Sunday, October 5, 2003

Expect more paperwork at the bank

By Eileen Alt Powell
The Associated Press

NEW YORK - Don't be surprised if it takes a bit longer to open a bank or brokerage account or to sign up for mutual funds. Wednesday, most of the nation's financial institutions - banks and credit unions, securities brokers, mutual funds and futures dealers - had to begin complying with the consumer identification provisions of the USA Patriot Act of 2001.

The insurance industry is still awaiting final regulations from the Treasury under the act, but eventually will be adopting the changes, too, said Victoria Fimea, senior counsel for litigation at the American Council of Life Insurers.

The USA Patriot Act, enacted by Congress after the Sept. 11, 2001, terror attacks, was designed to give federal authorities broader powers to go after terrorists. The provisions affecting financial institutions are aimed at making it difficult for criminals and terrorists to launder money or finance illicit activities through the U.S. banking system.

Show more ID

In most cases, consumers will be asked to show a government-issued photo ID, such as a passport or a driver's license.

They also may be asked for a utility bill or lease to prove where they live. In some cases, applicants' names will be run against computerized data bases to verify their identities.

If there are inconsistencies, there will be requests for additional information.

Under the new rules, financial institutions must maintain records on the accounts for five years and, if necessary, cross check them with U.S. government files of suspected terrorists.

"It will be a deterrent to criminals and others," said Adnane Charchour, chief executive of SciVantage Inc. of New York, which produces compliance software. "But financial institutions don't want it to become a customer experience nightmare."

John Byrne, senior counsel with the American Bankers Association in Washington, D.C., said consumers will be notified of the Patriot Act requirements through posters, pamphlets and online notices. And, he believes, most won't notice significant changes in sign-up procedures.

"Most people expect banks to ask for information about who they are," Byrne said. "We think they'll be happy to know we're verifying who they are."

Other benefits

That's because Byrne believes that a secondary result of the customer identification provisions will be deterring identity thieves, who use unsuspecting consumers' names and identification numbers to open credit-card accounts and take out loans.

While some provisions of the act have drawn legal challenges, notably those involving authorities' access to library and bookstore records during investigations and wire tapping powers, the provisions on consumer identification haven't been targeted.

That doesn't mean there aren't concerns. Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group in Washington, D.C., said "anything the government requires in terms of increased surveillance of consumers has to be weighted against the potential cost to privacy."

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