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New order on third party TINs from FinCEN is a good step in the process of Bank Secrecy Act (BSA) modernization providing banks more flexibility to operate in a manner that suits their business model

July 1, 2025 //  by Finnovate

New exemption orders from agencies including FinCEN, OCC and FDIC now permit banks to collect tax identification number (TIN) information from third parties rather than solely from the financial institution’s customer.  That rule 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 agencies stressed that the exemption is optimal, as banks are not required to use third-party providers. “The Order will benefit both consumers and the banking industry by promoting innovation and financial inclusion and providing banks more flexibility to operate in a manner that suits their business model,” OCC acting head Rodney Hood said. The agencies said that the new order supports the greater use of online and mobile channels to use online verification services to ensure compliance with KYC rules. In the order itself, the agencies stated that “reliable alternatives exist for verification today that did not exist or were not as prevalent twenty years ago” when customer identification processes were codified, adding that “there could be circumstances in which such processes produce an equivalent or more reliable outcome when banks are permitted the flexibility to change their method of TIN collection based on the bank’s assessment of the relevant risks. The combination of the increase in vulnerability of TINs to identity theft and the availability of reliable alternative options for verification lessens the importance of the specific method of TIN collection for identity verification.” The order added that “while FinCEN and the Agencies are not prescribing specific alternative processes for banks, such processes should take into consideration the purpose of the CIP Rule—to ensure a bank is able to form a reasonable belief that it knows the true identity of each customer—and the bank’s assessment of the relevant risks, including those presented by the various types of accounts maintained by the bank, the various methods of opening accounts provided by the bank, the various types of identifying information available, and the bank’s size, location, product and service offerings, and customer base.”

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Category: Authentication & Identity, Innovation Topics

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