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FinCEN’s New Proposed Beneficial Ownership Policies and Regulations

October 26, 2015
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FinCen SealYou may have seen or heard about the new proposals from FinCEN concerning beneficial ownership. It’s important to bear in mind these are still just proposals, not yet considered complete. You and your financial institution can actually take part in the process and send comments and concerns to FinCEN up until October 3, 2014 before they set a final release date.

What do we know about the potential new rules from what we can see in the proposals? They will probably add a requirement requiring financial institutions, subject to certain exemptions, to identify and verify the natural person beneficial owners of legal entity customers.

Surprisingly, FinCEN is considering adding much more than just the beneficial ownership clauses.

They are finally adding to the actual regulations what was previously just guidance in the FFIEC manual:

  • Codify explicit CDD requirements for covered financial institutions to:
    • Understand the nature and purpose of customer relationships
    • Conduct ongoing customer monitoring
  • As a secondary objective, FinCEN is proposing an update to its regulations to codify the four current core requirements of a required financial institution’s AML program (often referred to as “pillars”) and to add a fifth requirement that specifically addresses CDD.

The new proposed pillar would require financial institutions to complete the following CDD requirements:

  • Identify and verify the identity of customers
  • Identify and verify the identity of beneficial owners of legal entity customers
  • Understand the nature and purpose of customer relationships
  • Conduct ongoing monitoring to maintain and update customer information for the purpose of identifying and reporting suspicious transactions

Of the above, the only item in the current rules is, “identify and verify the identity of customers” which is under the CIP rules. The other three proposals are new and follow many of the hot buttons we have been seeing in BSA exams over the past 2-3 years. FinCEN is raising the bar by making this part of the actual regulation. Banks will be mandated to up their policies and procedures to include a much stronger CDD and EDD program.

Click here to read more analysis from the National Law Review.

If you want to learn more about how Banker’s Toolbox can help you automate your EDD process click here or email us at [email protected].

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