By using customer identification or “know your customer” rules, banks try to prevent money laundering and other financial frauds. This use of customer identification rules by banks is contemplated at the Fifth Recommendation of the Financial Action Task Force. The Fifth Recommendation urges banks to diligently verify a customer’s identity and to record the true beneficial ownership of bank accounts.
As reported at “Fighting Financial Fraud At UK Banks“, the UK changed its banks’ “know your customer” rules on December 15, 2007, by codifying them at Money Laundering Regulations 2007*. U.S. banks too verify customer identities, but do so pursuant to 31 C.F.R Part 103.121. Lawsuits alleging that two U.S. banks had failed to sufficiently identify their bank customers, are respectively described at: “Associated Bank Sued For Supposedly Ignoring Red Flags” and “Lawsuit Claims Wachovia Bank Facilitated Alleged Ponzi Scheme“.
UBS AG and other Swiss banks also require customer identification at the time a bank account is opened. The customers of Swiss banks execute a declaration of beneficial ownership, commonly referred to as a “Form A”. A July 13, 2001 “Form A” was used in the U.S. tax fraud case brought against Florida yacht broker Robert Moran. According to the Plea Agreement in Mr. Moran’s case, the July 13th “Form A” helped demonstrate that Mr. Moran had violated 26 U.S.C. § 7206 (1), (perjury on a return / false statements).
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