FINCen Issues Q&A On Beneficial Owner Regulation
July 21, 2016 at 8:51 am Leave a comment
My time for posting a blog today is running a little short, courtesy of Albany’s woefully inconsistent transportation system. For me, Uber can’t come soon enough. But I wanted to give you a heads-up on a Q&A guidance issued by FINCEN yesterday clarifying the Customer Due Diligence requirements obligations of financial institutions that open accounts for entities such as corporations and trusts with beneficial owners. The rule has taken effect but you have until May 11 , 2018 to comply.
To demystify this regulation it’s important to put it in context. There have been a series of articles in the New York Times reporting on how corporations often act as fronts for shall we say, individuals with questionable backgrounds. Setting up corporations to open up accounts where ill-gotten gains can be stored and from which a Manhattan penthouse can be purchased is a classic form of money laundering. After all, public pensions only go so far and any prudent dictator has to put aside funds for safe keeping in the event of an ill- timed coup. In addition, businesses can be controlled by persons not readily identifiable.
It didn’t get all that much attention in the compliance world but in May FINCen finalized regulations requiring credit unions and banks to extend account opening customer identification due diligence procedures to the beneficial owners of legal entities. The Q & A is intended to further clarify these obligations.
By the way, a beneficial owner is:
“each individual, if any, who, directly or indirectly, owns 25% or more of the equity interests of a legal entity customer (i.e., the ownership prong); and a single individual with significant responsibility to control, manage, or direct a legal entity customer, including an executive officer or senior manager (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer); or any other individual who regularly performs similar functions (i.e., the control prong). This list of positions is illustrative, not exclusive, as there is significant diversity in how legal entities are structured. ”
Hoping your journey to work was better than mine, your faithful blogger wishes you all a good day.
Entry filed under: Compliance, Regulatory. Tags: Customer Due Diligence, FinCEN..
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