchange it with a teller for paper currency.

Response Summary

The identification of persons using the coin counter who do not have accounts with the Bank would not be required under the CIP rules of the USA PATRIOT Act. Such identification, however, might be required under FinCEN regulations implementing the Bank Secrecy Act for currency transactions, or for OFAC SDN searches required by the OFAC rules. Since the federal laws and regulations are not clear on this point, the Bank will have to make a risk-based decision and establish a threshold, above which it will require identification.

Response Detail

The Customer Identification Program (“CIP”) rules of the USA PATRIOT Act require a financial institution to identify its customers, but a “customer” is generally defined as “a person who opens a new account.” 31 CFR §103.121(a)(3)(i)(A). A person using the coin counter who does not have an account with the Bank would not be a customer of the Bank, for CIP purposes, and the Bank would not be required to identify him.

On the other hand, FinCEN regulations implementing the Bank Secrecy Act require a financial institution to aggregate multiple currency transactions if it has knowledge that the multiple transactions are by or on behalf of any person, and result in either a cash-in or cash-out totaling more than $10,000 during any one business day. 31 CFR §1010.313.

The Bank may also be required to run an OFAC SDN (“Specially Designated National”) search under certain circumstances:

Every transaction that a U.S. financial institution engages in is subject to OFAC regulations. If a bank knows or has reason to know that the target is party to a transaction, the bank’s processing of the transaction is illegal. OFAC, Frequently Asked Questions, Q. 45.

So, the Bank would have to know the identity of a non-customer if it was going to aggregate currency transactions to determine whether a Currency Transaction Report (“CTR”) should be filed, or if it was going to run an OFAC SDN search.

Does this mean that it must know the identity of a person in all cases? After all, someone using a coin counter to exchange $25 in coins for paper currency would be unlikely to have other currency transactions reaching the CTR threshold, and the same argument could be made regarding the likelihood of such a person being on the OFAC SDN list.

An indication that the Bank does not have to know the identity of a person it does business with in all cases is the use of the words “if it has knowledge of” for currency transactions, and “if a bank knows or has reason to know” under the OFAC rules. This means that the Bank has to consider the likelihood that the particular rule requiring it to know the identity of the person it is dealing with is applicable in a particular case.

What the Bank should do, then, is establish a threshold above which it will require identification, since the larger the amount of coins a person brings in for exchange, the more likely it is that the CTR or OFAC rules will be applicable.

This entry was posted on Friday, October 10th, 2014 at 7:31 pm.