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Mar 09, 2010
Categories: BSA Consumer Lending

Beneficial Owners; Fed Proposal and Variable Rate Cards

Posted by Anthony Demangone

Last week, NCUA issued Regulatory Alert 10-RA-05, which shares Guidance Document FIN-2010-G001 with federally-insured credit unions.  The guidance clarifies regulator expectations regarding how financial institutions should gather “beneficial ownership information.”  In short, regulators are worried that individuals may use front companies or other account structures to hide the true ownership or control of an account. The beneficial owner, may dominate the account for illegal purposes in a way that shields their true identity. The guidance indicates that regulators expect financial institutions to implement internal controls to discover “beneficial owners,” especially for accounts that are higher risk for money laundering and other financial crimes.  Route this to your BSA Officer.  If you are the BSA Officer, note that many email programs will allow you to send an email to yourself.  I do this sometimes, along with a note that says something akin to "Demo, I need this analyzed by COB today." This at least gives me the feeling that I delegated the work to someone.  
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We've discussed the Fed's proposal that will require you to review rate increases on your credit cards if the increase was done after January 1, 2009.  But wait...what if the increase was due to the operation of a variable rate? Do you still have to review it and possibly lower the rate?  Nyet. Here's what the Fed indicated on pages 57-58 of the proposal.

For increases in annual 
percentage rates applicable to a credit card account under an open-end (not home- secured) 
consumer credit plan on or after January 1, 2009 and prior to August 22, 2010, 
§ 226.59(a) requires the card issuer to review changes in factors and reduce the rate, as 
appropriate, if the rate increase is of a type for which 45 days’ advance notice would 
currently be required under § 226.9(c)(2) or (g). For example, 45 days’ notice is not 
required under § 226.9(c)(2) if the rate increase results from the increase in the index by 
which a properly-disclosed variable rate is determined in accordance with 
§ 226.9(c)(2)(v)(C) or if the increase occurs upon expiration of a specified period of time 
and disclosures complying with § 226.9(c)(2)(v)(B) have been provided. The 
requirements of § 226.59 do not apply to such rate increases. (Emphasis added.)

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