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: , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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