By Nicole D. Prysby, J.D.
The Financial Crimes Enforcement Network announced a 30-day extension of the exception from the obligations of the Beneficial Ownership Rule for Legal Entity Customers. The extension applies for rollover or renewal of certain financial products and services (i.e., certificate of deposit or loan accounts) that were established before May 11, 2018. The exception is extended through Sept. 8, 2018.
In May 2018, FinCEN issued a 90-day limited exception to the Beneficial Ownership Rule for certificate of deposit and loan accounts in order to determine whether a further exception would be appropriate (see Banking and Finance Law Daily, May 17, 2018). Under the Beneficial Ownership Rule, covered financial institutions must identify and verify the identity of beneficial owners when those companies open accounts. Each time a loan is renewed or a certificate of deposit is rolled over, the bank establishes another formal banking relationship and a new account is created. As clarified in guidance, covered financial institutions are required to obtain information on the beneficial owners of a legal entity that opens a new account for each new formal banking relationship established, even if the legal entity is an existing customer.
In its original grant of the exception, FinCEN acknowledged that some covered institutions have not treated such rollovers or renewals as new accounts and have established automatic processes to continue the banking relationship with the customer. These covered financial institutions expressed concern regarding their ability to comply with the Beneficial Ownership Rule with respect to such accounts. FinCEN plans to use the 30-day extension to consider whether further exceptions would be appropriate.
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