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Will new rules for identifying customers
erode privacy?
By Laura
Bruce • Bankrate.com
You won't have to
get your iris scanned or your fingerprints checked, but you will
be subjected to greater scrutiny when opening a bank or brokerage
account in the future.
The Treasury Department has just proposed new rules
aimed at beefing up standards for identifying folks who want to
open bank or brokerage accounts.
Banks were severely criticized when it was learned
that the Sept. 11 hijackers had opened bank accounts using, among
other things, fraudulent Social Security numbers.
Shortly afterward, President Bush signed the USA Patriot
Act. The anti-terrorist legislation called on the Treasury Department
to devise minimum standards that all financial institutions, including
banks, trusts, savings associations, credit unions, brokerages,
insurance companies and credit card companies, would have to follow
to verify the identification of customers.
Hello, who are you?
Institutions will have to verify the identity of anyone
who wants to open an account, maintain records of the information
used to verify the person's identity and determine whether the person
appears on any list of known or suspected terrorists or terrorist
organizations.
Customers would have to provide information most customers
are already used to providing: name, address, date of birth and
a Social Security number. Customers would also be asked for government-issued
identification such as a driver's license.
Foreigners would be required to have an identifying
number similar to the Social Security number. It would come from
a U.S. government-issued document.
The onus would be on financial institutions to make
sure the Social Security number and the driver's license, for instance,
are valid.
Andy Zavonia, a compliance officer at a Texas bank,
calls the proposals "minimum procedures" and says most
banks are already doing that much. Zavonia says the government is
really talking about due diligence by banks.
"Is it a valid ID? Did I try to prove it's valid?
Does the ID look right? Did I get two forms of ID?"
A report prepared by the "Account Opening Best
Practices Group" at the American Bankers Association lists
a number of problems in trying to identify customers using the current
system:
- Lack of uniform procedures for official state identifications
- Lack of governmental verification processes
- Lack of meaningful biometric identifiers
- Lack of real-time commercial verification products
In short, there's no uniform identification card in
the United States and there's no quick way to verify if a driver's
license or a Social Security number is valid and belongs to the
person who presented it.
The Treasury Department and the Social Security Administration
are hoping to overcome one of those problems by developing and implementing
a system that would allow financial institutions to access a database
to verify Social Security numbers.
But verification of Social Security numbers may be
a stickier issue for customers.
Social Security insecurity
Privacy advocates fear that would open a Pandora's box.
"It puts a higher premium on the Social Security
number as an identifier, and that only exacerbates the problem of
identity theft," says Jim Dempsey of the Washington, D.C.-based
Center for Democracy and Technology.
"This proposal says if you're a bad guy and want
to open a bank account, don't make up a Social Security number,
use a stolen number.
"We're also allowing bank- and securities-industry
personnel access to the Social Security network and that creates
another security weakness in the system."
The proposed rules are expected to be published in
the Federal Register next week. There will then be a 45-day comment
period.
If you would like to read the proposal in its entirety,
click
here.
If you'd like to comment on the proposals, written
comments from the general public may be mailed to:
Fin CEN
Section 326 Bank Rule Comments
P.O. Box 39
Vienna, VA 22183
Or, send e-mail to regcomments@fincen.treas.gov
with the caption "Attention: Section 326 Bank Rule Comments"
in the subject line.
Final implementation of the rules is slated
for Oct. 25, 2002.
-- Posted: July 18, 2002
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