Beneficial Ownership – The Best Defense is A Good Offense
Beneficial Ownership – The Best Defense is A Good Offense!
Its time to call the team onto the practice field and start arranging those X’s and O’s! FinCEN’s proposed beneficial ownership ruling is looming and your financial institution’s best defense is a good offense. Talk in the locker room has shifted from whether and when the rule will be approved to whether financial institutions are prepared to comply. Is your team ready to play ball?
What is it?
FinCEN defines a “beneficial owner” as an “individual [or individuals] who have a level of control over, or entitlement to, the funds or assets in the account that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the account.” This individual not only has access to the funds, but also has the power to control the funds. Remember – just because an individual is designated as a signer on an account does not make them a beneficial owner for CDD purposes.
Why is this happening?
The identification of beneficial ownership for business customers will strengthen financial institutions’ knowledge of their customers, assist law enforcement in financial investigations, and aid in the fight against terrorism. Digging down through a business entity’s layers of ownership adds transparency to the identity of the business and their banking transactions.
What will my institution need to do in order to comply?
At a minimum, the proposed ruling, if passed, will require financial institutions to identify and document the identities and CIP for the individuals, who have 25% or more direct or indirect beneficial ownership in business entities. FinCEN has drafted the “Certification of Beneficial Owner(s)” form to assist in documentation. The form will need to be completed by the individual opening a new business account, who will also need to sign the form to attest the information is complete and correct. Financial institutions will be expected to verify the identity of the owners identified on the form, but will not be required to verify the beneficial ownership status. It will be your financial institution’s decision as to whether or not the status is verified, but this may be easier than you think – if you’re already collecting tax returns, Articles of Incorporation, or other organizational documentation for CDD purposes, the information is likely in there!
How can we prepare?
Gather your institution’s quarterbacks – you will need input and planning from department heads from the BSA, Compliance, Operations, Branch Administration, and Loan Operations areas. Develop training for frontline and lending personnel so they can learn how to ask for the information in a productive way – it shouldn’t feel like an inquisition to the customer. Discuss how the “Certification of Beneficial Owner(s)” form will be made available for personnel’s distribution and how the form will be retained for record retention compliance. Incorporate the collection of beneficial ownership into the Bank’s BSA, CIP, and CDD policies and procedures and determine what the plan will be for handling customers, who balk at providing this information once it is required or stall in returning the form.
Putting your team through beneficial ownership boot camp now will strengthen your financial institution’s readiness when FinCEN blows the whistle for kickoff!
For more information regarding the proposed rule and the “Certification of Beneficial Owner(s)” for, please refer to:http://www.fincen.gov/statutes_regs/files/CDD-NPRM-Final.pdf
Contact a member of the FOS team to assist with your beneficial ownership needs! For additional information regarding the article contact the author Julie J. Mixtacki at firstname.lastname@example.org.