Anti Money LaunderingOn May 11, 2018, compliance with the beneficial ownership rule became mandatory.  In accordance with the rule, a covered financial institution must verify, at the time a new account is opened, the beneficial owners opening the account on behalf of a legal entity customer.  For purposes of the rule, any rollover or renewal of an existing account is deemed to be an opening of a “new” account.  Despite the clarity of the regulation, many financial institutions are not certain how they are to comply with the beneficial ownership requirements when many renewals of loan accounts and rollovers of certificates of deposit (CDs) are automated.

In response, on May 16, 2018, the Financial Crimes Enforcement Network (FinCEN) issued an administrative ruling that provides covered financial institutions with a 90-day exemption from the beneficial ownership requirements with respect to certain financial products and services that automatically rollover or renew (e.g., CDs or loan accounts) and which were established before May 11, 2018.  This exemption begins, retroactively, on May 11, 2018, and will expire on August 9, 2018.  FinCEN has indicated that it may seek to amend the beneficial ownership rule’s application to rollovers and renewals in the interim.

The administrative ruling was followed by comments made by the FinCEN Director Kenneth A. Blanco before the House Financial Services Committee’s subcommittee on Terrorism and Illicit Finance.  Director Blanco assured the House lawmakers that FinCEN is not looking to “ding anybody” on the new customer due diligence rules and that FinCEN knows there is going to be a period of adjustment for financial institutions.  Director Blanco stated that all FinCEN is asking for is that financial institutions make a good-faith effort to comply with the rule.

Click here to read FIN-2018-R002 issued by FinCEN on the beneficial ownership rule.