If you have opened a new bank account in recent years, you may have found yourself surprised at just how much information banks are asking their customers nowadays. It can be off-putting at first being asked for personal data when you do not understand the why behind the request.
This article will break down the reasons banks ask so many questions and give you an insight into what motivates your bank to ask you these questions.
The primary reason for the number of questions is because of the international “Know Your Customer” (KYC) guidelines. Introduced as a result of the USA Patriot Act of 2001, the Secretary of the Treasury made KYC mandatory for all United States banks by October 26, 2002. Now, KYC is the gold standard for all banks, with its express purpose being to avoid illicit activities such as money laundering, the financing of terrorist organizations and theft from taking place.
For the security of your own account, financial institutions are required to ask the following information of any person who wishes to open one:
- A way to verify your identity and address:
- It can be a state-issued Identification Card/Driver’s License or Passport.
- Proof of address can be a bank/credit card statement or a utility bill.
- Keep in mind that electricity, gas, landline and water utility bills are all considered sufficient, whereas mobile phones, TV/Satellite, and internet utility bills typically are not.
- Permission to maintain records of this information and,
- Cross-check the information provided with databases of known or suspected terrorists and terrorist organizations to ensure no client has such ties.
- For business entities, review and copies of various registered business documentation, business agreements (showing ownership, authorization, etc.) and tax returns (if part of a credit application.)
These are just some basic identification requirements most banks and credit unions require. Check with your financial institution for details.
Account Safety and Customized Solutions
Other than just the international banking regulations which require this, the more your banker knows about you and your spending habits, the better equipped they are to serve your particular needs and protect your interests. When your bank knows what to expect from your account activity, they are prepared to spot something which is not typical behavior for you and act immediately to secure your assets. Meanwhile, knowing your financial habits also ensures that you are receiving the best customized service and supported in the way you need it.
For example, when your banker asks about the number of transactions you believe you will have in your account per month it allows them to discern whether you need a checking or savings account. That is because, in the U.S. savings accounts are regulated and only allowed a limited number of withdrawals per month, which once surpassed incur financial penalties.
Further questions are to ascertain any further needs you may have. For instance, if a banker finds that you have taken out a loan with a different bank, it is likely that they will offer you the opportunity to review it for refinancing to either save money on your monthly payment or cut down the life of your loan. When a banker enquires on a new client’s place of business, it is not them being overly personal; they could be trying to determine if it is possible to waive check holds on your payroll checks, provide you with the information to set up your direct deposit or offer rollover options for your previous 401k.
Moreover, if you are a business owner, there may be additional helpful questions your banker may ask to better assist you. For example, asking about transaction volume, employee numbers, and savings options. Bankers are looking for ways to simplify clients’ day-to-day activities and anticipate upcoming needs or services, and these questions provide a guide to allow for more appropriate recommendations.
We Are Here to Help
At Home Bank of California, we are committed to providing you with the best solutions to your personal and business banking needs. Our bankers are available to help with streamlining your banking and business operations, whether that includes online banking or remote deposits, ACH or HR services, or even retirement planning strategies.
It is important for your bank to know you, not only for your own economic safety but also to provide you with the most effective and personalized service possible.
Talk to a Home Bank of California banker today to see how we can help you!