vThe Customer Identification Program, or CIP for short, is a US standard for KYC record keeping for financial institutions.
The CIP has its origins in the US Patriot Act, specifically Section 326, and was part of a large-scale move towards stricter regulations on financial institutions. CIP aims for greater degrees of record keeping and grants easier government access to financial records for the stated purposes of anti-money laundering and counter-terrorist activities.
What does it require?
CIP targets three key areas:
- ID verification for opening new accounts with financial institutions.
- Open and ongoing comparison with government watch lists.
- Up-to-date and detailed record keeping.
In many ways, CIP is a more extensive version of KYC practices that are common in many countries.
The CIP requires that institutions and financial services take part in what is called “customer due diligence” as well as continue to monitor customer’s activities. Financial institutions and services operating in the US can do this in two key ways.
Firstly, the services have to cover the basic information-gathering protocols. That means things like date of birth, address, name etc. They verify this information through primary documentation, such as your driver’s license or passport.
Next, they use what is called “non-official documentation” to create a secondary profile of customers. This can include information from media sources and background searches.
All of this information is then cross-referenced with terrorist watch lists, ongoing warrants, and PEP scans, or “politically exposed persons.” (These are people who may be politically compromised via affiliation with certain groups, ongoing diplomatic issues or are particularly vulnerable to bribes or extortion.)