Steve H. Powell & Company

  • Contact
  • About us
  • Management
  • Services
    • Loan Review
    • Compliance
    • Due Diligence
    • ALLL Methodology
    • Strategic Planning
  • Newsletter
  • Blog
  • Contact
  • About us
  • Management
  • Services
    • Loan Review
    • Compliance
    • Due Diligence
    • ALLL Methodology
    • Strategic Planning
  • Newsletter
  • Blog

​

Common Beneficial Ownership Misconceptions

12/19/2019

0 Comments

 
By: Joseph Herald

With the implementation of the new Beneficial Ownership Rule on May 11, 2018, the Financial Crimes Enforcement Network (FinCEN) required all covered financial institutions to collect and verify from specific non-exempt legal entities information about the beneficial owners of the entity at the time in which the account is opened. This rule has now been in effect for approximately eighteen months and we have found a few common misconceptions and mistakes when testing for compliance with the rule. Below are some FAQs based on our sampling in according with this rule:
  • When do the Beneficial Ownership Certifications have to be completed?
    • Section 1010.230 makes it clear that Beneficial Ownership certifications must be completed at the time of account opening. Financial Institutions are reminded to ensure that the certifications are both signed and dated since the burden of proof is on the customer to certify that the information that they are providing is correct.  The date on the form will evidence that the certification was completed at the time the account was opened.
  • Is the financial institution required to complete both the ownership and control prongs if both individuals are the same person?
    • Yes, FinCEN expects that the Bank complete both the ownership prong and control prong even if the individual beneficial owner is the same person.
  • What if the covered entity is owned (25% or more) by a legal entity?
    • In this case, it is the financial institutions responsibility to “find a heartbeat”. In circumstances where this arises the Bank will be required to go through the layers of corporate ownership until they find an individual and if through indirect ownership, the individual owns 25% or more of the covered entity then they should be identified as a beneficial owner. Please see FAQ Question #3 of link 1 below.
  • What are some common policy exceptions in relation to Beneficial Ownership?
    • Some of the common areas that are found to be incomplete are that financial institutions’ policies do not specify that non-profit organizations and pooled investment vehicles are only subject to the control prong requirement of the rule. Further, banks should ensure that written risk-based procedures for updating Beneficial Ownership information are in place (for example: existing customer opening new accounts, renewing a loan (if any underwriting occurs), or if the Bank has knowledge that a change has occurred in the covered entity).
  • What is required for Non-Profit entities?
    • For non-profit entities, FinCEN has determined to exclude all non-profit entities (tax-exempt or not) from the ownership prong of the requirement. However, the requirement to identify an individual for the control prong is still present for non-profit entities and should be obtained.

For additional guidance / FAQs in relation to the Beneficial Ownership Rule, please use the following links:

1. FinCEN “Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions
​Click Here.

2. FinCEN “Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions” p.2
​Click Here.
​

3. The full Beneficial Ownership Rule is Available:
Click Here.
0 Comments



Leave a Reply.

    Past Articles

    All
    2017 DBF Final Rulemaking
    2017 TRID Final
    2017 Updated Guide For Servicing Rules
    2018 Compliance Updates
    April 2018 TRID Rule
    Beneficial Ownership Relief Extension
    Cashing Checks
    CFPB Annual Privacy Notice
    CFPB Prepaid Account Rule
    Commercial Real Estate
    CRA Lobby Notice
    CRE Concentrations
    Final Arbitration Rules
    FinCEN Finalizes Beneficial Ownership Relief
    HMDA Proposed Changes
    New HMDA Interpretive Rule
    Reg CC Reminder
    Regulation CC Final
    Restoration Of PTFA
    Rising Interest Rates Reg E
    SARs Data Fields
    SARs On Cyber Crime
    Second FAQs For Beneficial Ownership
    The Military Lending Act
    Visa Gross Negligence Change
    Visa & MasterCard Card Updater Services

    Archives

    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    July 2021
    May 2021
    February 2021
    January 2021
    October 2020
    August 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    March 2019
    January 2019
    September 2018
    August 2018
    June 2018
    May 2018
    April 2018
    February 2018
    January 2018
    October 2017
    August 2017
    July 2017
    June 2017
    March 2017
    February 2017
    October 2016
    September 2016
    August 2016
    June 2016

    RSS Feed

Powered by Create your own unique website with customizable templates.