Credit Unions Navigate Evolving rules for Identifying Minor Account Holders
WASHINGTON, D.C. – Credit unions are facing ongoing scrutiny and a lack of standardized guidance regarding Customer Identification Program (CIP) procedures for accounts opened by minors, according to recent analysis of federal regulations and industry resources. While no single document list exists for verifying the identity of young account holders, institutions are required to employ risk-based verification methods compliant with Bank Secrecy Act (BSA) regulations.
This issue has gained renewed attention as credit unions increasingly offer specialized savings programs for youth, including “Trump Accounts” – custodial accounts requiring partnerships with Credit Union Service Organizations (CUSOs) or third-party providers.
Understanding the Regulatory Landscape
Federal regulations,specifically 31 CFR §1020.220, mandate that credit unions establish CIPs with procedures for verifying customer identity “within a reasonable time after the account is opened.” These procedures must outline when documentary methods, non-documentary methods, or a combination of both will be used.
Crucially, the rules emphasize a “risk-based” approach. FinCENS regulations require credit unions to verify identity “to the extent reasonable and practicable,” meaning the level of scrutiny should align with the institution’s overall BSA/AML risk profile.
Acceptable Verification Methods – A Patchwork Approach
Unlike adult account openings, ther’s no universally accepted list of documents for minors. This has led to a diverse range of practices among credit unions.
Documentary Methods: Some institutions accept unexpired government-issued IDs like driver’s licenses (if applicable) or school identification cards. Others rely on combinations of documents such as a Social Security card and a birth certificate.
Non-Documentary Methods: Verification can also be achieved through alternative means, such as confirmation of identity by a school official like a teacher.The lack of a standardized approach underscores the need for each credit union to carefully review and update its own CIP policy, ensuring it aligns with its internal risk assessment.
key Considerations & Resources:
Risk Assessment is Paramount: The core principle is to tailor verification procedures to the specific risks associated with the account and the minor’s circumstances.
Legal Counsel: Given the complexities, consulting with legal counsel is highly recommended, notably when dealing with novel situations or specialized account types like “Trump Accounts.”
FFIEC BSA/AML Manual: The Federal Financial Institutions Examination Council (FFIEC) provides a detailed breakdown of CIP regulatory requirements: https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirements/01
Consumer Compliance Outlook: A helpful article on CIP and minors can be found in the Consumer Compliance Outlook: https://www.consumercomplianceoutlook.org/2015/first-quarter/agencies-issue-guidance-on-youth-savings-programs/
“Trump Accounts” & CUSOs/Third-Party Providers: America’s credit unions offers an FAQ on “Trump Accounts,” highlighting the necessity of partnering with a CUSO or third-party provider to facilitate these arrangements: https://www.americascreditunions.org/advocacy/regulatory-comment-alerts
Details Not Explicitly Mentioned in the Original Article:
The term “trump Account” refers to a custodial account established for a minor, frequently enough used for gifting purposes. The name originates from a popular trend of gifting funds to minors through these accounts.
Custodial accounts require specific documentation related to the custodian (the adult managing the account) in addition to the minor’s identity verification. this adds another layer of complexity to the CIP process.
The evolving regulatory landscape surrounding digital identity verification could impact future CIP procedures for minors. As digital IDs become more prevalent, credit unions may explore incorporating these methods into their verification processes.
This information is intended for general guidance only and does not constitute legal advice.Credit unions should consult with their legal counsel to ensure compliance with all applicable regulations.
