Featured Savings Rates

Popular Posts

Featured Accounts

Why Your Bank Wants to Know Your Social Security Number


Why Your Bank Wants to Know Your Social Security Number

It’s all about numbers – whether you’re talking your age, weight, salary, and just as important, your social security number.

In fact, try getting a bank account without a social security number or Individual Taxpayer Identification Number (ITIN). Good luck with that. For many years, banks and credit unions were interested in those digits primarily for the purposes of reporting financial information to the Internal Revenue Service.

Then came 9/11 and the Patriot Act. "Under regulations of the Patriot Act, banks are required to get an ITIN or social security number, to know your date of birth. It’s all part of banks knowing their customers," says Christopher Cole, executive vice president and senior regulatory counsel for The Independent Community Bankers of America.

If by chance a bank or credit union doesn’t ask for a social security number or ITIN when you open an account, you can expect to be asked for it after you open the account. "You will need a social security or ITIN for any transaction," explains Cole.

Under regulations of the Patriot Act, banks are required to get an ITIN or social security number

Often a portion of a customer’s social security number is used after opening an account as a method of authentication, in combination with other identifying questions, points out John Cooke, vice president and online marketing manager for BankFive.

A number is one of the best ways to identify a person. "You can’t rely solely on names because there are a lot of similar names," says Cole. Banks can ill afford to make mistakes. Cole, who was a bank attorney back in the 80s and 90s recalls banks in court battles because an account holder’s name was not clear or the bank had the wrong social security number. "Even in the case of a garnishment, maybe the information comes to the bank with just a first initial and a last name, without a social security number it’s almost impossible to figure out who is the right person."

For sure, banks are highly regulated. "One of those regulations has to do with reporting the flow of money. If someone deposits $20,000 into your account and that does not match up with your pay stubs, then that money is taxed differently and the IRS wants to make sure the correct taxes have been paid on that money," says Byron Galindo, a State Farm agent also versed in banking. "That $20,000 may be from another job, so then the IRS examines if the business that gave you that money is in compliance in reporting its money," he adds.

Simply put, "Social security numbers give the government the ability to track money moving from one person to another. And when money is not able to be accounted for then bam! There is most likely some illegal activity behind it. A social number means you are someone who is contributing taxes and are playing by the rules," says Galindo.

Every time money switches hands, taxes are paid, so if that money switches hands and the IRS can’t see it moving to another social security number, then they can assume the proper taxes were not paid, says Galindo.

A social security or ITIN is also likely to be required when you designate someone a beneficiary of your account. Beneficiary policies vary, says Cole. However, if the person who inherits the money will receive it in the form of a check or wire transfer, that’s a transaction that will require a number.

Given the importance of your "number", keep in mind that ID theft isn’t something that happens to someone else. Fortunately, the Social Security Administration has gotten better at allowing institutions to verify social security numbers, says Nessa Feddis, senior federal counsel, consumer protection with the American Bankers Association. The bottom line – protect your number with great care.

Related Posts

Comments
Anonymous
Anonymous   |     |   Comment #1
Like we did not know all of the above before. My question: what is the purpose of this basic refresher info?
paoli2
paoli2   |     |   Comment #2
No one has to read every article on DA.  Maybe we have a new member or two who did not know about the SS numbers.  It's always good to be reminded of important issues.  Thanks for the reminder Sheryl.
Anonymous
Anonymous   |     |   Comment #3
Every cent accounted for, yet somehow millions of foreigners work illegally without the IRS noticing anything...
paoli2
paoli2   |     |   Comment #4
Because they are not supposed to have social security numbers.  If they did, they would not be illegals.  Here is one of the ways the SS number can be a useful tool to catch illegals who don't have one.  Problem is, our country doesn't seem to concerned about actually catching them so they continue to get paid "under the table" as the old saying goes.
Anonymous
Anonymous   |     |   Comment #5
Nobody in government has any interest whatsoever in catching and returning illegals, or in enforcement of our existing laws relating to illegal immigration.  You can take that to the bank, and it applies to the leadership of both political parties.  Far too many of our politicians are despicable skunks.
paoli2
paoli2   |     |   Comment #6
#5  You have that right!  Both dummy parties think they will be able to use the illegals in some way to get their votes in the future after they find a way to sneak them in as "legals" so they can vote and get on the ACA (to the Repubs distern).  Wouldn't it be a joke on both parties if when they day comes, the legal illegals voted for their own man in a 3rd party! :)  The skunks would really put up a stink then!
Anonymous
Anonymous   |     |   Comment #7
Democrats think that illegals will (ultimately) vote for their candidates and (in the interim) the Republicans have a larger labor pool to draw from and thus lower wages to be paid.  The (un) holy alliance on why nothing happens (by mutual agreement) on the topic.
Anonymous
Anonymous   |     |   Comment #8
But, but, but, it's printed right on my Social Security card:

"NOT FOR IDENTIFICATION PURPOSES"
Anonymous
Anonymous   |     |   Comment #9
SNAFU. The Department of Defense replaced the military personnel 'Service Number' in 1969 with the Social Security Number (SSN) for member identification and records purposes. Then, effective June 2011, the US military introduced a plan to eliminate the use of Social Security Numbers on military and dependent ID cards, and replace them with a service number, in an effort to prevent identity theft against members of the armed services. All members are expected to have been granted the new service number by June 2015.
Anonymous
Anonymous   |     |   Comment #10
A little known fact (i.e. one in which the Gov't does not want to be well known b/c of the "work" involved) is one can get a new SocSec number!
Anonymous
Anonymous   |     |   Comment #11
Not all branches changed in 1969.
Anonymous
Anonymous   |     |   Comment #12
Correct. It was a phased process. The Army and Air Force converted to social security numbers on 1 July 1969, the Navy and Marine Corps on 1 January 1972, and the Coast Guard on 1 October 1974.
Anonymous
Anonymous   |     |   Comment #16
I only mentioned it because I often think of my USMC ID (1969) when asked for my ID. Funny how things works in the human mind.
Rosedala
Rosedala   |     |   Comment #14
YES!!!  I know for a fact that most of the illegals steal, rob and/or buy social security numbers, even from the dead!  Now...how the IRS always SO over efficient can't catch THESE "transactions" is more than mind boggling!!!   Or, is IRS deliberately allowing this for vote gaining for the Dems???  I'd like to know...    :o(
Rosedala
Rosedala   |     |   Comment #15
Interesting #13's link!  But the article's comments are more interesting and accurate, especially Claudia Splick Larson's comment!  :o)
Anonymous
Anonymous   |     |   Comment #17
Little known fact (including by the banks, apparently) is that you are not required by law to provide your SSN in order to open a credit card account.   The IRS obviously doesn't care (there are no tax issues involved in credit cards - not since 1987 when the personal interest charge deduction vanished).

Patriot Act?  An explicit exception there for credit cards: 31 CFR 103.121(b)(2)(i)(C):

"Credit card accounts. In connection with a customer who opens a credit card account, a bank may obtain the identifying information about a customer required under paragraph (b)(2)(i)(A) by acquiring it from a third-party source prior to extending credit to the customer."

If a bank tells you that it "needs" your SSN to check your credit report, that's stretching the truth (it's harder, but not impossible, for a financial institution to get your credit info without your SSN), but if they tell you you're required to provide your SSN by law, that's a flat out misrepresentation.
Anonymous
Anonymous   |     |   Comment #18
Agreed but a bank could decline to do business if a Soc Sec is not provided.  Right?

Also, I recall a few years ago a person put a very low amount of $s on credit card app as being income (thought the info was none of their business, i.e. if the disclosed asset amount was insufficient, "tough," and would move on).  The credit card was promptly issued!
Anonymous
Anonymous   |     |   Comment #19
Yes (they could decline to do business), and unfortunately that's what SSA says about any business asking for your SSN - they're free to ask, you don't have to give it, and they don't have to do business with you.