Managing the Beneficial Ownership Certifications

May 11th marked the compliance date for FinCEN’s final rule on CDD (customer due diligence).

The rule places additional requirements on certain financial institutions in the United States, including banks and credit unions. Among other obligations, financial institutions must now obtain, verify, and record information about the beneficial owners of the legal entities they serve.

In this post, we’ll explore how some banks and credit unions are leveraging technology to streamline this requirement.

Beneficial Ownership

FinCEN’s (Financial Crimes Enforcement Network) final rule on customer due diligence became effective on July 11, 2016. According to a summary of the ruling by the FFIEC (Federal Financial Institutions Examinations Council) all banks must conduct “ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information, including information regarding the beneficial owner(s) of legal entity customers.” The FFIEC goes on to say, “Should the bank become aware as a result of its ongoing monitoring that customer information, including beneficial ownership information, has materially changed, it should update the customer information accordingly.”

FinCEN’s own guidance also stipulates, “Covered financial institutions are required to retain all beneficial ownership information collected about a legal entity customer. Identifying information, including the Certification Form or its equivalent, must be maintained for a period of five years after the legal entity’s account is closed. However, all verification records must be retained for a period of five years after the record is made.”

To help banks comply, FinCEN has provided this certification form, titled “Certification Regarding Beneficial Owners of Legal Entity Customers.”

Tracking with Paper

As with any new documentation requirement, financial institutions face a two-pronged challenge. The first involves ensuring that proper internal procedures are in place to collect and verify customer information. The second, which can be particularly challenging, involves ongoing tracking and retention.

Although a majority of financial institutions utilize a paperless customer document management system, a sizable percentage still rely exclusively on paper documents. A paper-only approach compounds the complexity of CDD compliance for several reasons. For starters, paper documents are easily lost and misplaced. It’s difficult to maintain a reliable due diligence program when information is routinely missing. Furthermore, paper documents can only be in one place at one time. Sharing beneficial ownership documentation in real-time between departments or branches is essentially impossible with paper documents.

Tracking Electronically

A better approach may involve the use of an integrated document management and tracking system, such as our AccuAccount platform. Unlike paper documents, AccuAccount makes it easy to organize, track, and share customer information at your bank or credit union. The system centralizes each customer’s due diligence documentation in a convenient, accessible information portal.

AccuAccount 2018 Customer Page

AccuAccount runs on your institution’s server and integrates to your core processing system, which means information is both secure and reliable. And, as beneficial ownership changes, uploading new certifications is as easy as clicking a button, scanning the new documentation, and keying in any relevant notes.

Beneficial Ownership

AccuAccount even maintains a historical archive of prior beneficial ownership documentation. The system also offers document retention features that align with your internal retention policies. Best of all, AccuAccount comes with unlimited seat licenses. Users from across departments and branches can simultaneously access the same entity’s documentation, thereby enhancing collaboration, knowledge of the customer, and compliance.

Take Ownership of CDD Compliance

Ready to take ownership of your financial institution’s CDD compliance program? Reach out to us and learn how our software can supplement your ongoing compliance initiatives.


Disclaimer: This article is for informational purposes only and is not intended to provide compliance or legal advice. Speak to your internal counsel before making any decisions about beneficial ownership documentation or related topics.

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