A new client wants to open an account using a passport from abroad, names a friend to place trades, and asks you to skip the privacy notice. Three rules just triggered, and getting any one wrong stalls the account.
The customer identification program exists because Congress ordered it. USA PATRIOT stands for Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism, and the USA PATRIOT Act of 2001 (Pub. L. 107-56) amended the Bank Secrecy Act of 1970. Three of its Title III sections drive what a representative does at account opening, and each one lands in a citable rule, either in the Code of Federal Regulations (CFR) or in the FINRA rulebook.
The customer identification program (CIP) is the gate. Before the account opens, you collect four items: full name, date of birth, a physical address (not a P.O. box), and a taxpayer identification number. A US person gives an SSN or ITIN.
KEY: CIP verifies identity. Know Your Customer (Rule 2090) gathers the facts needed to service the account.
Common mistakes
- Confusing CIP with KYC. CIP verifies identity with four items; Rule 2090 gathers servicing facts. They are separate obligations.
- Swapping the SAR and CTR thresholds. SAR for suspicious activity at or above $5,000; CTR for cash over $10,000.
- Treating discretion as verbal. Rule 3260 demands prior written customer authorization and principal approval, not a phone okay.
Bottom line
- The CIP requires four identifiers before opening: name, date of birth, physical address, and taxpayer ID (SSN or ITIN); a non-US person may use a passport number and country
- The CIP comes from Section 326 of the USA PATRIOT Act (31 CFR 1023.220); Section 352 requires the written AML program carried into FINRA Rule 3310, and Section 314 governs information sharing
- Income, net worth, objectives, and risk tolerance are investment-profile facts under Rule 2111 and Regulation Best Interest, never CIP elements; identity is verified within a reasonable time and CIP records are kept five years after account closure
- FINRA Rule 2090 (Know Your Customer) requires reasonable diligence to know the essential facts about every customer at account opening and to retain them
Exam shortcut
$5,000 means SAR, $10,000 means CTR. Suspicion drives the SAR; raw cash size drives the CTR. Two signatures for discretion. Customer in writing plus principal in writing, both before the first discretionary trade. S-P notices come in threes. Initial at opening, annual thereafter, opt-out before any nonaffiliated sharing. Count to four for the CIP. Name, birth date, street address, taxpayer ID.
The full lesson (about 1,973 words, 13 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- B4
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