The Information Keeps Rolling Out - Beneficial Ownership Latest News

As we go through our daily lives, the potential flow of information and conflicting information is never ending. One day coffee is good for you and will enable you to live a long life, the next day it will send you to an early grave. One day red wine is good for you, the next day any alcohol is bad for you. Even water is no left unscathed. That bottled water will do you in for sure; however, just the other day you should only be drinking water.

Compliance is much the same. No matter the compliance area, the initial regulation going into effect or that went into effect said one thing, then comes the clarification often in the form of FAQ's.

Hence, if you do nothing else this week outside your normal work duties, take the time to check out FinCEN Guidance in the form of FIN-2018-G001 as issued on April 3, 2018. This 24 page document is well worth the read. The title of the document is "Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions" and needless to say the subject matter is Beneficial Ownership.

While in a brief newsletter article one cannot detail the entire document, the FinCEN document has some great clarification points we have eagerly awaited in addition to points likely to be included in future regulatory examinations.

I will outline a brief sampling of some of the content in the listing which follows:

  1. Including written procedures to identify and verify the identity of beneficial owners of legal entity applicable customers in the AML compliance program.

  2. Identification and verification of existing customers as beneficial owners of new legal entity customer accounts. A financial institution "may rely on information in its possession to fulfill the identification and verification requirements, provided the existing information is up-to-date, accurate and the legal entity customer's representative certifies or confirms (verbally or in writing) the accuracy of the pre-existing CIP information. The covered financial institution's records of beneficial ownership for the new account could cross-reference the relevant CIP records and the verification of information would not need to be repeated." (Question 7, page 6).

  3. Certification when a single legal entity customer opens new accounts. " institution that has already obtained a Certification Form (or its equivalent) for the beneficial owner(s) of the legal entity customer may rely on that information to fulfill the beneficial ownership requirements for subsequent accounts provided the customer certifies or confirms (verbally or in writing) that such information is up-to-date and accurate at the time each subsequent account is opened and the financial institution has no knowledge of facts that would reasonable call into question the reliability of such information. The institution would also need to maintain a record of such certification or confirmation, including both verbal and written confirmations by the customer." (Question 10, page 8).

  4. Product or service renewals. "In the case of a loan renewal or CD rollover, because we understand these products are not generally treated as new accounts by the industry and the risk of money laundering is very low, if at the time the customer certifies its beneficial ownership information, it also agrees to notify the financial institution of any change in such information, such agreement can be considered the certification or confirmation from the customer and should be documented and maintained as such, so long as the loan or CD is outstanding." (Question 12, page 10).

I don't know about you folks, but just starting the document, I don’t want to stop reading as we're finally getting a little clarification here. A great reading project for a one of those rainy nights of April showers.