Patriot Act Disclosure informs the borrower that the lender is requesting identifying information for each borrower to establish their identities. It is provided at the time of account opening to explain to the borrower that the information is required in pursuance of federal regulations.
Mortgage lenders are required to implement a Customer Information program (CIP) under the Bank Secrecy Act (BSA) regulations. CIP must contain procedures to obtain identifying information for each customer at the time of account opening. Additionally, the regulation requires a lender to provide the Patriot Act Disclosure to the customer to inform that the purpose of requesting identifying information is to verify their identity.
At the time of closing, the closing agent (escrow officer, notary, or settlement agent) will ask the borrower to show identity cards or documents. The identification documents may include passport, driver's license, State Id cards, etc. The form is used to record the key identifying information from the documents such as document type, id number, state/country, issue date, and expiry date. Copies of identification documents are not required. For example, if the borrower provides driver's license then the closing agent will record the license number, issue date, expiration date, and other important details in the form. A copy of the driver's license is not retained.
Since the disclosure is provided when collecting the identification information, many lenders provide the Patriot Act Disclosure along with the Borrower Identification Form. The form contains the fields for noting down the identification information.
The disclosure is provided in pursuance of the Bank Secrecy Act regulations codified under 31 CFR 1020.220. The regulations are promulgated by Financial Crimes Enforcement Network, Department of the Treasury.
Patriot Act Disclosure itself is for informational purposes only since it does not contain any specific loan information that requires your review. However, be prepared to provide identification documents to help establish your identity.
FinCEN Regulation, Chapter X - Financial Record Keeping and Reporting of Currency and Foreign Transactions - 31 CFR 1020.220(a)(5) provides model language that can be used to provide the notice. The notice is generic and there are no requirements to add any borrower or transaction specific information. The model language is reproduced below:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
I/We have received, read, and understood a copy of this document.
Patriot Act Disclosure must be provided before opening an account. Most lenders require the closing agent to provide the disclosure and obtain identification information at the time of closing. For this reason, ensure the closing instructions require the closing agent to provide the Patriot Act Disclosure and obtain the proper identification.
A copy of the disclosure is not required to be maintained. However, the lender must be able to show that the disclosure was adequately provided before account opening. If the lender obtains an acknowledgement of receipt of the disclosure then the signed acknowledgement should be maintained, as best practice, in the loan file for at least five years after the date the account is closed.
If the disclosure is provided within the Borrower Identification Form then the form must be maintained at least for five years after the date the account is closed.
Treasury regulation, 31 CFR 1020.220, contains the requirements to provide the Patriot Act Disclosure.
Important Information About Procedures for Opening a New Account
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.
Updated: May 18, 2017