CIP - POA & Legal Capacity of Incarcerated Person

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Question:

Who is the customer when an account is opened by a power-of-attorney. I have read over the answer to the question posted under CIP titled <a href="http://www.bankersonline.com/security/guru2008/gurus_sec022508c.html">"POA CIP Requirements"</a>, and also Section 103.121(a) (3) Q and A outlined in the regulation. What is the definition of "legal capacity"? I am in the process of updating the CIP section of our Anti-Money Laundering Policy and I need to address this issue. A POA comes in and opens a checking account for an individual that is incarcerated. The POA document provides for the POA to open accounts for that person. Since the individual is in jail, does he or she lack legal capacity?

Answer:

Think of legal capacity as the default status of anyone who has reached the age of majority. It's also granted by law to minors under certain specific situations under state law. It includes (and this is the part that matters to CIP) the legal ability to enter into a binding contract, your deposit contract, for example.

Once someone has reached majority and gains legal capacity, it is lost only under a court order that the individual is incapable of managing his/her own affairs, in which case a guardian or conservator is typically appointed, or by operation of law, which I believe to be very rare. Many states take away certain rights of citizenship when an individual is convicted of serious crimes. Usually, that's restricted to voting, running for office, etc.

I am not aware of a state law that would take away someone's capacity to enter into a binding contract due to such a conviction. You will have to check your state's laws to find out. If the incarcerated individual retains the right to enter into a contract (ignoring the physical challenge presented by his or her being in prison), he or she is your customer, and his/her attorney in fact is not.

First published on BankersOnline.com 7/26/09