Appendix J to Part 41 - Interagency Guidelines on Identity Theft Detection, Prevention, and Mitigation
12:1.0.1.1.36.3.28.4.28 : Appendix J
Appendix J to Part 41 - Interagency Guidelines on Identity Theft
Detection, Prevention, and Mitigation
Section 41.90 of this part requires each financial institution
and creditor that offers or maintains one or more covered accounts,
as defined in § 41.90(b)(3) of this part, to develop and provide
for the continued administration of a written Program to detect,
prevent, and mitigate identity theft in connection with the opening
of a covered account or any existing covered account. These
guidelines are intended to assist financial institutions and
creditors in the formulation and maintenance of a Program that
satisfies the requirements of § 41.90 of this part.
I. The Program
In designing its Program, a financial institution or creditor
may incorporate, as appropriate, its existing policies, procedures,
and other arrangements that control reasonably foreseeable risks to
customers or to the safety and soundness of the financial
institution or creditor from identity theft.
II. Identifying Relevant Red Flags
(a) Risk Factors. A financial institution or creditor
should consider the following factors in identifying relevant Red
Flags for covered accounts, as appropriate:
(1) The types of covered accounts it offers or maintains;
(2) The methods it provides to open its covered accounts;
(3) The methods it provides to access its covered accounts;
and
(4) Its previous experiences with identity theft.
(b) Sources of Red Flags. Financial institutions and
creditors should incorporate relevant Red Flags from sources such
as:
(1) Incidents of identity theft that the financial institution
or creditor has experienced;
(2) Methods of identity theft that the financial institution or
creditor has identified that reflect changes in identity theft
risks; and
(3) Applicable supervisory guidance.
(c) Categories of Red Flags. The Program should include
relevant Red Flags from the following categories, as appropriate.
Examples of Red Flags from each of these categories are appended as
supplement A to this appendix J.
(1) Alerts, notifications, or other warnings received from
consumer reporting agencies or service providers, such as fraud
detection services;
(2) The presentation of suspicious documents;
(3) The presentation of suspicious personal identifying
information, such as a suspicious address change;
(4) The unusual use of, or other suspicious activity related to,
a covered account; and
(5) Notice from customers, victims of identity theft, law
enforcement authorities, or other persons regarding possible
identity theft in connection with covered accounts held by the
financial institution or creditor.
III. Detecting Red Flags
The Program's policies and procedures should address the
detection of Red Flags in connection with the opening of covered
accounts and existing covered accounts, such as by:
(a) Obtaining identifying information about, and verifying the
identity of, a person opening a covered account, for example, using
the policies and procedures regarding identification and
verification set forth in the Customer Identification Program rules
implementing 31 U.S.C. 5318(l); and
(b) Authenticating customers, monitoring transactions, and
verifying the validity of change of address requests, in the case
of existing covered accounts.
IV. Preventing and Mitigating Identity Theft
The Program's policies and procedures should provide for
appropriate responses to the Red Flags the financial institution or
creditor has detected that are commensurate with the degree of risk
posed. In determining an appropriate response, a financial
institution or creditor should consider aggravating factors that
may heighten the risk of identity theft, such as a data security
incident that results in unauthorized access to a customer's
account records held by the financial institution, creditor, or
third party, or notice that a customer has provided information
related to a covered account held by the financial institution or
creditor to someone fraudulently claiming to represent the
financial institution or creditor or to a fraudulent website.
Appropriate responses may include the following:
(a) Monitoring a covered account for evidence of identity
theft;
(b) Contacting the customer;
(c) Changing any passwords, security codes, or other security
devices that permit access to a covered account;
(d) Reopening a covered account with a new account number;
(e) Not opening a new covered account;
(f) Closing an existing covered account;
(g) Not attempting to collect on a covered account or not
selling a covered account to a debt collector;
(h) Notifying law enforcement; or
(i) Determining that no response is warranted under the
particular circumstances.
V. Updating the Program
Financial institutions and creditors should update the Program
(including the Red Flags determined to be relevant) periodically,
to reflect changes in risks to customers or to the safety and
soundness of the financial institution or creditor from identity
theft, based on factors such as:
(a) The experiences of the financial institution or creditor
with identity theft;
(b) Changes in methods of identity theft;
(c) Changes in methods to detect, prevent, and mitigate identity
theft;
(d) Changes in the types of accounts that the financial
institution or creditor offers or maintains; and
(e) Changes in the business arrangements of the financial
institution or creditor, including mergers, acquisitions,
alliances, joint ventures, and service provider arrangements.
VI. Methods for Administering the Program
(a) Oversight of Program. Oversight by the board of
directors, an appropriate committee of the board, or a designated
employee at the level of senior management should include:
(1) Assigning specific responsibility for the Program's
implementation;
(2) Reviewing reports prepared by staff regarding compliance by
the financial institution or creditor with § 41.90 of this part;
and
(3) Approving material changes to the Program as necessary to
address changing identity theft risks.
(b) Reports. (1) In general. Staff of the
financial institution or creditor responsible for development,
implementation, and administration of its Program should report to
the board of directors, an appropriate committee of the board, or a
designated employee at the level of senior management, at least
annually, on compliance by the financial institution or creditor
with § 41.90 of this part.
(2) Contents of report. The report should address
material matters related to the Program and evaluate issues such
as: the effectiveness of the policies and procedures of the
financial institution or creditor in addressing the risk of
identity theft in connection with the opening of covered accounts
and with respect to existing covered accounts; service provider
arrangements; significant incidents involving identity theft and
management's response; and recommendations for material changes to
the Program.
(c) Oversight of service provider arrangements. Whenever
a financial institution or creditor engages a service provider to
perform an activity in connection with one or more covered accounts
the financial institution or creditor should take steps to ensure
that the activity of the service provider is conducted in
accordance with reasonable policies and procedures designed to
detect, prevent, and mitigate the risk of identity theft. For
example, a financial institution or creditor could require the
service provider by contract to have policies and procedures to
detect relevant Red Flags that may arise in the performance of the
service provider's activities, and either report the Red Flags to
the financial institution or creditor, or to take appropriate steps
to prevent or mitigate identity theft.
VII. Other Applicable Legal Requirements
Financial institutions and creditors should be mindful of other
related legal requirements that may be applicable, such as:
(a) For financial institutions and creditors that are subject to
31 U.S.C. 5318(g), filing a Suspicious Activity Report in
accordance with applicable law and regulation;
(b) Implementing any requirements under 15 U.S.C. 1681c-1(h)
regarding the circumstances under which credit may be extended when
the financial institution or creditor detects a fraud or active
duty alert;
(c) Implementing any requirements for furnishers of information
to consumer reporting agencies under 15 U.S.C. 1681s-2, for
example, to correct or update inaccurate or incomplete information,
and to not report information that the furnisher has reasonable
cause to believe is inaccurate; and
(d) Complying with the prohibitions in 15 U.S.C. 1681m on the
sale, transfer, and placement for collection of certain debts
resulting from identity theft.
Supplement A to Appendix J
In addition to incorporating Red Flags from the sources
recommended in section II.b. of the Guidelines in appendix J of
this part, each financial institution or creditor may consider
incorporating into its Program, whether singly or in combination,
Red Flags from the following illustrative examples in connection
with covered accounts:
Alerts, Notifications or Warnings from a Consumer Reporting Agency
1. A fraud or active duty alert is included with a consumer
report.
2. A consumer reporting agency provides a notice of credit
freeze in response to a request for a consumer report.
3. A consumer reporting agency provides a notice of address
discrepancy, as defined in 12 CFR 1022.82(b) of this part.
4. A consumer report indicates a pattern of activity that is
inconsistent with the history and usual pattern of activity of an
applicant or customer, such as:
a. A recent and significant increase in the volume of
inquiries;
b. An unusual number of recently established credit
relationships;
c. A material change in the use of credit, especially with
respect to recently established credit relationships; or
d. An account that was closed for cause or identified for abuse
of account privileges by a financial institution or creditor.
Suspicious Documents
5. Documents provided for identification appear to have been
altered or forged.
6. The photograph or physical description on the identification
is not consistent with the appearance of the applicant or customer
presenting the identification.
7. Other information on the identification is not consistent
with information provided by the person opening a new covered
account or customer presenting the identification.
8. Other information on the identification is not consistent
with readily accessible information that is on file with the
financial institution or creditor, such as a signature card or a
recent check.
9. An application appears to have been altered or forged, or
gives the appearance of having been destroyed and reassembled.
Suspicious Personal Identifying Information
10. Personal identifying information provided is inconsistent
when compared against external information sources used by the
financial institution or creditor. For example:
a. The address does not match any address in the consumer
report; or
b. The Social Security Number (SSN) has not been issued, or is
listed on the Social Security Administration's Death Master
File.
11. Personal identifying information provided by the customer is
not consistent with other personal identifying information provided
by the customer. For example, there is a lack of correlation
between the SSN range and date of birth.
12. Personal identifying information provided is associated with
known fraudulent activity as indicated by internal or third-party
sources used by the financial institution or creditor. For
example:
a. The address on an application is the same as the address
provided on a fraudulent application; or
b. The phone number on an application is the same as the number
provided on a fraudulent application.
13. Personal identifying information provided is of a type
commonly associated with fraudulent activity as indicated by
internal or third-party sources used by the financial institution
or creditor. For example:
a. The address on an application is fictitious, a mail drop, or
a prison; or
b. The phone number is invalid, or is associated with a pager or
answering service.
14. The SSN provided is the same as that submitted by other
persons opening an account or other customers.
15. The address or telephone number provided is the same as or
similar to the address or telephone number submitted by an
unusually large number of other persons opening accounts or by
other customers.
16. The person opening the covered account or the customer fails
to provide all required personal identifying information on an
application or in response to notification that the application is
incomplete.
17. Personal identifying information provided is not consistent
with personal identifying information that is on file with the
financial institution or creditor.
18. For financial institutions and creditors that use challenge
questions, the person opening the covered account or the customer
cannot provide authenticating information beyond that which
generally would be available from a wallet or consumer report.
Unusual Use of, or Suspicious Activity Related to, the Covered
Account
19. Shortly following the notice of a change of address for a
covered account, the institution or creditor receives a request for
a new, additional, or replacement card or a cell phone, or for the
addition of authorized users on the account.
20. A new revolving credit account is used in a manner commonly
associated with known patterns of fraud. For example:
a. The majority of available credit is used for cash advances or
merchandise that is easily convertible to cash (e.g., electronics
equipment or jewelry); or
b. The customer fails to make the first payment or makes an
initial payment but no subsequent payments.
21. A covered account is used in a manner that is not consistent
with established patterns of activity on the account. There is, for
example:
a. Nonpayment when there is no history of late or missed
payments;
b. A material increase in the use of available credit;
c. A material change in purchasing or spending patterns;
d. A material change in electronic fund transfer patterns in
connection with a deposit account; or
e. A material change in telephone call patterns in connection
with a cellular phone account.
22. A covered account that has been inactive for a reasonably
lengthy period of time is used (taking into consideration the type
of account, the expected pattern of usage and other relevant
factors).
23. Mail sent to the customer is returned repeatedly as
undeliverable although transactions continue to be conducted in
connection with the customer's covered account.
24. The financial institution or creditor is notified that the
customer is not receiving paper account statements.
25. The financial institution or creditor is notified of
unauthorized charges or transactions in connection with a
customer's covered account.
Notice From Customers, Victims of Identity Theft, Law Enforcement
Authorities, or Other Persons Regarding Possible Identity Theft in
Connection With Covered Accounts Held by the Financial Institution
or Creditor
26. The financial institution or creditor is notified by a
customer, a victim of identity theft, a law enforcement authority,
or any other person that it has opened a fraudulent account for a
person engaged in identity theft.
[72 FR 63754, Nov. 9, 2007, as amended at 74 FR 22642, May 14,
2009; 76 FR 6688, Feb. 8, 2011; 79 FR 28401, May 16, 2014]