26 Nov Pnc Certification regarding Beneficial Owners of Legal Entity Customers
However, it is hard to imagine that there would not be a desire from the perspective of regulators and law enforcement agencies for a financial institution to somehow register the participation of (from the example above) of Snidely Enterprises LLC, Whiplash Enterprises LLC and Luthorcorp. (What if these entities – but not their owners – were later part of a 314(a) request, or possibly added to OFAC`s list?) A revised beneficial ownership attestation form could collect this information, possibly by asking each beneficial owner whether ownership is “through one or more legal entities” and then require that the entity or entities be named. Next, a financial institution should decide where that company`s information should be recorded. If the central system does not have fields, could the information contained in the financial institution`s anti-money-laundering system be recorded in such a way as to allow FOCA and section 314(a) to check names? Again, there does not appear to be an explicit requirement to register the names of intermediary legal entities, but time will tell if this becomes an expectation of best practice. Speaking of basic software limitations. Similar to the discussion above about lowering the ownership threshold by 25% due to high-risk status, the financial institution is now in a position to decide whether failure to respond to a recertification request is sufficient reason to terminate the relationship, although the beneficial ownership information currently stored may be entirely accurate. In short, financial institutions must be cautious when it comes to establishing triggering events that are admirable in intent, but difficult to practice and monitor consistently, especially if the triggering event establishes an expectation beyond the expectations of the customer due diligence rule itself. (The second set of Customer Due Diligence FAQs makes it clear that FinCEN does not expect periodic reviews unless there are specific risk-based concerns. The response to question 14 states that “relevant financial institutions will not be required to obtain or update beneficial ownership information during periodic or periodic reviews, unless there are specific risk-based concerns.
Periodic reviews are not in themselves a trigger for obtaining or updating beneficial ownership information. In other words, lowering the beneficial ownership forfeiture threshold to 10 or 20% is really the best way to mitigate a client`s additional risk? FinCEN states that a financial institution could “reasonably conclude” that there are more efficient and effective ways to do so. So if no reporting requirements are added, what is the challenge? Since most financial institutions use a query system that compares all customer files to the 314(a) list at receipt, financial institutions should now be aware that there may be positive matches that should not be reported. Procedurally, the identification of such matches could be achieved in two ways. First, any positive correspondence could be scrutinized and investigated prior to reporting, to determine that the appropriate person`s only relationship to the financial institution is as a beneficial owner (most institutions probably already do this). Second, the ownership code used to identify beneficial owners in a financial institution`s central system could be added as a data point at the output of query 314(a). However, FinCEN provided some clarification at the end of the tunnel on this topic with regard to future renewals and renewals. Still from the second set of FAQs relevant to the customer due diligence rule: “In the case of a credit renewal or CD rollover, because we understand that these products are not generally treated as new accounts by the industry and that the risk of money laundering is very low if the customer certifies their beneficial ownership information at that time, it also undertakes to inform the financial institution of any change in this information, such an agreement may be considered a confirmation or confirmation by the client and must be documented and kept as such for as long as the loan or CD is in progress.
“It`s certainly helpful, but financial institutions need to think about how best to document that customer agreement on the beneficial ownership certificate form (possibly by adding an appropriate statement that is unique to CDs and credit products). Commercial loan extensions typically involve financial institutions, which allows beneficial ownership information to be gathered about a potentially long-standing business relationship. However, renewals of certificates of deposit are often automatic and therefore do not collect information. Therefore, financial institutions are considering how to monitor the renewal of certificates of deposit held by legal entities to ensure that beneficial ownership information is properly recorded in a timely manner. In the case of a new account, beneficial ownership information must be collected prior to account opening; Therefore, financial institutions need to develop procedures to highlight relevant upcoming deposit renewal certificates (perhaps within the next thirty days?) in order to begin collecting information. The question then arises, what happens if the financial institution is not able to collect them? Presumably, renewal would not take place in accordance with the requirements of the rule; and the certificate of deposit would be exchanged to the owners. However, a common triggering event was not mentioned above – knowledge of a change in ownership. When identifying it as a triggering event, financial institutions must frame it carefully. Simply referring to a “change of ownership” as a triggering event would apparently require a financial institution to be aware of any change in ownership of a legal entity on its books.