New CDD Rule: Exceptions and Exemptions
Friday, March 30, 2018 8:45 AM

As we all know, beginning May 11, 2018, credit unions will be required to obtain identifying information about the beneficial owners of their legal entity accounts. 

We also know that beneficial owners are defined in the rule as:

  • Ownership Criteria: Each individual, if any, who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25 percent or more of the equity interests of a legal entity customer: and
     
  • Control Criteria: A single individual with significant responsibility to control, manage, or direct a legal entity customer, including:
     
    1. An executive officer or senior manager (e.g. a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer); or
    2. Any other individual who regularly performs similar functions.

There are some legal entities and some accounts that are so unlikely to foster money laundering that FinCEN has provided exceptions to the rule.  In the final weeks before the compliance date, let's review the exceptions and exemptions of the new requirements.

Quasi-Exception:  The following are instances when a credit union will only obtain the information required by the control criteria as described above:

  • When there is no individual or entity that owns at least 25% of the legal entity opening the account at the credit union;
  • When the legal entity is established as a nonprofit corporation or similar entity and has filed its organizational documents with the appropriate State authority as necessary; and
  • When the legal entity is a pooled investment vehicle that is operated or advised by a financial institution not already excluded by one the several exceptions in the rule as described below.

Click here to read the rest of CUNA’s blog post!

Source:  CUNA Compliance Community