CDs and FINCEN's Exceptive Relief

We were as delighted as you were to see FinCEN’s exceptive relief in September…until we scrolled down to the definitions section.  Why, you ask?  Well, here’s how they defined CDs to qualify for the exceptive relief:

“For purposes of this Rule, a CD is a deposit account that has a specified maturity date but cannot be withdrawn before that date without incurring a penalty. During the term of the CD, a customer cannot add additional funds to the CD.  The term of the CD may vary from a week to several years.  At the end of the term, when the CD matures, the customer is entitled to the amount deposited and any interest that has accrued; the customer may also have the ability to elect to renew or close the account.  Typically, the account will automatically renew absent affirmative action by the customer to close the account.”

So, what if you offer a no-penalty CD or one in which a customer can add additional funds during its life?  Does your product still qualify for exceptive relief?  We reached out to FinCEN but have yet to receive a response. However, we have floated this question out to examiners from the OCC, FDIC and FRB, who consistently communicated that such a CD would not qualify for the exceptive relief the way the rule is currently written. If you offer a no-penalty CD or one to which funds may be added, you will need to address beneficial ownership at the time of renewal for your accounts established prior to May 11, 2018, and for those originated thereafter.  

In the meantime, we are appealing to FinCEN to perhaps consider the definition of a time deposit under Regulation D in defining CDs for the purpose of exceptive relief.

by Angela Lucas, Sterling Compliance

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