On May 11, 2016 FinCEN is publishing a 227-page final rule under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements for banks and others. The rules contain explicit customer due diligence requirements and include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.
Covered financial institutions are not presently required to know the identity of the individuals who own or control their legal entity customers (also known as beneficial owners). This enables criminals and others looking to hide ill-gotten proceeds to access the financial system anonymously. The beneficial ownership requirement addresses this weakness and provides information that will assist law enforcement in financial investigations, help prevent evasion of targeted financial sanctions, improve the ability of financial institutions to assess risk, facilitate tax compliance, and advance U.S. compliance with international standards and commitments.
Beginning on May 11, 2018, covered financial institutions must identify and verify the identity of the beneficial owners of all legal entity customers (other than those that are excluded) at the time a new account is opened (other than accounts that are exempted). The financial institution may comply either by obtaining the required information on a standard certification form (Certification Form (Appendix A)) or by any other means that comply with the substantive requirements of this obligation.
Although the rules are effective 60 days after publication (July 11, 2016); the Applicability Date is May 11, 2018. Two years is a long time to develop the appropriate compliance management systems to assure compliance with this new requirement. Remember time flies when you are having fun.
A copy of the final rule is available by clicking here.