Lessons in Account Opening ID Requirements - Youth Edition
Happy first day of school! At least, for those kiddos that attend the elementary school across from my house. It was fun watching all of the parents and kids walk to school this morning, their brand new backpacks and lunch boxes full to the brim and ready for a new year of learning and adventures. Even though I’ve been out of school for some time, now, I still love this time of year; it reminds me of my favorite scene from the classic Meg Ryan/Tom Hanks film, You’ve Got Mail, where Tom Hanks asks, “don’t you just love the fall? It make me want to buy school supplies. I would send you a bouquet of newly sharpened pencils if I knew your name and address.”
While the elementary school kiddos may be a bit young for their own credit union accounts, watching them nonetheless got me thinking about finances, and how expensive it is to raise kids, and how I wish I had my own bank account when I was younger, and then how could I have had my own account when I was younger? And then, youth account opening and the required identification documentation, since many minors do not have a photo ID, which is what today’s lesson will be about.
In general, the BSA requirements for Customer/Member Information Programs (CIP/MIP) do not appear to require that a copy of an ID card be obtained and retained on file. But it does require the verification of member information, and section 1020.220(a)(2)(ii) includes “unexpired government-issued identification” as an example of a document that could be used for customer verification purposes. Subparagraph (a)(2)(ii)(B), however, also provides for verification through non-documentary methods, which could include:
(B) Verification through non-documentary methods. For a credit union relying on non-documentary methods, the CIP must contain procedures that describe the non-documentary methods the credit union will use.
1) These methods may include contacting a member; independently verifying the member's identity through the comparison of information provided by the member with information obtained from a consumer reporting agency, public database, or other source; checking references with other financial institutions; and obtaining a financial statement.
2) The credit union's non-documentary procedures must address situations where an individual is unable to present an unexpired government-issued identification document that bears a photograph or similar safeguard; the credit union is not familiar with the documents presented; the account is opened without obtaining documents; the customer opens the account without appearing in person at the credit union; and where the credit union is otherwise presented with circumstances that increase the risk that the credit union will be unable to verify the true identity of a customer through documents.
Based on this requirement, credit unions’ CIP/MIP policies should outline what documentation it requires for verification purposes, and the methods it uses for non-documentary verification. If this is not currently addressed in the policy, a credit union may want to consider updating it to reflect that information in order to facilitate the process of minor account openings where the minor does not have government-issued photo ID.
Another consideration may be how the credit union opens minor accounts. The Federal Credit Union Act and NCUA’s Model Bylaws both permit federal credit unions to issue shares in a minor’s name. This previous blog post discusses minor accounts and the bylaws:
“Article XV. Minors
Section 1. Minors permitted to own shares. Shares may be issued in the name of a minor. State law governs the rights of minors to transact business with this credit union.” See, 12 C.F.R. Part 701, Appendix A, Article XV, Section 1
The standard bylaws direct an FCU to the state law in their jurisdiction regarding the rights of a minor because whether or not a minor has legal ability to enter into a binding agreement, i.e., the legal capacity to contract, is determined by law in each state. If an FCU were to enter into a contract, for example - an account agreement, with someone who did not have capacity to do so at the time the agreement was made, the agreement could become void, possibly even years later. For this reason, most credit unions require a parent or adult to also be on the account, to ensure that an enforceable agreement is in place. An FCU considering youth accounts or writing a policy regarding youth accounts should speak with local counsel who can advise it on the law regarding minority and capacity to contract in the credit union's jurisdiction.
If a parent or guardian is included, the blog post explains that, “when a parent opens the account for the minor because the minor does not have the legal capacity to make an agreement under state law, the customer for an account is usually the parent” for MIP purposes:
Below is from the CIP Overview section of the FFIEC's Bank Secrecy Act/Anti-Money Laundering Examination Manual:
“The CIP rule applies to a customer. A customer is a person (an individual, a corporation, partnership, a trust, an estate, or any other entity recognized as a legal person) who opens a new account, an individual who opens a new account for another individual who lacks legal capacity, and an individual who opens a new account for an entity that is not a legal person (e.g., a civic club).” (Emphasis in original.)
Even if not needed for CIP reasons, many credit unions request the minor’s SSN and/or birth certificate to document the account and to ensure the minor is actually a minor.
With that, it appears there are multiple ways to open accounts for minors, with or without government issued photo IDs. Class dismissed!
In honor of Labor Day, NAFCU’s office will close at noon on Friday and reopen on Tuesday, September 6th. We’ll be back to blogging on Wednesday, September 7th!