Banks are being "prudent and practical" when they insist on copying the IDs of customers, says a joint statement from the Financial Intelligence Centre and the Ombudsman for Banking Services.
The Cape Argus recently reported consumer concerns about identity theft after some retailers copied the ID documents of customers paying for their purchases by cheque or with a credit card.
The report quoted Banking Ombudsman Clive Pillay saying there was no obligation for banks to copy ID books.
Pillay had commented that consumers were right to be worried when retailers wanted to copy their IDs, and said he would refuse as the potential for the copy to be used to his detriment was "just too great".
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Asked why banks required customers to submit their IDs for copying, Pillay replied that although the Financial Intelligence Centre Act (Fica) obliged banks to establish and verify the identity of every client before they could enter into a business relationship, there was no obligation in the act to actually copy ID books.
But the joint statement released yesterday said money laundering control measures under Fica obliged banks, life insurers, investment managers, attorneys, estate agents and licensed gambling institutions, referred to in the act as "accountable institutions", to establish and verify the identities of their customers.
"The underlying principle is that institutions must know who they are doing business with," said the statement.
They were also obliged to keep records of customers' identities and their transaction activities.
"The purpose is to ensure that a transaction, or a series of transactions, can be reconstructed during an investigation clearly indicating not only what had transpired, but also who was involved."
Prescribed steps to establish and verify an individual's identity included getting the full name, date of birth and identity number and verifying this information by comparing it with the person's identity document.
Accountable institutions had to keep records of the identity of the customer, including a record or copy of the documents the institution had used to verify the person's identity.
"When the record-keeping requirement is read in conjunction with the requirement to establish and verify the identity of a customer, it is clear that the use of an identity document forms part of the procedure of identifying a customer and therefore forms part of the record of the customer's identity which must be kept," said the statement.
"As much as the act does not clearly state that a copy of the identity document must be made by an accountable institution, the most prudent and practical manner to comply with this obligation would indeed be to make and keep a copy of the identity of the client, in the form of an identity document."
All accountable institutions were therefore "reminded and encouraged" to continue meeting their obligations set out in the act. In other words, it was prudent and practical to keep copying ID books.
- This article was originally published on page 10 of Cape Argus on July 10, 2009
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