Back to Member Home Page   
Regulatory/Compliance
Credit Union System National Disaster Preparedness Plan

Oklahoma Financial Transaction Reporting Act (OFTRA)

Money Service Regulations

Money Services Rules Draft

Rule Impact Statement

UBIT Questions and Answers
 

USA PATRIOT Act Rule Finalized for Member Identification Programs (MIP)

Since the USA PATRIOT Act was signed into law, following the terrorists attacks on 9/11/01, there has been discussion of little else. The provision that credit unions are most interested in has finally been released by the federal agencies, including NCUA. The effective date is Oct. 1, 2003.

The final regulations were technically required to be issued last year on Oct. 25, 2002. That date came and went, and we've been waiting since for the rule to come out. That finally happened on April 29, just a mere six month delay.

Now that the rule is here, credit unions can begin the task of creating policies and procedures for how they will verify the identity of members and potential members, as required under the new regulation.

The Member Identification Program (MIP) under section 326 of the USA PATRIOT Act requires financial institutions, including credit unions, to implement specific procedures for:

  • Verifying a person's identity at account opening.

  • Maintaining records of the information used to verify the person's identity.

  • Determining whether the person appears on any lists of terrorists provided by any government agency.

The final rule will definitely be easier to comply with than was first expected when the proposal was issued. The list of requirements is still extensive and the final rule does a nice job of clarifying what will be required, and defining terms that are important for compliance.

In a briefing after the rule was issued, the Treasury Department stated that the goal is to require each institution to have a reasonable belief that it knows the true identity of every person opening a new account. The Treasury followed up the briefing with a news release promising that the "final rules will provide financial institutions with a reasonable amount of time in which to come into compliance." Treasury provided the following details regarding the rule's requirements.

  • Prior to each account opening, each institution must obtain: name, address, and birth date of the member or customer opening a new account.

  • Exceptions can be made for individuals applying for a Taxpayer ID and credit card accounts.

  • Each institution must ensure that the member or customer is able to view a notice or be given a notice before account opening. A sample notice is provided in the final rule.

  • Each institution must establish risk-based procedures for verifying each member or customer within a reasonable time. There are requirements both for documentary and for non-documentary methods.

  • Each institution must keep a description of the document relied upon to verify identity, as well as a description of the resolution of any discrepancies. The identifying information must be retained for five years after the closing of the account.

  • Each institution must have a written customer identification program (CIP) tailored to size, location and type of institution. The CIP must be approved as part of each institution's Bank Secrecy Act (BSA) program. One regulator at the Treasury briefing suggested that institutions may want to establish different procedures for different categories of members or customers.

  • The definition of "customer" means any person that opens a new account. An institution can open a new account for a person with an existing account if the institution has a reasonable belief that it knows the customer's (or member's) identity. The customer/member definition does not include signatories, inquiries about opening an account, accounts opened on behalf of any person without the legal capacity to open an account (such as a minor), or accounts opened on behalf of an entity that is not a legal entity. It does not include corporate credit unions.

  • The definition of "account" remains broad. It includes all formal banking relationships, deposits and credit accounts. The rule now specifically includes safe deposit boxes, cash management services, custodial accounts and trust accounts.

  • Not included are: wire transfers, check cashing, sales of checks and money orders, accounts acquired through mergers, and accounts opened for the purpose of participating in an employee benefit plan covered by ERISA.

  • Institutions have flexibility to determine whether to accept Mexican Matricula Consular cards as identification. The rule does not forbid the use of Matricula Consular cards, nor does it require the use of the cards.

  • By Oct. 1, the regulators will notify institutions what government lists they must check new accounts against.

  • Regulators may exempt any institutions or types of accounts, but they have decided not to do so at the present time. If NCUA wanted to exempt a particular credit union or type of credit union, NCUA would have to coordinate with the Treasury.

Your league's compliance department is currently reading the final rule and will be issuing a Regulatory Alert in the very near future. For questions or further information, credit unions are encouraged to contact the Regulatory and Compliance Division of the Oklahoma Credit Union League at (800) 375-6285, ext. 226, or via email at rdelsesto@okleague.org. (Posted 5/21/03)

NCUA Eases Many Restrictions for FCU Membership

In a final rule that will take effect in May, the National Credit Union Administration (NCUA) Board unanimously removed many unnecessary restrictions on federal credit unions' field of membership. This action took place at the March 27 meeting of the NCUA Board.

Key policy changes will:

  • Increase the size of communities that meet the requirements of interaction - thereby making it easier to obtain community charters;

  • Allow federal credit unions with a single occupational common bond to include a trade, industry or profession (TIP) within their geographic service area;

  • Permit associational common bonds to be based on "totality of circumstances" rather than a limited number of factors;

  • Give many federal credit unions authority to branch around a wholly owned ATM; and

  • Allow federal credit unions to branch around a shared service center as long as they have a shared ownership interest in the center.

Other changes will:

  • Eliminate outdated overlap protection requirements that NCUA says "have proven unworkable and unenforceable";

  • Clarify the process of how to remove existing exclusionary clauses;

  • Streamline additions to multiple-group federal credit unions for employers with less than 3,000 potential members;

  • Establish three standard criteria for determining a community:

  1. A single political jurisdiction (township, city, or county);

  2. A metropolitan statistical area (MSA), or is equivalent, with less than 1 million residents (provided the FCU supplies a narrative description of community interaction); or

  3. Multiple political jurisdictions with less than 500,000 residents (also provided the FCU supplies a narrative description of community interaction).

  • Eliminate "time-in-place" restrictions on occupational, associational or multiple-group federal credit unions that wish to convert to another type of charter; and

  • Allow state-chartered CUs converting to federal charters to retain groups added through emergency FOM provisions.

The new rule will be effective 30 days after publication in the Federal Register, which took place in mid-April.

(Posted 5/21/03)

Regulation Z Commentary Revised

The Federal Reserve Board issued a final rule that revises the staff Commentary to Regulation Z. The revisions to the Commentary state the rules for disclosing fees to expedite a loan payment or delivery of a card. The revisions also interpret the rules for replacing an accepted credit card to permit a card issuer, under certain conditions, to replace an accepted card with more than one card. In addition, the revisions discuss the treatment of private mortgage insurance payments in disclosing the payment schedule and the selection of Treasury security yields for determining whether a mortgage loan is covered by provisions in Regulation Z that implement the Home Ownership and Equity Protection Act.

The Commentary changes were effective April 1, 2003 and compliance becomes mandatory on October 1, 2003.

(Posted 5/21/03)

Final Rule on Advertising & Notice of Insured Status

NCUA's has updated part 740 of its Rules and Regulations, regarding advertising practices and the official sign and statement of the Credit Union's insured status.  The rule clarifies that the use of a trade or second name of the CU is permitted, except it may not be used on legal documents.  Credit Unions must also use the official advertising statement on the home page of their Internet website, which is the statement that the CU is federally insured by NCUA up to $100,000 on any page of the website where the CU accepts deposits or opens accounts.  Similar information must also be placed on all newspaper or newsletter advertising.  The effective date of this rule is July 1, 2003.