[Federal Register Volume 68, Number 186 (Thursday, September 25, 2003)]
[Proposed Rules]
[Pages 55335-55337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24226]



31 CFR Part 103

RIN 1506-AA28

Customer Identification Programs for Financial Institutions

AGENCY: Departmental Offices, Treasury.

[[Page 55336]]

ACTION: Disposition of comments and termination of inquiry.


SUMMARY: The Department of the Treasury is announcing the results of 
its July 1, 2003, Notice of Inquiry that sought comment on two aspects 
of the final rules issued pursuant to section 326 of the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (the 
Act). Following a review of comments and a careful analysis of the 
issues, Treasury has determined that no changes to the final rules are 

FOR FURTHER INFORMATION CONTACT: Office of the General Counsel, (202) 


I. Background

    On May 9, 2003, the Department of the Treasury (Treasury), through 
the Financial Crimes Enforcement Network (FinCEN), together with the 
federal functional regulators, jointly issued final rules implementing 
section 326 of the Act.\1\ The final rules require banks, securities 
broker-dealers, mutual funds, and futures commission merchants and 
introducing brokers to establish reasonable procedures for the 
identification and verification of new accountholders. These rules 
became effective on June 9, 2003, although financial institutions have 
until October 1, 2003 to come into compliance.

    \1\ See 68 FR 25089-25162. The Federal functional regulators 
include the Board of Governors of the Federal Reserve System, the 
Federal Deposit Insurance Corporation, the Office of the Comptroller 
of the Currency, the Office of Thrift Supervision, the National 
Credit Union Administration, the Securities and Exchange Commission, 
and the Commodity Futures Trading Commission. In addition to the 
joint rules, FinCEN also issued separately a rule applicable to 
various state chartered institutions lacking a Federal functional 

    On July 1, 2003, Treasury published a Notice of Inquiry seeking 
additional comment on two discrete aspects of the final rules: (i) 
Whether and under what circumstances financial institutions should be 
required to retain photocopies of identification documents relied on to 
verify customer identity; and (ii) whether there are situations when 
the regulations should preclude reliance on certain forms of foreign 
government-issued identification to verify customer identity.\2\

    \2\ 68 FR 39039.

II. Summary of Comments

    Treasury received over 34,000 comments in response to the Notice of 
Inquiry.\3\ All comments have been reviewed. Treasury received comments 
from a wide variety of individuals and entities, including members of 
Congress, the Department of Justice, representatives and officials of 
State and local governments, the financial services industry (including 
the banking, securities, mutual fund, and insurance industries), faith-
based organizations, advocacy groups, and interested citizens.

    \3\ Treasury received over 27,000 comment letters, e-mails, and 
web postings. Many of the comment letters offered separate opinions 
on the two issues, thus raising the total number of comments 
received on the two issues to over 34,000.

    The Photocopy Issue: Treasury received approximately 10,700 
comments relating to the question of whether the final rules should 
require financial institutions to make and retain photocopies of 
identification documents relied upon to verify identity. As issued, the 
final regulations do not require financial institutions to photocopy 
identification documents. Although it is not dispositive of the issue, 
Treasury notes that the great majority of those submitting comments, 
nearly 90 percent, did not believe that the rules should be amended to 
require financial institutions to make and retain photocopies of 
identification documents.
    The Foreign Identification Documents Issue: Treasury received 
approximately 24,000 comments relating to the question of whether the 
final rules should preclude financial institutions from relying on 
certain forms of identification issued by a foreign government. As 
issued, the final rules neither endorse nor preclude reliance on 
particular forms of foreign government issued identification. Virtually 
all comments were directed toward encouraging Treasury either to allow 
financial institutions to accept, or to preclude them from accepting, 
the Mexican consular identification document, the Matricula Consular. 
Indeed, many of the comments addressed questions of immigration policy, 
rather than the security of such documents. Again, although not 
dispositive of the issue, the vast majority of those submitting 
comments, nearly 83 percent, did not believe that the final rules 
should be changed to preclude reliance on certain forms of 
identification issued by a foreign government.

III. Resolution

    Treasury issued the Notice of Inquiry to enhance the administrative 
record with respect to the two issues outlined above. The addition of 
over 34,000 comments has done precisely that. Despite the volume of 
comments received, the comments presented no new arguments or 
information relative to the requirements of the final rules that 
Treasury and the financial regulators did not already consider in 
developing the final rules.
    Treasury remains persuaded, as it was at the conclusion of the 
rulemaking process, that requiring photocopies of identification 
documents is not an appropriate requirement to impose. While individual 
financial institutions may well determine that it is prudent to 
photocopy identification documents in some instances, an across-the-
board requirement is inconsistent with the risk-based approach of the 
final rules and is not warranted.
    The divergence of opinion concerning the relative security of 
consular identification cards demonstrates the difficulties associated 
with drafting a rule that would purport to specify ``unacceptable'' 
documents. And, given the wide array of identity documents available, 
the security and reliability of which is constantly changing, it makes 
little sense from a regulatory perspective to specify individual types 
of documents that cannot be used within the regulation itself. Any such 
list would inevitably be quickly out of date and may provide financial 
institutions with an unwarranted sense of security about documents that 
are not prohibited. Treasury is committed to protecting the financial 
system from abuse by those seeking to finance terrorism or commit 
financial crimes. This commitment includes providing financial 
institutions with information relating to the security and reliability 
of identification cards. Treasury will use appropriate methods, both 
formal and informal, to ensure that such information is collected and 
shared with the financial community to assist them in verifying the 
identity of their customers.

IV. Compliance Deadline

    Numerous commenters from the financial community requested that 
Treasury extend the October 1, 2003 deadline for complying with the 
customer identification regulations in light of the Notice of Inquiry. 
The implementation deadline will not be extended. Treasury expects all 
financial institutions covered by the customer identification 
regulations to have their customer identification program drafted and 
approved by October 1, 2003.

[[Page 55337]]

    Dated: September 17, 2003.
Wayne A. Abernathy,
Assistant Secretary of the Treasury.
[FR Doc. 03-24226 Filed 9-24-03; 8:45 am]