FinCEN Issues Exceptive Relief in Connection with Beneficial Ownership Requirements

On Feb. 13, the Financial Crimes Enforcement Network (FinCEN) issued an order granting exceptive relief from certain requirements under the agency’s 2016 Customer Due Diligence (CDD) Rule. Under the CDD rule, credit unions are required to collect and verify information about the beneficial owners of legal entity members. A beneficial owner is one individual with significant responsibility to control or manage the legal entity AND any other individual that owns 25% or more of the equity interests of the legal entity. A legal entity member is any corporation, limited liability company, or other entity created by the filing of a public document with the Secretary of State.

NOTE: For more information, visit the Customer Due Diligence and Beneficial Ownership topic under the Bank Secrecy Act channel on InfoSight360.  

The CDD rule states that the credit union must collect and verify beneficial ownership information about the legal entity member at the time each new account is opened. As a result, credit unions have been collecting and verifying this information each time the legal entity member opens a subsequent account, regardless of whether the information has changed since the initial account was opened.

Under FinCEN’s Feb. 13order, the credit union is only required to collect and verify beneficial ownership information in the following circumstances:

• When the legal entity member first opens an account with the credit union,
• When the credit union has knowledge of facts that reasonably call into question the reliability of previously obtained beneficial ownership information, and
• As otherwise required under the credit union’s risk-based procedures for ongoing customer due diligence.
  

The order is not mandatory, meaning credit unions may continue to collect and verify beneficial ownership information each time a legal entity member opens a subsequent account. Credit unions may exceed minimum compliance requirements if doing so aligns with their risk profile and tolerance. The extent to which a credit union avails itself of the exceptive relief outlined in the order is at the discretion of the credit union.