Exemptions under Phase II of the Bank Secrecy Act

C

Phase II of the Bank Secrecy Act (BSA) requires financial institutions to establish and maintain effective anti-money laundering (AML) programs. One important aspect of an AML program is customer identification, which involves identifying and verifying the identity of customers who open accounts or conduct transactions.

Certain customers may be exempt from the customer identification requirements under Phase II of the BSA. These exemptions are intended to reduce the burden on financial institutions and their customers, while still ensuring that the AML objectives of the BSA are met.

Of the options given, the following customer types may be exempted under Phase II of the Bank Secrecy Act:

A. Government agencies: Financial institutions are not required to identify and verify the identity of government agencies that open accounts or conduct transactions. This exemption applies to all levels of government, including federal, state, and local agencies.

B. Correspondent banks: Correspondent banks are banks that provide services to other banks. Financial institutions that provide correspondent banking services are not required to identify and verify the identity of the correspondent bank's customers.

C. Payroll customers: Financial institutions are not required to identify and verify the identity of payroll customers who receive wages or other compensation from an employer through a payroll card or other electronic payment method.

D. Businesses whose stocks are traded on a national stock exchange: Financial institutions are not required to identify and verify the identity of businesses whose securities are registered with the Securities and Exchange Commission (SEC) and traded on a national stock exchange.

It's worth noting that even if a customer is exempt from the customer identification requirements under Phase II of the BSA, financial institutions are still required to monitor and report suspicious activity by that customer. Additionally, some financial institutions may choose to apply their own customer identification procedures even if a customer is exempt under the BSA.