FinCEN Lets Banks Collect Customer Tax Info From Third Parties

The Treasury Department has debuted rule changes designed to help banks maintain compliance.

The department’s Financial Crimes Enforcement Network (FinCEN) issued an order Friday (June 27) that allows banks to collect tax identification number (TIN) information from a third party rather than from the financial institution’s customer. 

“We recognize that the way customers interact with banks and receive financial services has changed significantly since 2001, when the initial requirement was enacted into law under the USA PATRIOT Act,” FinCEN Director Andrea Gacki said in a news release.

“This order reduces burden by providing banks with greater flexibility in determining how to fulfill their existing regulatory obligations without presenting a heightened risk of money laundering, terrorist financing, or other illicit finance activity.”

According to the release, FinCEN issued the order in coordination with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC), and the National Credit Union Administration (NCUA).

The order lets banks that are under these agencies jurisdiction use an alternative collection method to obtain TIN information from a third-party rather than from the customer, so long as the bank otherwise adheres to the Customer Identification Program (CIP) Rule.

That rule, the release noted, requires written procedures that allow a bank to obtain TIN information prior to opening an account and “are based on the bank’s assessment of the relevant risks.”

The rule change follows a request last year by FinCEN and the above-mentioned agencies for information about potential advantages and drawbacks, along with possible safeguards, if banks were permitted to obtain part or all of a customer’s TIN information from a third party prior to opening an account instead of the customer. 

“The requirement for banks to collect identifying information from a customer prior to opening an account has been a long-standing component of a bank’s anti-money laundering program,” Gacki said at the time.

She added that the agency nonetheless acknowledges the “significant changes in technology and financial services that have taken place since promulgation of the CIP Rule.”

In other financial crime news, the Financial Action Task Force said last week that the rising adoption of stablecoins and other virtual assets “could amplify illicit finance risks,” noting also that “most on-chain illicit activity now involves stablecoins.” 

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