Escrow Accounts and CIP

Question:

At our bank we open Escrow Trust Accounts. Our customer is the Escrow Company and they are opening accounts under their client's name and social security number as a trust. We are only obtaining the name and social security number of these individuals. Are we obligated to ask the escrow companies for more information on their clients, such as their address and date of birth and identification?

Answer:

From the supplementary information accompanying the final CIP regulation:

For purposes of this rule, a bank will not be required to look through trust, escrow, or similar accounts to verify the identities of beneficiaries and instead will only be required to verify the identity of the named accountholder.(14)

Footnote 14:

However, based on a bank’s risk assessment of a new account opened by a customer that is not an individual, a bank may need to take additional steps to verify the identity of the customer by seeking information about individuals with ownership or control over the account in order to identify the customer, as described in Section 103.121(b)(2)(ii)(C), or may need to look through the account in connection with the customer due diligence procedures required under other provisions of its BSA compliance program.

From Ken: The footnote waters down the initial statement considerably. In combination, I take them to mean that if you are very, very comfortable with the escrow agent; i.e. you have KYC'ed them out the wazoo, it is not necessary for you to subject their clients to CIP's information and verification requirements.

First published on BankersOnline.com 9/8/03