Patriot Act compliance
The war on terrorism might make you feel somewhat put upon when you open a bank account. We expect financial institutions to be a bit nosy when we’re applying for a loan, but when we’re putting money in the bank, some questions can seem prying.
The anti-money laundering provisions of the Patriot Act affect everyone who opens a bank account. The Patriot Act was enacted in response to the Sept. 11 attacks, and covers many areas of anti-terrorism. Financial institutions are affected, in part, because the terrorists seemingly had no problem opening bank accounts in this country and obtaining credit cards with false Social Security numbers.
Obligations of the banks
Banks are now being held more accountable for verifying the identity of any person seeking to open an account. They must do this by obtaining customer identification that includes name, date of birth, address and an identification number, which would be a taxpayer identification number for American citizens or a government-issued document for noncitizens.
The institutions must maintain records of the information used to verify an identity. If you submit a driver’s license, the bank would have to keep a record of that. And, finally, the institutions must check your name against a list of known or suspected terrorists or terrorist organizations provided by the government.
If the institution deems it necessary, it can get more intrusive. For instance, a banker could ask the nature of your business or occupation, the name and address of your employer, questions about your wealth and the source of your income, and the source of the money you’re using to open the account.
In essence, institutions are being told they need to know their customers. How much scrutiny you’re subjected to could depend, in part, on the nature of your transactions and the amount of money.
If you open an account with $100,000, you’ll likely be asked for more than a driver’s license. The bank may crosscheck you with other financial institutions and credit reports.
If you ordinarily maintain a $3,000 balance and over the course of a few months deposit a couple of $25,000 checks, those transactions could be flagged.
If an institution does suspect your actions, don’t expect to be told of an investigation. In fact, the law states that the person involved in the transaction may not be notified by the financial institution. You could simply be told that your account has been frozen, and not told why. But you probably wouldn’t be in the dark for long. The bank would file a Suspicious Activities Report and the issue would be handled by federal authorities.
But that isn’t something the average consumer should waste time worrying about. Banks say that the vast majority of legitimate consumers will hardly notice the implementation of the regulations.
What’s probably more important to millions of consumers is keeping financial institutions from selling their personal information to hundreds of other companies. In the next section, we’ll look at how you can guard your privacy.