FinCEN Delays Beneficial Owner Requirements for Existing Rollover Accounts

May 18, 2018 at 9:43 am Leave a comment

Here is one of those mind-numbing facts  the compliance world relishes and the rest of the world finds as boring as a three-hour rain delay: Did you know that every time a share certificate rolls over it must be treated as a new account for customer identification purposes?

Now that you do, it helps to explain why it is good news that FinCEN has issued a temporary exemption from the beneficial owner rules for rollover products such as certificates of deposit (or share certificates). This is a “Grab Your Coffee” special, so grab some extra coffee and hopefully either you or I will fall asleep before I get done explaining this.

The beneficial owner rule took effect on May 11th. Generally speaking, this enhanced Customer Due Diligence requirement mandates that financial institutions have written policies and procedures to identify the beneficial owners of accounts entered into by legal entities, such as corporations. A “beneficial owner” is any individual who controls 25 percent or more of a legal entity or who exercises significant responsibility to control or direct the entity, such as a CEO.

FinCEN apparently created some compliance anxiety when it explained in question 12 of this recent Q&A that financial institutions were “required to have their legal entity customers certify the beneficial owners for existing customers during the course of a financial product renewal (e.g., a loan renewal or certificate of deposit).” The postponement announced  yesterday means that this requirement doesn’t apply to rollover accounts entered into before May 11th that expire on or before August 9th.

What about a certificate of deposit entered into before May 11th that doesn’t expire until after August 9th? FinCEN tells us that it will be determining whether additional relief is necessary.

Now I know there are many credit unions out there that don’t have many beneficial owner accounts. Remember, however, that you are still obligated to have policies and procedures in place.

On that scintillating note, enjoy your weekend. God save the Queen!

Entry filed under: Compliance. Tags: , .

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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