The USA PATRIOT Act Section 326, passed by Congress in October, 2001, aims to prevent terrorism. It outlines regulations dealing with systems for preventing identity theft, fraud, money laundering, and more. In particular, the USA PATRIOT Act Section 326 is known as the Customer Identification Program regulation. All banks and other financial institutions are required to comply with the regulations.

Summary of USA PATRIOT Act Section 326

Banks must verify the identity of prospective customers. All new accounts must be screened against government watch lists. A database must be maintained on all accounts for five years after closure. It should include name, date of opening account, verification that identifying information is presented, and method used to verify identity. Financial institutions must have a written policy detailing their Customer Identification Program in order to comply with USA PATRIOT Act Section 326.

Financial institutions required to comply include banks, credit unions, securities brokers, futures merchants, and mutual funds. Types of accounts covered by the rule are savings accounts, checking accounts, credit cards, loans, mortgages, and safe deposit boxes. Transactions that are excluded would be wire transfers, check cashing, money orders or traveler's checks. A policy must be written that includes procedures for closing accounts if identity information cannot be obtained or verified.

USA PATRIOT Act Section 326 does place a burden on financial institutions. Software is available to provide solutions to meet regulations. The programs verify identities, store transaction records, screen government watch lists, and outline customer identification programs. Many of these programs are easy to use and are also cost-effective for financial institutions.