FINCEN ISSUES BENEFICIAL OWNERSHIP DELAY IN REGARDS TO RENEWALS AND ROLLOVERS

On Wednesday, May 16th, FinCEN issued a ruling that provides covered institutions a 90-day period of limited exceptive relief to their requirements under the Beneficial Ownership Rule. This exception applies to products and services that are set to automatically rollover or renew (CD or loan accounts) that were established before May 11, 2018. This exception came just five days after the mandatory compliance date of the Beneficial Ownership Rule had passed. This relief period will retroactively begin on May 11, 2018 and end on August 9, 2018.

The ruling says that, during this time, “FinCEN will determine whether and to what extent additional exceptive relief may be appropriate for such financial products and services that were established before May 11, 2018, but are expected to rollover or renew after such date.”

FinCEN issued this ruling due to the understanding that some covered institutions have not been treating rollovers or renewals as new accounts. According to the CIP rules, when a rollover or renewal of an account occurs, there has been a new account created. As stated in the Customer Due Diligence Frequently Asked Questions released on April 3, 2018, information on beneficial owners of legal entities must be collected with any new account or formal banking relationship established, even if they are an existing customer. It is understood that you do in fact know the customer, but it is possible that the beneficial owners of the legal entity have changed since the original account was created.

Assume, for example, a 90-day automatic renewal certificate of deposit issued on February 15, 2018. Under the exception, beneficial owners do not have to be determined when the CD automatically renews on May 15, 2018. However, when the CD automatically renews on August 15, 2018, and every three months thereafter the beneficial owners must be verified. FinCEN may, or may not, issue additional future guidance on this issue. Many financial service trade associations are lobbying for a change in the rules for the renewal process.

Procedures must be adopted to assure that your institution contacts an individual with substantial control of the legal entity customer to identify the beneficial owners and complete the certification form prior to the date of the automatic renewal.

The footnote in the ruling contains FAQ #12 on this subject from the April 3, 2018 guidance. This is a PORTION of that footnote:
At the time of each subsequent renewal, to the extent that the legal entity customer and the financial service or product (e.g., loan or CD) remains the same, the customer certifies or confirms that the beneficial ownership information previously obtained is accurate and up-to-date, and the institution has no knowledge of facts that would reasonably call into question the reliability of the information, the financial institution would not be required to collect the beneficial ownership information again.

You can view the official ruling here https://www.fincen.gov/sites/default/files/administrative_ruling/2018-05-17/FinCEN%20Ruling%20CD%20and%20Loan%20Rollover%20Relief_FINAL%20508-revised.pdf

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