Compliance: FinCEN grants temporary beneficial owner relief

May 21, 2018

The Financial Crimes Enforcement Network (FinCEN) has issued a ruling to provide a 90-day limited exceptive relief to covered financial institutions from the obligations of the beneficial ownership requirements for Legal Entity Customers for certain accounts. The ruling is retroactively effective as of May 11, when the customer due diligence rule became effective, and runs through Aug. 9.

Consistent with the definition of “account” in the Customer Identification Program (CIP) rules and subsequent guidance, each time a loan is renewed or a certificate of deposit is rolled over, the financial institution establishes another formal banking relationship and a new account is created.

FinCEN’s April frequently asked questions document clarifies that covered financial institutions are required to obtain information on the beneficial owners of a legal entity that opens a new account for each new formal banking relationship established, even if the legal entity is an existing customer.

According to FinCEN, the 90-day relief will be to identify and verify beneficial ownership information for rollover or renewal of certain financial products and services established before May 11, 2018.

“FinCEN understands that some covered institutions have not treated such rollovers or renewals as new accounts and have established automatic processes to continue the banking relationship with the customer,” writes FinCEN in the ruling, noting that those institutions have expressed concerns about compliance with the rule.

FinCEN added that it believes further consideration of the rule is appropriate.

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