JOURNAL 15
MONEY LAUNDERING – US STYLE
An article in newKerala.com recites that last November the Nuns of the Holy Name Monastery, a Benedictine nunnery in St Leo, Florida had its bank account frozen for a week last November causing cheques to bounce and taking three months to straighten out.
The Bank apparently blamed section 326 of the Patriot Act. This requires financial institutions to institute a Customer Identification Program (CIP) that contains reasonable risk – based procedures to verify that customers are who they say they are to the extent reasonable and practicable and to maintain records of customer information and methods used to verify that identity.
Sound familiar? Just like the UK’s money laundering rules.
The nun’s bank apparently realised that they did not have on file the social security number and photo-identification of one of the cheque signatories – an 80 year old nun. They seem to have decided that this meant they could not verify who their customer was. Don’t they have phones in Florida? Couldn’t they have phoned the nunnery and explained the problem? And what risk were they concerned about that made it so vital to freeze the account?
Ironically the Regulations promulgated by the US Treasury include “Treasury and the Agencies acknowledge that the proposed rule might have had unintended consequences for bank-customer relationship and that the risk-based approach suggested by commentators would avoid these consequences. Accordingly the final rule excludes from the definition of a customer a person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of that person”.
They also say, “After revisiting the issue of whether a signatory should be a “customer”…the proposed provision defining customer to include a signatory on an account is deleted. Instead the final rule requires bank’s CIP to address situations where the bank will take additional steps to verify the identity of a customer that is not an individual by seeking information about individuals with authority or control over the account, including signatories, in order to verify the customer’s identity”.
So the bank seemingly didn’t even have an obligation to verify the nun’s identity! All they were required to do was ask someone at the nunnery who she was!
Robert W Maas
MONEY LAUNDERING – US STYLE
An article in newKerala.com recites that last November the Nuns of the Holy Name Monastery, a Benedictine nunnery in St Leo, Florida had its bank account frozen for a week last November causing cheques to bounce and taking three months to straighten out.
The Bank apparently blamed section 326 of the Patriot Act. This requires financial institutions to institute a Customer Identification Program (CIP) that contains reasonable risk – based procedures to verify that customers are who they say they are to the extent reasonable and practicable and to maintain records of customer information and methods used to verify that identity.
Sound familiar? Just like the UK’s money laundering rules.
The nun’s bank apparently realised that they did not have on file the social security number and photo-identification of one of the cheque signatories – an 80 year old nun. They seem to have decided that this meant they could not verify who their customer was. Don’t they have phones in Florida? Couldn’t they have phoned the nunnery and explained the problem? And what risk were they concerned about that made it so vital to freeze the account?
Ironically the Regulations promulgated by the US Treasury include “Treasury and the Agencies acknowledge that the proposed rule might have had unintended consequences for bank-customer relationship and that the risk-based approach suggested by commentators would avoid these consequences. Accordingly the final rule excludes from the definition of a customer a person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of that person”.
They also say, “After revisiting the issue of whether a signatory should be a “customer”…the proposed provision defining customer to include a signatory on an account is deleted. Instead the final rule requires bank’s CIP to address situations where the bank will take additional steps to verify the identity of a customer that is not an individual by seeking information about individuals with authority or control over the account, including signatories, in order to verify the customer’s identity”.
So the bank seemingly didn’t even have an obligation to verify the nun’s identity! All they were required to do was ask someone at the nunnery who she was!
Robert W Maas
posted by CBW at 2:24 am
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