By: Nash Cullens
On April 3, 2020 FinCEN released guidance to help relieve the pressure of Bank Secrecy Act (BSA) guidelines for financial institutions due to the COVID-19 virus pandemic. As communicated in current and previous guidance, compliance with BSA remains crucial, and FinCEN expects financial institutions to continue following a risk-based approach to diligently adhere to their BSA obligations to detect and report potential money laundering and related crimes, including terrorism finance. FinCEN has also indicated financial institutions should be on special alert for particular types of fraud that commonly arise following natural disasters or national emergencies, such as imposter scams, investment scams, product scams, COVID-19-related insider trading, benefits fraud, charities fraud, and cyber-related fraud.
Due to the increasing spread of the COVID-19 virus and the affect it has on financial institutions, FinCEN has relaxed deadlines for BSA reporting requirements. While they did not set what temporary deadlines would be, they stated that reasonable delays in reporting would be understandable. In addition, FinCEN suspended the implementation of CTR ruling FIN-2020-R001 (“the 2020 Ruling”) for reporting transactions on sole proprietorships and entities doing business under an alternate name until further notice.
FinCEN also released guidance for completing beneficial ownership requirements for Payroll Protection Program (PPP) loans. For all PPP loans originated for new customers, the financial institution should complete beneficial ownership procedures according to its policy and regulatory guidance. However, the guidance provides an exception when originating a PPP loan for an existing customer. FinCEN does not require the financial institution to reverify or recertify the beneficial ownership form when a PPP loan is originated for an existing customer. Furthermore, if the financial institution has not yet collected beneficial ownership information on existing customers, it does not need to collect and verify beneficial ownership information for those customers applying for a PPP loan, unless otherwise indicated by the lender’s risk-based approach to BSA compliance. Specifically, FinCEN stated that although financial institutions are not specifically required to recertify beneficial ownership for existing customers they should adhere to their risk-based procedures for recertifying beneficial ownership forms. Therefore, financial institutions should consider the risk level of each existing customer requesting to originate a PPP loan and make a risk-based decision to determine if beneficial ownership should be reverified such as for high risk customers or instances where the financial institution has knowledge of facts that would reasonably call into question the reliability of such information. Institutions should consider amending their BSA policy to document the PPP exception as it relates to beneficial ownership on existing customers to ensure that this exclusion would not be in contravention to the current board approved BSA policy.
The previous paragraph refers only to new and existing customer requests to originate PPP loans. All other account types being opened should be opened in accordance with the financial institution’s policy and existing regulatory guidance. FinCEN stated that this guidance does not supersede previous rulings but is in addition to previous guidance. Further, the PPP guidance does not change the requirement for the institution to implement its CIP on any new customer.
Existing guidance provides in general, covered financial institutions must identify and verify the identity of the beneficial owner(s) of legal entity customers at the time each new account is opened. However, if the individual identified as the beneficial owner is an existing customer of the financial institution and is subject to the financial institution’s CIP, a financial institution may rely on information in its possession to fulfill the identification and verification requirements, provided the existing information is up-to-date, accurate, and the legal entity customer’s representative certifies or confirms (verbally or in writing) the accuracy of the pre-existing CIP information. The covered financial institution’s records of beneficial ownership for the new account could cross-reference the relevant CIP records and the verification of information would not need to be repeated. However, record retention procedures should ensure the beneficial ownership identifying information is maintained for five years after the new account is closed and the relied upon description of any document relied on, description of any non-documentary methods and the results of any measures undertaken, and of the resolution of each substantive discrepancy is retained for five years after the certification of the accuracy of the preexisting CIP information is made.
It should also be noted that existing guidance from FinCEN ruling FIN-2018-R004 provides exceptions, in part, to the requirement to identify and verify the identity of the beneficial owner(s) when a legal entity customer opens a new account as a result of a renewal, modification, or extension of a loan, commercial line of credit, or credit card (e.g., setting a later payoff date) that does not require underwriting review and approval. This exception only applies to the renewal, modification or extension of any of the types of loan account listed above occurring on or after May 11, 2018 and does not apply to the initial opening of such accounts.
As part of its response, FinCEN has set up a direct helpline for any BSA related question that may arise due to the COVID-19 pandemic, including those related to difficulties in meeting certain BSA obligations, and the timing requirements for certain BSA report filings. To access this helpline go to www.finCEN.gov, click on “Need Assistance” click on the drop down list and select “COVID19.”
For the full article released by FinCEN use the following link:
https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-provides-further-information-financial
For further information about beneficial ownership and PPP loans please use the following link and reference FAQ #18:
https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequenty-Asked-Questions.pdf
For any other beneficial ownership questions please use the following links:
https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf
https://www.fincen.gov/resources/statutes-regulations/administrative-rulings/exceptive-relief-beneficial-ownership
For additional information on detecting and preventing potentially fraudulent activity related to disaster relief efforts, please use the following link:
https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2017-a007-0
On April 3, 2020 FinCEN released guidance to help relieve the pressure of Bank Secrecy Act (BSA) guidelines for financial institutions due to the COVID-19 virus pandemic. As communicated in current and previous guidance, compliance with BSA remains crucial, and FinCEN expects financial institutions to continue following a risk-based approach to diligently adhere to their BSA obligations to detect and report potential money laundering and related crimes, including terrorism finance. FinCEN has also indicated financial institutions should be on special alert for particular types of fraud that commonly arise following natural disasters or national emergencies, such as imposter scams, investment scams, product scams, COVID-19-related insider trading, benefits fraud, charities fraud, and cyber-related fraud.
Due to the increasing spread of the COVID-19 virus and the affect it has on financial institutions, FinCEN has relaxed deadlines for BSA reporting requirements. While they did not set what temporary deadlines would be, they stated that reasonable delays in reporting would be understandable. In addition, FinCEN suspended the implementation of CTR ruling FIN-2020-R001 (“the 2020 Ruling”) for reporting transactions on sole proprietorships and entities doing business under an alternate name until further notice.
FinCEN also released guidance for completing beneficial ownership requirements for Payroll Protection Program (PPP) loans. For all PPP loans originated for new customers, the financial institution should complete beneficial ownership procedures according to its policy and regulatory guidance. However, the guidance provides an exception when originating a PPP loan for an existing customer. FinCEN does not require the financial institution to reverify or recertify the beneficial ownership form when a PPP loan is originated for an existing customer. Furthermore, if the financial institution has not yet collected beneficial ownership information on existing customers, it does not need to collect and verify beneficial ownership information for those customers applying for a PPP loan, unless otherwise indicated by the lender’s risk-based approach to BSA compliance. Specifically, FinCEN stated that although financial institutions are not specifically required to recertify beneficial ownership for existing customers they should adhere to their risk-based procedures for recertifying beneficial ownership forms. Therefore, financial institutions should consider the risk level of each existing customer requesting to originate a PPP loan and make a risk-based decision to determine if beneficial ownership should be reverified such as for high risk customers or instances where the financial institution has knowledge of facts that would reasonably call into question the reliability of such information. Institutions should consider amending their BSA policy to document the PPP exception as it relates to beneficial ownership on existing customers to ensure that this exclusion would not be in contravention to the current board approved BSA policy.
The previous paragraph refers only to new and existing customer requests to originate PPP loans. All other account types being opened should be opened in accordance with the financial institution’s policy and existing regulatory guidance. FinCEN stated that this guidance does not supersede previous rulings but is in addition to previous guidance. Further, the PPP guidance does not change the requirement for the institution to implement its CIP on any new customer.
Existing guidance provides in general, covered financial institutions must identify and verify the identity of the beneficial owner(s) of legal entity customers at the time each new account is opened. However, if the individual identified as the beneficial owner is an existing customer of the financial institution and is subject to the financial institution’s CIP, a financial institution may rely on information in its possession to fulfill the identification and verification requirements, provided the existing information is up-to-date, accurate, and the legal entity customer’s representative certifies or confirms (verbally or in writing) the accuracy of the pre-existing CIP information. The covered financial institution’s records of beneficial ownership for the new account could cross-reference the relevant CIP records and the verification of information would not need to be repeated. However, record retention procedures should ensure the beneficial ownership identifying information is maintained for five years after the new account is closed and the relied upon description of any document relied on, description of any non-documentary methods and the results of any measures undertaken, and of the resolution of each substantive discrepancy is retained for five years after the certification of the accuracy of the preexisting CIP information is made.
It should also be noted that existing guidance from FinCEN ruling FIN-2018-R004 provides exceptions, in part, to the requirement to identify and verify the identity of the beneficial owner(s) when a legal entity customer opens a new account as a result of a renewal, modification, or extension of a loan, commercial line of credit, or credit card (e.g., setting a later payoff date) that does not require underwriting review and approval. This exception only applies to the renewal, modification or extension of any of the types of loan account listed above occurring on or after May 11, 2018 and does not apply to the initial opening of such accounts.
As part of its response, FinCEN has set up a direct helpline for any BSA related question that may arise due to the COVID-19 pandemic, including those related to difficulties in meeting certain BSA obligations, and the timing requirements for certain BSA report filings. To access this helpline go to www.finCEN.gov, click on “Need Assistance” click on the drop down list and select “COVID19.”
For the full article released by FinCEN use the following link:
https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-provides-further-information-financial
For further information about beneficial ownership and PPP loans please use the following link and reference FAQ #18:
https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequenty-Asked-Questions.pdf
For any other beneficial ownership questions please use the following links:
https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf
https://www.fincen.gov/resources/statutes-regulations/administrative-rulings/exceptive-relief-beneficial-ownership
For additional information on detecting and preventing potentially fraudulent activity related to disaster relief efforts, please use the following link:
https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2017-a007-0
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