Understanding Customer Due Diligence and Proposed Federal Legislation
Explore the importance of Customer Due Diligence (CDD) for financial institutions in verifying beneficial owners and monitoring transactions. Learn about the requirements and deadlines set by the FinCEN and Department of Treasury. Additionally, delve into the details of the proposed Federal Legislation Companion Bills HR4450 & S2489, focusing on the duty of corporations and LLCs to provide and update beneficial ownership information. Examine exemptions for banks and public corporations, along with regulations concerning foreign beneficial owners.
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Identity Management: Do You Know Who You Are Doing Business With? John Robinson
Customer Due Diligence (CDD) Final Rule FinCEN / Department of Treasury Rule Applies to Covered Financial Institutions o Banks or credit unions o Brokers or dealers in securities o Mutual funds o Futures commission merchants o Introductory brokers in commodities 3 Core Requirements o Collect and verify the personal information of beneficial owners when a company opens an account o Understand the nature and purpose of customer relationships / Develop risk profiles o Conduct ongoing monitoring to identify and report suspicious transactions Must Comply by May 11, 2018
Proposed Federal Legislation Companion Bills HR4450 & S2489 Corporations and LLCs - Duty to Provide o Must provide state with list of beneficial owners during formation process Corporations and LLCs - Duty to Update o Must provide the state with beneficial owner information no later than 60 days after a change o List of beneficial owners must be included in annual filings with the state States Retention of Information o Required to retain beneficial ownership information for five (5) years following the date of entity termination
Proposed Federal Legislation Companion Bills HR4450 & S2489 Licensed Formation Agents o In lieu of filing beneficial ownership information, companies may provide information to a licensed formation agent if the state has a system in place to license those agents o Licensed formation agent must consent to collect and maintain beneficial ownership information o Corporation or LLC must provide the state with certification from the licensed formation agent that they have agreed to maintain the information Exempt Entities o Banks and public corporations do not have to file beneficial ownership information o BUT must provide officer/director or member/manager information
Proposed Federal Legislation Companion Bills HR4450 & S2489 Foreign Beneficial Owners o If there are foreign beneficial owners, companies must have a formation agent file certification with the state that the formation agent: Obtained for each person a current street address and a copy of current passport Verified the name, address, and identity of each person Will provide the information on each person upon request Will retain the information and proof of verification for five (5) years after the entity terminates Formation Agents o Adds formation agents to the definition of financial institution under the Bank Secrecy Act o Would require formation agents to establish anti-money laundering (AML) programs
Proposed Federal Legislation Companion Bills HR4450 & S2489 Opposed by o National Association of Secretaries of State (NASS) o National Conference of State Legislatures (NCSL) o American Bar Association (ABA) o U.S. Chamber of Commerce
Proposed (not yet filed) Federal Legislation Amending Bank Secrecy Act Proposed by White House and Department of Treasury Gives Secretary of Treasury the power to require US entities to maintain and file reports on the beneficial owners of legal entities Proposes penalties for failure to comply
Capitol Services, Inc. OFAC Compliance Policy Summary Daily- New Accounts & New Contacts o Potential customer (person/entity), including the point of contact, is searched and vetted against the current SDN list via a subscription service to a global compliance application o Any new contact added to an existing account is searched and vetted against the current SDN list as well o Procedure is performed daily to ensure that potential customers and contacts are not prohibited persons or entities
Capitol Services, Inc. OFAC Compliance Policy Summary Quarterly- Existing Customer and Contact Base o All existing customers and contacts are searched against the current SDN list via a subscription service to a global compliance application o Procedure is performed quarterly to ensure that existing customers and contacts are not prohibited persons or entities
Capitol Services, Inc. OFAC Compliance Policy Summary Potential Match o When a potential name match between customer and SDN list is detected, we take OFAC s due diligence steps to determine whether the match is valid Quarterly- Existing Customer and Contact Base o If an exact match or a match with a number of similarities is found after taking OFAC s due diligence steps, we notify OFAC via their hotline
