Customer Identification Program (CIP) Procedures and Minors

Frequently, the Compliance Team here at America’s Credit Unions fields various questions with respect to Customer Identification Program (CIP) procedures. One of the questions we see from time to time is whether CIP should be performed on minors.

First, NCUA’s Model Bylaws permits federal credit unions (FCUs) to issue shares in a minor’s name. Article XV of the Model Bylaws states the following:

“Section 1. Minors permitted to own shares. The credit union may issue shares in the name of a minor. State law governs the rights of minors to transact business with this credit union.”

However, as indicated above, it’s important to note that credit unions will need to look to their state’s laws to determine whether minors have the ability to open accounts and transact business with the credit union. If an FCU enters into a contract—such as an account agreement—with an individual who lacks the legal capacity to contract at the time of signing, that agreement may later be deemed void, potentially even years afterward. To mitigate this risk, most credit unions require a parent (or other adult) to be listed on the account, ensuring the agreement is legally enforceable. Any FCU that is considering offering youth accounts should consult with its legal counsel to understand the applicable laws regarding minors and contractual capacity within its jurisdiction.

That said, when a parent opens the account for the minor because the minor does not have the legal capacity to make an agreement under state law, the customer for the account is usually the parent. Section 1020.100 of FinCEN’s regulations defines a “customer” as the following:

“(b) Customer. For the purposes of § 1020.220:
(1) Customer means:
(i) A person that opens a new account; and
(ii) An individual who opens a new account for:
(A) An individual who lacks legal capacity, such as a minor; or
(B) An entity that is not a legal person, such as a civic club.” (Emphasis added).

As you can see, an individual (such as a parent) who is opening an account “for an individual who lacks legal capacity” would be considered the “customer” for CIP purposes.

However, if a credit union’s state laws, as well as the credit union’s own internal policies, permit a minor to open the account on their own behalf, then the minor would be the customer. When the minor is considered the customer, then it would be business as usual, and the credit union would perform CIP on the minor just like it would any other customer.

As a quick refresher, what information needs to be collected for CIP? As the FFIEC’s BSA/AML Manual summarizes:

“The CIP must contain account-opening procedures detailing the identifying information to obtain from each customer.13 At a minimum, the [credit union] must obtain the following identifying information from each customer before opening the account:
•    Name,
•    Date of birth for an individual,
•    Address, and
•    Identification number.”

So, you’ve determined that your credit union needs to perform CIP on a minor. What now? Well, section 1020.220(a)(2)(ii) of FinCEN’s regulations requires that the credit union’s CIP “contain procedures for verifying the identity of the customer, using information obtained in accordance with paragraph (a)(2)(i) of this section, within a reasonable time after the account is opened. The procedures must describe when the bank will use documents, non-documentary methods, or a combination of both methods as described in this paragraph (a)(2)(ii).” (Emphasis added).

For those using documentary methods, while there isn’t any specific set of documents that credit unions use when opening an account for minors, from a Bank Secrecy Act perspective, FinCEN’s rules generally require credit unions to use “risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable.” Some credit unions using documentary methods of verifying the identity of the minor may, for example, use an unexpired government-issued identification such as a driver’s license or school identification card, or some combination of a social security card and birth certificate. Alternatively, credit unions using nondocumentary methods may, for example, have the student’s teacher confirm the student’s identity.

As such, there does not appear to be any consensus on what documents should be collected from the minor. Rather, credit unions have adopted various risk-based policies and procedures consistent with their own internal BSA/AML risk profile. Credit unions will need to review their own CIP policy regarding acceptable documentary/nondocumentary methods. It may also be helpful to consult the credit union’s legal counsel when specific issues arise regarding performing CIP on minors.

For more information, the FFIEC’s BSA/AML Manual provides a helpful breakdown of regulatory requirements for CIP here: FFIEC BSA/AML Assessing Compliance with BSA Regulatory Requirements - Customer Identification Program.

Additionally, this Consumer Compliance Outlook article has a great section on CIP and minors: Agencies Issue Guidance on Youth Savings Program - Consumer Compliance Outlook.

Relatedly, since this blog is focused on minors and accounts, it’s worth briefly noting that America’s Credit Unions has a helpful FAQ on “Trump Accounts”, located on our Advocacy page here. As the FAQ notes, “to facilitate […] Trump Accounts, credit unions will have to work with either a CUSO or a third-party provider.” Credit union’s may also want to consult their legal counsel when navigating these types of arrangements.