By Amy Kleinschmit
FinCEN believes that more explicit customer due diligences (CDD) rules are necessary for financial institutions to clarify and strengthen CDD within the Bank Secrecy Act regime.
In a proposed rule’s preamble, FinCEN argues that, “such changes will enhance financial transparency and safeguard the financial system against illicit use. Requiring financial institutions to perform effective CDD so that they know their customers—both who they are and what transactions they conduct—is a critical aspect of combating all forms of illicit financial activity, from terrorist financing and sanctions evasion to more traditional financial crimes, including money laundering, fraud, and tax evasion.”
What is your opinion – you already know your member – but what about the transactions they conduct?
A person opening a new account on behalf of a legal entity with a credit union would be required to complete a new form. In this form they will be required to provide the name, address, date of birth and social security number (or passport number or other similar information, in the case of foreign persons) for the following individuals (i.e., the beneficial owners): (i) Each individual, if any, who owns, directly or indirectly, 25% or more of the equity interests of the legal entity customer (e.g., each natural person that owns 25% or more of the shares of a corporation); and (ii) An individual with significant responsibility for managing the legal entity customer (e.g., a CEO, CFO, COO, Managing Member, General Partner, President, VP or Treasurer). The financial institution may also ask to see a copy of a driver’s license or other identifying document for each beneficial owner listed on this form.
I’m curious as to credit unions’ opinions about these new information collection requirements? What would be an estimate of the economic impact that these requirements would have on your credit union? Is there a less burdensome alternative that FinCEN should consider? What “legal entities” should be exempt from this requirement?
Are These Rules Necessary?
Currently, credit unions must implement and maintain an anti-money laundering program that includes internal controls, independent testing, designates a compliance officer and training. The proposed rule would add that the credit union’s (along with other FIs’) program also must include appropriate risk-based procedures for conducting ongoing customer due diligence, to include, but not be limited to understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile, and conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.
Should FinCEN define any of the terms used in those proposed requirements to clarify that such requirements apply broadly to all account relationships maintained by covered financial institutions?
Should FinCEN define the term ‘‘customer risk profile,’’ or is this term sufficiently understood by covered financial institutions?
Are these rules necessary or has your credit union been able to meet the existing AML program requirements and SAR requirements without understanding the nature and purpose of customer relationships and conducting ongoing monitoring?
Let FinCEN know what you think by offering your comments at www.fincen.gov.
Amy Kleinschmit is VP of Compliance with the Credit Union Association of the Dakotas. Ms. Kleinschmit can be reached at akleinschmit@cuad.coop.