Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal, NAFCU

New regulations generate a great many compliance issues and questions.   The Financial Crimes Enforcement Network's (FinCEN) Customer Due Diligence (CDD) rule has been no exception. NAFCU's Regulatory Compliance team has been fielding questions right and left on this rule in the last couple of weeks leading up to the effective date.  One such question dealt with the rule's beneficial ownership requirements and certain products that rollover and renew. 

The Customer Identification Program rules and 2005 interagency guidance state an account means that "each time a loan is renewed or a certificate of deposit is rolled over, the bank establishes another formal banking relationship and a new account is established."  Then Question 12 in FIN-2018-G001 , FinCEN's frequently asked questions CDD guidance of April 3, 2018, indicates a credit union is required to get information on the beneficial owners of a legal entity that opens a new account and for each "new" formal banking relationship even if that legal entity is an existing member.

So under the CDD rule, with any financial services or products established before May 11, 2018, a credit union is required to get certified beneficial ownership information of the legal entity members of a loan account or share certificate at the time of the first renewal following that date. Then with any subsequent renewals, if the legal entity member and the loan account or share certificate stay the same, the member certifies or confirms the beneficial ownership information is still accurate and the credit union has no reason to question the information's reliability, it would not be required to collect it again. FinCEN then stated "In the case of a loan renewal or CD rollover, because we understand that these products are not generally treated as new accounts by the industry and the risk of money laundering is very low, if at the time the customer certifies its beneficial ownership information, it also agrees to notify the financial institution of any change in such information, such agreement can be considered the certification or confirmation from the customer and should be documented and maintained as such, so long as the loan or CD is outstanding."   

So the rule and the guidance both require a credit union is to get the beneficial ownership information on all its existing members for any loan products or share certificates before May 11, 2018, with the first rollover and/or renewal.   No problem, right? No, not so right.

Just last week, listening to concerns on the ability to comply with this, FinCEN offered covered financial institutions a temporary respite in issuing a ruling giving a 90-day limited exceptive relief on the beneficial ownership requirements for certain products and services that automatically rollover or renew established before May 11, 2018. The ruling, FIN-2018-R002 , states the exception retroactively begins on May 11, 2018, and expires on August 9, 2018.    FinCEN has also indicated it will decide whether and to what extent more exceptive relief may come in the future as it believes the issue warrants further consideration.

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Rabobank Sentenced.   A follow-up for BSA Blast readers, in the last issue I wrote about Rabobank NA pleading guilty in a California court to a felony conspiracy charge to hiding problems with its anti-money laundering program from its primary regulator, the Office of the Comptroller of Currency.   On May 18, 2018, the bank was sentenced to a two-year probation term and ordered to pay the maximum statutory fine of $500,000.   This was in addition to its forfeiture of almost $369 million in penalties to the United States for allowing illicit monies to be processed through the bank.   One of the investigating agents stated "Rabobank’s sentencing today is a victory for all Americans and sends a strong message about the need for transparency in banking and ultimately contributes to the fight against money laundering.”