FDIC Updates Approach to Using Pre-Filled Data for CIP Compliance
Commentary by Thomas Delaney
The FDIC issued updated guidance to supervised institutions regarding the use of pre-populated customer information to satisfy obligations under the Customer Identification Program ("CIP").
The CIP Rule, established under Section 326 of the USA PATRIOT Act, requires banks to implement reasonable procedures to verify a customer's identity before opening an account and to maintain records of the information used for verification.
In the Financial Institution Letter, the FDIC stated that collecting identifying information "from the customer" under the CIP rule does not rule out the use of pre-filled data. The FDIC highlighted that financial institutions may use information from current or prior accounts, affiliates, vendors, or other third parties to pre-fill identifying information, as long as the customer reviews and submits the data. The FDIC said such information is considered "from the customer" under the CIP rule.
The FDIC explained that examiners will treat pre-filled information as customer-provided if (i) the customer can review, correct, update and confirm its accuracy, and (ii) the institution's process supports a reasonable belief in the customer's identity based on its assessment of relevant risks, including fraud or account takeover.
Commentary
The action taken yesterday by the FDIC is a welcome recognition that under a risk-based approach to AML compliance, it is possible for financial institutions to confirm customer identities during the account opening process, without requiring customers to provide proof of their identities. For years, as technology has expanded the capability of financial institutions to confirm customer identities, the industry has requested the regulators to align CIP requirements with those expanded capabilities. The FDIC is to be applauded for acknowledging that, in certain circumstances, the customer onboarding process can be made more efficient and less burdensome, without exposing the financial system to increased AML risk.
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