SIE Ready🛡️ Compliance Considerations · Lesson 2 of 6 · 5 min
Know Who You're Dealing With
🪪 Before a firm opens an account, it has to know who the customer actually is. The USA PATRIOT Act turned that from good practice into law.
💡 Key idea
CIP = Name, Date of birth, Address, ID number. Section 326 is CIP, 352 is the AML program, 314 is information sharing.
🧠 Why it matters
PATRIOT Act Section 326 created the CUSTOMER IDENTIFICATION PROGRAM (CIP): before opening an account, the firm collects NAME, DATE OF BIRTH (individuals), ADDRESS (a street address, not just a P.O. box) and an ID NUMBER (a taxpayer ID for U.S. persons). It verifies identity within a reasonable time before or after opening, checks government terrorist lists and keeps identifying information 5 years after the account closes. Section 352 requires an AML PROGRAM; under FINRA Rule 3310 it includes a designated AML compliance person, ongoing training and INDEPENDENT TESTING every calendar year (every two years for a firm with no customer business). Section 314(a) lets FinCEN query firms; 314(b) lets institutions share voluntarily.
📈 In the real world
📮 Priya opens an account online and lists only a P.O. box. The system stops her: CIP needs a residential or business street address. She adds her apartment address, the firm verifies her license against a database, and the account opens. The P.O. box can still be her mailing address.
📌 Takeaways
- CIP's four items: name, date of birth, address, ID number
- Section 352 AML program: policies, AML officer, training, independent testing
- 314(a) is FinCEN asking firms; 314(b) is firms sharing with each other
📖 Terms in this lesson
AML compliance program: The written program every broker-dealer must have under FINRA Rule 3310, with policies, a designated officer, training and independent testing.
USA PATRIOT Act: The 2001 law that strengthened anti-money-laundering duties, including customer identification programs and information sharing.
✅ Test yourself
Which item is NOT one of the minimum pieces of information required under a broker-dealer's CIP for an individual?
- Taxpayer ID number
- Date of birth
- Annual income
- Street address
Answer: C · Annual income
CIP requires name, date of birth, address and an identification number. Income is gathered for suitability and Reg BI, but it is not a CIP identity element.
Under FINRA Rule 3310, how often must a firm that holds customer accounts generally have its AML program independently tested?
- Every month
- Every calendar quarter
- Every three calendar years
- Every calendar year
Answer: D · Every calendar year
The general standard is annual testing on a calendar-year basis. Only firms that do not execute transactions for customers, hold customer accounts or act as an introducing broker (such as proprietary-only firms) may test every two years.
FinCEN sends a firm a list of names tied to a terrorism investigation and asks it to search its records. Which provision is this?
- Section 314(b)
- Section 326
- Section 352
- Section 314(a)
Answer: D · Section 314(a)
314(a) is the government-to-firm request. 314(b) is voluntary sharing between financial institutions, 326 is the CIP and 352 is the AML program requirement.
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