Time flies when you’re having fun! It has already been a year since FinCEN’s Customer Due Diligence rule became effective. In this month’s Regulatory Refresher, we have highlighted some of the information related to the CDD Rule that became effective May 11, 2018. Under FinCEN’s CDD rule credit unions are required to identify and verify the beneficial owners of business-type accounts. One way to accomplish this is by using the Beneficial Owner Certification Form.
The Beneficial Owner Certification must be completed by the person opening the new account (on or after May 11, 2018) on behalf of a legal entity. It must be a natural person authorized to open the account – it cannot be the entity itself. Legal entities include:
- limited liability companies,
- other entities that are created by filing a public document with a Secretary of State or similar office, and
- general partnerships or any similar business entities formed in the United States or a foreign country.
This requirement does not apply to:
- sole proprietorships,
- unincorporated associations (youth sports leagues), or
- natural persons opening accounts on their own behalf.
The Beneficial Owner Certification form requires the person opening the account to provide their name and title, as well as the name, address, date of birth and identification number for the “beneficial owners” of the entity.
Beneficial Owners are defined in the rule as:
- Ownership Criteria: Each individual, if any, who, directly or indirectly, through any contract, arrangement or understanding, relationship or otherwise, owns 25% or more of the equity interests of a legal entity customer as well as
- Control Criteria: A single individual with significant responsibility to control, manage, or direct a legal entity customer, including
- An executive officer or senior manager (CEO, CFO, COO, Managing Member, General Partner, President, VP, or Treasurer) or
- Any other individual who regularly performs similar functions
The form must be completed for any new loan or share product or changes in ownership. A new form does not need to be completed for a Share Certificate that has automatically renewed.
FinCEN’s Information on Complying with the Customer Due Diligence (CDD) Final Rule: FinCEN’s CDD Final Rule