H.R. 8836: Know Your American Customer Act

The bill titled the Know Your American Customer Act aims to establish requirements for certain financial institutions to verify the citizenship and legal status of individuals before they can open or maintain an account. Here’s an overview of the provisions included in the bill:

Definitions

• Covered Individual: Refers to anyone who wants to open a new account or whose existing account was opened after the bill's effective date, who is either a U.S. citizen or lawfully present in the U.S.
• Covered Institution: Refers to insured depository institutions (like banks) and insured credit unions.
• Lawful Presence: An individual is considered lawfully present if they are a U.S. citizen, a national, or an alien who has been granted the right to remain in the U.S. under certain conditions.

Account Opening Requirements

Covered institutions must verify the legal status of individuals looking to open accounts. This includes:

• Individuals must present specific forms of identification that demonstrate U.S. citizenship or lawful presence.
• Examples of acceptable documents include state-issued driver’s licenses, U.S. passports, birth certificates, and other legal documents outlining citizenship or lawful presence.

Account Maintenance

For individuals who are present in the U.S. under a temporary status, the bill establishes requirements to ensure they continue to meet criteria for holding an account:

• If their authorized stay expires, they may still have access to their account for 30 days, after which restrictions may apply unless documentation of their legal status is revalidated.
• Differentiates between permanent and temporary legal statuses in handling accounts.

Account Freezing and Closing Procedures

If a covered individual is found to be unlawfully present, their account must be frozen or closed. The following applies:

• Institutions must follow due process when freezing or closing an account and provide necessary notices to account holders.
• There are specific procedures outlined for handling incoming deposits and outgoing transfers during the period an account is restricted.

Penalties for Violations

Financial institutions that fail to comply with the verification requirements could face civil penalties. However, there are provisions for safe harbors, meaning institutions that make a good faith effort to comply may avoid penalties.

Enforcement and Regulations

The Secretary of the Treasury will oversee the enforcement of these provisions, and there are timelines set for issuing interim guidance and final regulations.

Applicability and Limitations

This legislation applies specifically to accounts held by lawfully present individuals and does not impose additional requirements on accounts already recognized under existing laws, such as those held by nonresident aliens.

Effect on State Laws

The bill will supersede state laws concerning the verification of lawful residency for financial institutions, establishing a uniform standard across the United States.

Relevant Companies

• JPM - JPMorgan Chase & Co.: As one of the largest banking institutions in the U.S., JPMorgan Chase would be required to implement the verification processes mandated by this bill for new and existing accounts.
• BAC - Bank of America Corp.: Similar to JPMorgan, Bank of America will need to adapt its account opening policies to comply with the new verification requirements, potentially impacting customer onboarding processes.
• WFC - Wells Fargo & Co.: Compliance with account verification processes will be essential for Wells Fargo and could lead to changes in their customer service operations and client interactions.