The US Financial Crimes Enforcement Network updated the Beneficial Ownership Rule in May of 2018. Have you done what you can to maintain compliance? In addition to updating the rules, they also provided improved guidance to help ensure clarity for financial institution compliance.
The rule is intended to prevent the creation of shady shell companies that finance illegal or terrorist activity, but how do we prevent this from affecting our legitimate customers? And how do we, as financial institutions, remain compliant with the rules?
Let’s start simply – there are two components of the Beneficial Owner of an account. This can be the “Control Prong” (a senior member of the customer’s company that controls the flow of funds both in and out) and the “Ownership Prong” (Owners of the company – if they own more than 25% of the company). But, at 25%, are banks meeting the Enhanced Due Diligence requirements?
Vetter can assist you with compliance with the Beneficial Ownership Rule and more! Click here to see how we can help.
According to FinCEN’s related FAQs, a financial institution can collect additional information for high-risk customers at ownership levels they deem fit (10%, for example). Other options include higher levels of account usage monitoring or collecting information at account opening for expected usage on the account.
How do we implement this in a digital world? So many forms are being pre-populated based on information pulled from external sources. The first step is to maintain a chain of custody for the information. Make sure you can easily reference where data was pulled from and have the requestor verify the information during the sign-up process. Requiring documentation such as a photo of a government issued ID can help locate parties in question.
Additionally, ensure you cross-check your accounts. Match names and addresses to information provided. By exceeding the requirements, you will protect your financial institution in the case of an investigation or audit.
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This brings us to the big question; how do we gather the information from a customer without breaking the user experience? In this day and age, a more difficult process will only make the customer move to another financial institution. The first thing to remember is that the other financial institution has to gather this information; it’s just a matter of how it’s done to make sure it minimizes the customer impact. So, be compliant with the information, let tech help you where it can (pictures of driver’s licenses combined with OCR, which I wrote about in last week’s blog), ask the customer verify the information, and if additional information is required, build a questionnaire that is easy to navigate and collects all the required information. With this additional insight into your customer, you will not only be compliant, but also better able to serve them. That’s a win-win.