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FOS Blog

15 Sep

Are Trust accounts subject to “Beneficial Ownership” rules?

Are Trust accounts subject to “Beneficial Ownership” rules?

Whether it be a commercial bank or a trust company, how do you identify “trust” accounts for CIP and CDD purposes? Generally speaking, usually the trust document is required and the identification of the person establishing the trust account. Do I need to do more than that to meet the requirements of FinCEN’s new “Beneficial Ownership” rules? Well, according to the preamble to the new rule, that answer is “No.” A trust generally involves the person who provides the funds or assets and instruction for how they are to be applied (grantor or settler), a person with control over the assets (trustee), and a person or organization who benefits (beneficiary) from this contractual arrangement. How do you identify a “beneficial owner” from among these? Not possible according to FinCEN.

FinCEN has previously cited in issuing CIP rules that financial institutions are not required to look through a trust to its beneficiaries, but they do recommend gathering identifying information about settlers, grantors, trustees, and persons with authority or control over the account in order to establish the true identity of the customer relationship. And you will need a means for monitoring account activity for suspicious activity – does the source and outflow of money make rationale sense given the knowledge you have about the purpose and persons involved in the Trust? That seems to be what FinCEN is banking on also. Their logic is that financial institutions generally identify and verify the trustees, who are the signatories on the account, and that provides a sufficient source of information for law enforcement. Their expectation is that financial institutions will continue to use a risk-based approach to safeguard against money laundering and terrorist financing. This might be a good time to review your institution’s CIP requirements for “Trusts” to see how you measure up to these current expectations.

Written by Evelyn Dehmey.