Quick Answer
Account opening requires collection and maintenance of required customer information and documentation, application of the Customer Identification Program, and Know Your Customer procedures. The Customer Identification Program addresses identity identification, while Know Your Customer requires essential facts about every customer and each person authorized to act for that customer.
The account file supports both identity identification and the broader understanding of the customer relationship.
Required Customer Information and Documentation
- Required customer information: Collect the information needed for account opening.
- Required customer documentation: Obtain and maintain the documentation needed for the account.
Customer Identification Program
- Customer Identification Program (CIP): Apply the account-opening identity-identification requirements.
Identity identification -> establishes the customer’s identity for account opening.
Know Your Customer
- Know Your Customer (KYC): Know and retain the essential facts concerning every customer and the authority of each person acting on the customer’s behalf.
- The Know Your Customer rule reaches beyond an identity-identification check: it includes the customer and each authorized person.
Think of it this way: CIP answers, “Can the firm identify this customer?” KYC answers, “What essential facts does the firm know and retain about this customer, and who is authorized to act?” The first is identity-focused; the second is relationship-focused.
Exam Tip: Gotchas
- CIP is not a substitute for KYC. Both apply at account opening, but an identity-identification check does not satisfy the broader obligation to know the customer and each authorized person.