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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsRules Designed to Catch Terrorists Cost This Unsuspecting Customer Her Bank Account
The 75-year-old Ms. Liegey discovered that Citigroup Inc. had blocked her checking and trust accounts after she didnt respond to a notice asking her for personal information to verify the accountspart of the banks efforts to comply with government-mandated rules referred to as know your customer, or KYC.
The rules are designed to make it harder for money launderers, terrorists and other criminals to finance illicit activities, hide funds or move dirty money around the globe.
(snip)
Banks have been obligated to collect identification information on their customers for decades to help law enforcement track possible criminal activity. The 2001 USA Patriot Act, adopted after the Sept. 11 terrorist attacks, added new requirements. More recently, regulators have fined or cited a number of large banks for having insufficient procedures to monitor customers and transactions. The U.S. Treasury Departments Financial Crimes Enforcement Network, or FinCEN, has adopted new due-diligence guidelines as recently as May.
(snip)
Ms. Liegey, who opened her Citigroup account in 2013, went to her local branch and provided her drivers license. Her Citi banker apologized in a letter, saying her accounts were blocked due to BANK ERROR, adding that the accounts have always been in good standing and remain so.
Later, Ms. Liegey got another warning from Citi that her accounts would be frozen if she didnt provide the signatory page of her trust accountwhich someone at her branch said the bank already had. Then, she said United Parcel Service delivered a letter saying Citi had closed her accounts, and included a check with her funds.
She recalled being frightened that she couldnt get access to her money if she needed it, adding: They dont have the right to do that...or do they? She since has deposited her funds at Apple Bank for Savings.
https://www.wsj.com/articles/rules-designed-to-catch-terrorists-cost-this-unsuspecting-customer-her-bank-account-1531495802 (paid subscription)
safeinOhio
(32,531 posts)with my local bank. When I walk in they all say hello and I don't need any ID or my account number. Got a call from my SO that she needed some $ while out of town. Walked in a ask to transfer a couple of hundred to her account. Didn't have my account # or hers, no problem.
One good reason to deal deal with local banks.
ProfessorGAC
(64,425 posts)I use an indie 3 blocks away and a big CU. My wife has extra $ in another indie 10 blocks away
Much more comfortable.
wonkwest
(463 posts)Which Im fine with. I havent thought about it in awhile. Bank wanting verification is just an everyday fact of life.
This poor woman, though. Sounds like she got caught up in the bureaucracy.
progree
(10,864 posts)If some of it was a traditional IRA, this could be considered an early distribution, meaning she would have to declare it as income (the IRS will) and pay taxes on it. If a Roth IRA, she loses the tax free status as they become ordinary funds. If she's swift, she might be able to roll it over to another IRA in the 60 day time window...if it is allowed in a situation like this...
If it included some investments with capital gains, e.g. mutual funds and ETFs, and if they liquidated them ("and included a check with her funds" ), of course she would have to pay capital gains taxes...
mythology
(9,527 posts)progree
(10,864 posts)tax-deferred account as long as possible, which is usually what one wants their traditional IRA to be (so the magic of tax-deferred compounding will last as long as possible).
Yes, she has to take RMDs, (Required Minimum Distributions) beginning at age 70.5, but that's only 1/27.4 = 3.6% of the account value in the first year, 1/26.5 = 3.8% of the account in the 2nd year, 3.9% in the 3rd year, 4.0% in the 4th year, 4.2% in the 5th year, and so on at a slowly increasing but ever increasing percentage each year. And one pays taxes each year on the RMD for that year.
https://www.bankrate.com/finance/money-guides/ira-minimum-distributions-table.aspx
That's a lot less taxes at age 75 than paying 100% of the account value (whatever the account value is) at age 75. Which could be a sizable amount that pushes one up into another tax bracket, besides ending the tax-deferred compounding forever.
A 75 year old woman has a life expectancy of 16 more years, according to https://www.johnhancockinsurance.com/life/life-expectancy-tool.aspx
question everything
(47,271 posts)Though I suspect that she just kept a regular checking account
progree
(10,864 posts)and/or a regular savings account
Ilsa
(61,675 posts)retirement account? I've done that. And you keep the paperwork and copy of the the checks forever.
And at what age are you required to start drawing down your IRA?
progree
(10,864 posts)and hopefully the bank didn't screw up in some way and violate some obscure rule and all that, and that she knows what to do ... assuming it's a traditional IRA account (question everything was probably right that it's probably a regular checking or savings account. I haven't read the entire Wall Street Journal article, which is paywalled, I've only read the OP excerpt. But question everything, who posted the OP, presumably read it all. I'm just operating on my imagination and worst case fears, when I read something like "they closed her account and sent her a check with her funds" ).
I haven't heard of any 6 month rule for rollovers.
Source: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions