Final answer:
Yes, a Broker-Dealer (BD) must verify a customer's identity when opening a new account as part of their Customer Identification Program (CIP), a requirement under the USA PATRIOT Act to prevent money laundering and terrorist financing.
Step-by-step explanation:
The question asks whether a Broker-Dealer (BD) must verify the customer's identity when opening a new account. In the context of financial regulation, particularly under the USA PATRIOT Act, it is mandatory for financial institutions, including broker-dealers, to implement a Customer Identification Program (CIP). This program requires that sufficient information be collected to form a reasonable belief that the true identity of a new customer is known. Verification of identity can include asking for government-issued identification, social security numbers, birth dates, addresses, and potentially further due diligence depending on the level of risk associated with the new account.
To ensure compliance, BDs must not only collect this information at the account opening stage but also maintain records of the information and update it as necessary. Failure to comply with these requirements can lead to significant regulatory penalties and undermines efforts designed to prevent money laundering and the financing of terrorism. Therefore, verifying a customer's identity is considered both a legal obligation and a critical aspect of a financial institution's risk management practices.