Compliance Blog

Written by Stephanie Lyon, Regulatory Compliance Counsel, NAFCU

FinCEN recently issued technical amendments to its Customer Due Diligence (CDD) rule or as some of you may know it, the Beneficial Ownership rule. These amendments became effective the day they were published in the Federal Register but the compliance deadline is not until May 11, 2018. Unfortunately, the compliance deadline may take away from the enjoyment of celebrating Eat What You Want Day, but I will nonetheless observe this holiday.

I just wanted to note from the onset that these technical amendments do not provide additional guidance on complying with the CDD rule but we do anticipate additional FAQs before the compliance deadline—specifically on complex corporate structures and how deep to dig to find a natural person (finding the heartbeat).

Of the technical amendments, only one part is specifically relevant to credit unions while the other part deals with the training element of the AML program for mutual funds, which was inadvertently omitted from the final rule. See, 81 Fed. Reg. 45183. Here are the applicable corrections noted in the amendment:

Corrections to the Beneficial Owner Certification Form

Under the final CDD rule, credit unions are required to identify up to 4 beneficial owners who own 25% or more of legal entity customers at the time a new account is opened. To comply with this requirement, the credit union may obtain the required information on a standard certification form or through substantially similar means. Credit unions seeking to comply with this requirement through the standard certification form can find an image of the Certification Regarding Beneficial Owners of Legal Entity in Appendix A of the final rule.

The technical amendments made a couple of corrections to the model Certification Form found in Appendix A. The changes are meant to fix inadvertent mistakes instead of imposing additional requirements to obtain information for beneficial owners of legal entities. Here is a summary of the changes:

1. In the first sentence in Part I under the heading “What information do I have to provide?”, the term “foreign persons” is changed to “non-U.S. persons”.
2. In Part II, the heading of Section II b. is changed to “b. Name, Type, and Address of Legal Entity for Which the Account is Being Opened:”
3. In the headings of the last column in the Tables in Section II c and Section II d, the term “Foreign Persons” is changed to “Non-U.S. Persons” and the term “Social Security Number” is added after the term “persons”.
4. In footnote 1, the term “Foreign Persons” is changed to “Non-U.S. Persons” and “a Social Security Number,” is inserted after the word “provide”.

81 Fed. Reg. 45183. For visual learners, such as myself, I summarized the changes in red in the old model form and highlighted the last change in the new model Certification Form:

Change # 1

Change #2

Change #3

Change #4

Credit unions that are relying on a forms provider to create the Certification Form may want to ensure the technical amendments are incorporated before the compliance deadline sneaks up. As I recall, the process of requesting a modification to a form, reviewing the changes and approving the final form can take some time so it is important to get the ball rolling. The technical amendment did include a model Certification Form that incorporates the amendments, but the form is spread out into four parts:

https://s3.amazonaws.com/images.federalregister.gov/ER28SE17.004/original.png?1506528076

https://s3.amazonaws.com/images.federalregister.gov/ER28SE17.005/original.png?1506528077

https://s3.amazonaws.com/images.federalregister.gov/ER28SE17.006/original.png?1506528077

https://s3.amazonaws.com/images.federalregister.gov/ER28SE17.007/original.png?1506528093

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CFPB Updates HMDA Small Entity Compliance Guide. The CFPB just updated their HMDA small entity compliance guide to incorporate the amendments to its 2015 HMDA rule. The updates incorporate changes introduced in the April 2017 HMDA proposal (technical clarifications) and the July 2017 HMDA proposal regarding transactional thresholds for reporting HELOCs.

Regulatory Compliance School and Seminar. I also wanted to say on behalf of the Regulatory Compliance team, thank you for joining us at NAFCU's Regulatory Compliance School and Seminar in sunny San Diego. It is energizing to see so many engaged compliance professionals in one place!