FinCEN Makes Permanent Beneficial Ownership Limited Exception

• September 12, 2018
• CLA Regulatory Compliance Team

On September 7, 2018, the Financial Crimes Enforcement Network (FinCEN) made permanent the limited exception to the Beneficial Ownership Rule for certain products and services that were established prior to May 11, 2018. FIN-2008-R003 provides that covered financial institutions indefinitely do not have to identify and verify the identity of the beneficial owner when a legal entity customer opens a new account as a result of the following:

• A rollover of a certificate of deposit/share certificate;
• A renewal, modification, or extension of a loan that does not require underwriting review and approval;
• A renewal, modification, or extension of a commercial line of credit or credit card account that does not require underwriting review and approval; and
• A renewal of a safe deposit box rental.

The beneficial ownership rule required that each time a certificate of deposit/share certificate or loan was renewed, a new account was created necessitating identifying and verifying beneficial ownership information. Financial institutions would struggle with this because traditionally most rollovers and renewals were not treated as new accounts and the rollover and renewals happen automatically, meaning obtaining beneficial ownership information would not be easy.

Back on May 16, 2018, FinCEN issued an administrative ruling that provided a 90 day delay for compliance with the beneficial ownership requirements for rollover and renewal products and services established before May 11, 2018. That expired on August 9, 2018. FinCEN then issued a new 30 day extension providing relief up to, and including, September 8, 2018.

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