Topic: Bank Secrecy Act & Anti-Money Laundering (BSA/AML)
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We have an existing legal business entity customer whose CD is due to auto-renew. One of the beneficial owners of the business is an estate with one beneficiary. To comply with the beneficial ownership requirements of FinCEN’s new customer due diligence rule, should we verify the identity of the estate beneficiary or the estate executor?
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We believe the executor of the estate should be treated as the beneficial owner of the CD, based on informal guidance we received from a representative of FinCEN, who advised us that this would be the appropriate treatment in the situation you are describing. Also, we note that FinCEN created a temporary ninety-day exception from…
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A beneficial owner of a legal entity customer presented a Global Entry card as their identification. Our BSA policy states that our bank will accept an unexpired, government-issued driver’s license, identification card, or passport containing a photo as identification for a beneficial owner. Can we use the Global Entry card as a form of identification to verify the identity of a beneficial owner?
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In our view, FinCEN’s identification requirements would not prevent your bank from using a Global Entry Card to verify a beneficial owner’s identity, but whether you accept the card is a business decision for your bank. The new identification and verification procedures for beneficial owners are the same as the existing customer identification program (CIP)…
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A healthcare facility pools its residents’ social security insurance proceeds into one single “resident trust” deposit account. Is this account subject to FinCEN’s new legal entity customer due diligence (CDD) requirements? Or would the account be exempt as a trust account? Or as a pooled investment vehicle? The account funds are not invested in anything. The healthcare facility provided us with evidence of a surety bond regarding the account funds, but no evidence of a trust agreement.
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We recommend treating the healthcare facility as the ”legal entity customer” when opening this account, unless the facility can provide additional information demonstrating that it is a trustee opening the account on behalf of a trust (in which case it would be exempt from FinCEN’s new CDD rule). The account that you have described appears…
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Does FinCEN’s beneficial ownership rule apply to loans made to a trustee of a land trust?
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No, FinCEN’s beneficial ownership requirements do not apply to land trusts and their trustees. FinCEN’s beneficial ownership requirements apply only to “legal entity customers,” defined to include corporations, limited liability companies, general partnerships and any “other entity that is created by the filing of a public document with a Secretary of State or similar office.”…
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Should our bank require the entire trust agreement when opening a trust deposit account? This would be for our deposit side, not our trust department (which requires the entire trust agreement when acting as trustee for a trust).
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No, we do not recommend requiring a full trust instrument when opening a trust account, subject to the discussion below. Neither Illinois nor federal law requires your bank to obtain a full copy of a trust instrument when opening a trust account. In fact, Illinois law requires banks to accept a Certification of Trust form…
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What are the record retention requirements for our bank’s internal records of loan account and deposit account transactions? For loans, we have the loan agreements and account statements, but our internal transaction records are harder to track down.
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Regarding your internal records for deposit account transactions, FinCEN and the NACHA rules impose record retention requirements for certain transactional records. If the FinCEN or NACHA retention periods do not apply, the record retention period for these documents would be a business decision for your bank as embodied in your document retention policy. FinCEN imposes…
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A nonprofit corporation maintains custodial accounts for several mentally incapacitated individuals. The nonprofit corporation uses the accounts to accept deposits and pay bills on behalf of the individuals, who do not have access to the accounts. For the purposes of our customer identification procedures, we treat the nonprofit as our customer. Under the new customer due diligence final rule, are we required to obtain information regarding the individuals who control the nonprofit?
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Yes, your bank is required to obtain information about the individuals who control the nonprofit corporation. Under the new customer due diligence final rule, banks are required to obtain and verify information at account opening about the beneficial owners of legal entity customers, which typically includes information about both those who own (the “ownership prong”)…
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In recent frequently asked questions (FAQs) on the beneficial ownership rule, FinCEN stated that a bank may satisfy the rule requirements for account renewals if a legal entity customer: (1) certifies its beneficial ownership information once after the new rule takes effect, and (2) agrees to notify the bank of any changes when it certifies this information. Where can we find a certification form that includes this “notification” language?
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The Certification Form in Appendix A of the beneficial ownership final rule does not include this language. However, as you pointed out, FinCEN’s subsequent FAQs permit banks to comply with the beneficial ownership rule requirements for account renewals by adding this “notification” language to the legal entity customer’s certification at the time of the first…