At the most basic level of beneficial ownership compliance, financial institutions must identify, verify and retain the following beneficial ownership information: Some beneficial owners may be cautious when providing the required personal information. Financial institutions can promote transparency by providing clear information on the requirements and underlying purpose of the rule in order to ensure cooperation between customer owners and controllers of legal entities. (1) Identify the beneficial owners of each client of a legal entity at the time of opening a new account, unless the client is otherwise excluded in accordance with paragraph (e) of this section or the account is exempted in accordance with paragraph (h) of this section. A financial institution concerned may do so either by obtaining a certificate in the form of Schedule A to this Division from the person opening the account on behalf of the client of the legal person, or by otherwise obtaining from the person the information requested in the form, provided that the person certifies to the best of his knowledge and convictions: the accuracy of the information; and (c) Account. For the purposes of this Section, Account shall have the meaning set out in Section 1020.100(a) of this Chapter (for banks); paragraph 1023.100(a) of this Chapter (for investment dealers or dealers); paragraph 1024.100(a) of this Chapter (for mutual funds); and § 1026.100(a) of this chapter (for forward commission traders or commodity introducing brokers). A legal entity has at least one and a maximum of five beneficial owners. This is the lowest equity interest rate threshold set by FinCEN. Banks may have a stricter capital threshold that defines a „beneficial owner,” but this is at the discretion of each institution. The number of persons who meet the definition of „beneficial owner” and who must therefore be identified and verified in accordance with this Section may vary. Pursuant to paragraph (d)(1) of this Section, it may be necessary to identify up to four persons, depending on the circumstances of the case. In accordance with point (d)(2) of this Section, only one person may be identified. It is possible that, in certain circumstances, the same person(s) may be identified in accordance with points (d)(1) and (2) of this Section.
A covered financial institution may also identify other persons as part of its customer due diligence if it deems it appropriate on the basis of risk. FinCEN considers loan extensions, CD renewals and similar events as new banking relationships and therefore as „new accounts” within the meaning of the beneficial ownership rule. However, FinCEN recognizes that the industry does not generally treat these types of events as new relationships. As a result, FinCEN has issued guidelines that exempt institutions from collecting beneficial ownership information when renewing most CDs, renewing locker rentals, and renewing certain loans, commercial lines of credit, and credit card accounts if renewal does not require review and subscription approval (see FIN-2018-R004 for more details). For other types of loan extensions, FinCEN requires institutions to renew after 11 years. May 2018 Collect beneficial ownership information or request its clients to reconfirm previously submitted beneficial ownership information. In particular, however, if a client of a legal person certifies his beneficial ownership information to an institution in connection with a loan and the client also agrees to inform the institution of any change in his information, the institution may rely on this Agreement as a continuous certificate for the subsequent renewal of that loan, unless otherwise known (see FAQ #12, FIN-2018-G001, for more details). Institutions should consider adding this type of client agreement to their credit and renewal documents. Although the rule is already in effect, many organizations have questions about the rule and how to follow it.
Below is an overview that will serve as a guide for financial institutions looking to clarify the beneficial ownership rule. (f) The financial institution concerned. For the purposes of this Section, the financial institution concerned has the meaning set out in section 1010.605(e)(1) of this Chapter. The terminology used in the legislation is somewhat ambiguous, so let`s start by breaking down the main actors to whom the new rule applies. FinCEN further recommends that client risk profiles be developed by understanding the nature and purpose of client relationships, with continuous monitoring for: The rule refers to „ownership” and „control” as two different types of beneficial ownership. The term „control” in this sense differs from the simple signatory authority or the legal title as „significant responsibility for the control, administration or management of a legal person”. With the exception of certain legal entities that are excluded from the rule, all legal entities are required to identify a „controlling person” for whom financial institutions must collect information about the Customer Identification Program (PIC) before a new account can be opened. The new rule explicitly requires financial institutions to implement and maintain appropriate risk-based procedures to conduct ongoing customer due diligence.
Covered financial institutions implement „appropriate risk-based procedures to carry out ongoing customer due diligence”, including, but not limited to: An institution may rely on information provided by the client`s representative to the legal entity regarding the identity of its beneficial owner(s), unless the institution has knowledge of facts that determine the reliability of the information. would be reasonably questioned. Under the beneficial ownership rule, state-insured banks and other covered financial institutions must establish and maintain written procedures to identify and verify the beneficial owners of customers of legal persons. In general, this means that when a business customer opens a new account with a bank, the bank must identify and verify the identity of each person who owns 25% or more of the entity and a person who controls the business. (xiv) a foreign financial institution established in a jurisdiction in which the regulatory authority of such an institution retains beneficial ownership information in respect of that institution; The rule does not require financial institutions to validate the percentages of ownership of individuals, but it does require financial institutions to have a reasonable assumption that they are who they claim to be and that they must use methods similar to those used for individuals under CIP. 3. Where a trust owns, directly or indirectly, through a contract, agreement, arrangement, relationship or otherwise, 25% or more of the interests of a client of a legal entity, the beneficial owner within the meaning of paragraph (d)(1) of this Section means the trustee. If an entity listed in subsection (e)(2) of this Section possesses, directly or indirectly, through a contract, agreement, arrangement, relationship or otherwise, 25% or more of the interests of a client of a legal entity, no person needs to be identified with respect to the interests of that entity for the purposes of paragraph (d)(1) of this Section.
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