Topic: Customer Due Diligence (CDD)
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We understand that FinCEN created a temporary exception from the requirement to collect beneficial ownership information for accounts that automatically rollover or renew. For commercial loan renewals, we review the file, gather appropriate financials, and produce renewal documents. Would this be considered “auto renewing” under the temporary exception?
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Yes, we believe that the commercial loans you described would qualify for FinCEN’s ninety-day exception to the new customer due diligence rule’s beneficial ownership information collection requirements for accounts that automatically renew, provided that the accounts were established before May 11, 2018. A representative from FinCEN informed us that the agency is taking a very…
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We understand that FinCEN created a temporary exception from the requirement to collect beneficial ownership information for accounts that automatically rollover or renew. For commercial loan renewals, we review the file, gather appropriate financials, and produce renewal documents. Would this be considered “auto renewing” under the temporary exception?
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No, we do not believe that the commercial loans you described would qualify as automatically renewing accounts under the temporary exception. You are correct that FinCEN has provided a ninety-day exception to the new customer due diligence rule’s beneficial ownership information collection requirements for accounts that automatically renew, such as CDs and loan accounts, provided…
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Under the beneficial ownership rule, how can we find out if a trust is a statutory trust “created by a filing with a Secretary of State or similar office”? Does the Secretary of State’s website contain listings?
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We recommend incorporating a question into your account opening questionnaire and customer due diligence (CDD) procedures that requires your customers to identify whether they are a statutory trust. Unlike ordinary trusts, statutory trusts (also known as “business trusts”) are formed by filing a certificate of trust or other filing with a public official, typically the…
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Do the beneficial ownership requirements in the new customer due diligence final rule that takes effect May 11, 2018, include any new signage requirements for banks? Our forms vendor called to promote signs that describe the rule’s requirements, but we were not aware that we needed new signs.
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No, the final customer due diligence rule that takes effect on May 11, 2018, does not include new signage requirements for banks, and it does not revise the existing customer identification program (CIP) signage requirements. Whether you wish to purchase and post signs regarding the new beneficial ownership requirements is a business decision for your…
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We are updating our customer due diligence (CDD) processes. Do the new beneficial ownership requirements cover Interest on Lawyer Trust Accounts (IOLTAs)?
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Yes, IOLTAs are covered by FinCEN’s new beneficial ownership requirements. But FinCEN has clarified that these accounts are treated as “intermediated accounts,” meaning that you need only obtain beneficial ownership information on the law firm or attorney holding such an account (the “intermediary”). Financial institutions are not required to obtain beneficial ownership information regarding the…
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Do we need to obtain certified beneficial ownership information under the new customer due diligence (CDD) rule every time a business customer renews a certificate of deposit? If so, how do we handle situations when a business customer with an automatically renewing CD refuses to provide this information at the time of renewal? Should we send new disclosures converting automatically renewing CDs to term CDs unless we receive the beneficial ownership information?
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No, your bank does not need to obtain certified beneficial ownership information each time a CD automatically renews. In a recently issued guidance, FinCEN stated that if a customer: (1) certifies their beneficial ownership information once after the new CDD rule takes effect, and (2) agrees to notify your bank of any changes when it…
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Does FinCEN’s beneficial ownership rule apply to land trusts? Are land trusts considered a “legal entity”?
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No, we do not believe that FinCEN’s beneficial ownership requirements apply to land trusts. 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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We understand the statutory trusts are subject to the beneficial ownership provisions of FinCEN’s Customer Due Diligence Rule. How can we identify when a trust is a statutory trust? Will it be apparent from the trust documents?
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We recommend incorporating a question into your account opening questionnaires and customer due diligence (CDD) procedures to require your customers to identify whether they are a statutory trust (also called a “business trust”). Statutory trusts are a special type of entity that can engage in business or other activities. Unlike ordinary trusts, statutory trusts are…