Reliance-model programs for regulated financial institutions.
Where legally available and approved by the applicable bank and program partners, a reliance model defines how a sponsor bank uses customer-identification work performed by another eligible financial institution — while the bank keeps its governance, oversight, and approval rights.
The structure has to satisfy the rule, not just the workflow.
The U.S. bank CIP rule permits a bank's program to specify when it will rely on another financial institution to perform parts of its CIP, subject to defined conditions.
- Condition 01
The reliance is reasonable under the circumstances.
- Condition 02
The other institution is subject to an AML-program rule under the Bank Secrecy Act and is regulated by a federal functional regulator.
- Condition 03
The other institution contractually agrees to certify annually that it has implemented its AML program and will perform the specified CIP requirements.
Important limitation
A program should not be described as a reliance model solely because a party performs KYC or KYB. Eligibility, regulatory status, contractual allocation, procedures, evidence, testing, and oversight all matter.How responsibility is allocated.
Reliance covers only the procedures named in the approved agreement. Everything else is allocated expressly.
| Function | Typically performed by | Approval and oversight |
|---|---|---|
| Customer identification for shared customers | The relying financial institution, for the procedures named in the agreement | Bank retains oversight and approval rights |
| Beneficial-ownership review | Allocated expressly in the program documents | Bank and program policy |
| Sanctions and prohibited-party screening | Allocated expressly; never assumed to be included in reliance | Bank and program policy |
| Transaction monitoring and investigations | Allocated expressly; often retained by the bank or program | Bank and program policy |
| Recordkeeping and evidence production | The party performing the procedure, with defined retrieval rights | Subject to testing and annual certification |
| Material program changes | The client proposes; change control governs | Prior approval may be required |
How underlying accounts are structured.
A reliance structure is useful where an approved program serves underlying customers that already hold a formal banking or financial relationship with the relying institution. The account structure still has to match the legal relationship.
- Named or virtual account details for attribution and reconciliation
- FBO or omnibus structures with customer-level ledger records
- Defined permitted funding sources and beneficiaries
- Defined third-party pay-in and payout rules
- Evidence retrieval rights for the bank and program
- Change control for policy, product, jurisdiction, and verification changes
For the underlying account concepts, see named, virtual, FBO, and omnibus accounts explained.
What the model does not permit.
Reliance does not mean every regulated financial institution automatically qualifies.
Reliance does not transfer the sponsor bank's oversight, approval rights, or regulatory responsibility.
Reliance does not allow customer types, jurisdictions, products, or funds flows to change without review.
Reliance does not automatically include sanctions screening, transaction monitoring, investigations, suspicious-activity escalation, or regulatory reporting.
Reliance does not permit the relying institution to open accounts for any customer it chooses.
A registration alone is not sufficient evidence of licensing, supervision, or regulatory eligibility.
Sponsor bank
Certain banking services available through approved Ledger1 programs are provided by SSB Bank, a Pennsylvania stock savings bank and FDIC-insured depository institution. TheroPay, Inc. serves as program manager for applicable programs. SSB Bank retains the responsibilities and discretion allocated to the bank under the applicable program agreements. Banking services are subject to eligibility, risk review, due diligence, underwriting, program approval, and applicable agreements.Availability
Products and services are subject to eligibility, customer and use-case review, due diligence, underwriting, jurisdictional restrictions, partner approval, and applicable agreements. Availability varies by product, country, state, currency, asset, network, corridor, and program structure.Frequently asked questions.
- What is a banking reliance model?
- A banking reliance model is a formally documented arrangement in which a bank relies on another eligible financial institution to perform specified elements of the bank's Customer Identification Program for shared customers. Under the U.S. bank CIP rule, the reliance must be reasonable under the circumstances, the other institution must meet specified regulatory conditions, and the parties must contract for annual certification regarding the other institution's anti-money-laundering program and performance of the specified CIP requirements.
- Which institutions may qualify?
- The rule requires that the other institution be subject to an anti-money-laundering program rule under the Bank Secrecy Act and be regulated by a federal functional regulator. Eligibility is determined through legal, regulatory, and partner review of the specific institution and program.
- Is reliance the same as outsourcing KYC to a vendor?
- No. A vendor can provide verification technology without becoming the financial institution on which the bank relies under the CIP rule. Regulatory reliance is a specific legal and contractual structure.
- Does the sponsor bank still approve underlying customers?
- The bank retains the rights, responsibilities, and discretion established in its program agreements and policies. Reliance on specified procedures is not a surrender of bank oversight.
- Does Ledger1 grant regulatory status or guarantee eligibility?
- No. Ledger1 does not grant regulatory status, replace required licenses, or guarantee that an institution qualifies for reliance. Eligibility and responsibilities are determined through legal and compliance review and documented in applicable agreements and operating procedures.
Assess whether an approved reliance structure is available.
If your institution already maintains regulated relationships with underlying businesses or individuals, Ledger1 can assess whether an approved U.S. account program may be supportable.