In the latest episode in a decade-long saga of efforts to involve them in the enforcement of immigration policy, banks in many parts of the country are wrestling with what to make of identification cards issued by local governments. Some cities are quite bold about announcing that they will issue their municipal IDs to people who are not legal residents of the United States. New York City began its program in January 2015.
What do municipal IDs have to do with banks? Under anti-money laundering (AML) laws and regulations all banks are required to verify the identity of their customers before allowing them to open a bank account (the customer identification program, CIP). Banks have to decide whether municipal IDs are valid and reliable forms of identification for the purposes of AML standards. That is not a decision that New York City or other municipalities can make for the banks.
It turns out that the federal regulators, who do have authority over such decisions, are punting the question back to the banks—with some guidance. In a letter sent to NYC officials and to the New York Bankers Association in April, the federal banking regulators and Treasury’s Financial Crimes Enforcement Network (FinCEN) reminded banks that AML rules require—
a bank to have procedures in place to identify its customers at account opening. . . [including] procedures in place that set forth the documents the bank will rely on to verify a customer’s identity. The CIP rule neither endorses nor prohibits a bank from accepting particular types of government identification cards. . . . Ultimately, each bank’s management must determine which forms of documentation are acceptable. . . . [T]he institution must verify enough information to form a reasonable belief that it knows the true identity of the customer.
This policy is very much in line with the policy of the Bush Administration. When I was an official at the Treasury Department I recall testy interagency meetings over whether bank regulatory policy should recognize matriculas consulares , ID cards issued by the Mexican authorities to nationals resident in the U.S. (legally or illegally resident). One argument was asserted that providing access to bank accounts made it easier for illegal aliens to remain in the country, the riposte to which was, so does allowing access to grocery stores. Ultimately, the Bush Administration decided not to use access to banking services as a means of enforcing immigration laws.
Today banks are looking at the quality of these municipal IDs and making their own decisions as to how reliable they are, not whether municipalities should issue them. That is the right question and a reasonable approach, given that banks are not particularly charged with or equipped for making immigration enforcement policy.