By: Matthew Hovis, CAMS, CFE, CPP, Director of BSA/AML Services

On December 7, 2021, FinCEN issued a Notice of Proposed Rulemaking (“NPRM”), for the purpose of establishing beneficial ownership reporting rules – in accordance with the Corporate Transparency Act (“CTA”) – that will apply to all applicable legal entities formed or registered to do business within the United States (i.e. “reporting companies”).

KEY TAKEAWAYS

For financial institutions, there will not be a substantial and immediate impact since the CTA imposes no new requirements upon them. However, there are several key points and developments included within the NPRM for which financial institutions subject to the Customer Due Diligence rule should be aware:

  • The nature of the beneficial ownership information businesses must report to FinCEN, as well as the exemptions from needing to provide that information, are similar but not identical to those within the CDD Rule. BSA/AML should familiarize themselves with the specifics of the proposed rules, as they may eventually replace the current requirements.
  • FinCEN will maintain a beneficial ownership information (“BOI”) repository to house the data.
  • FinCEN will release two additional related sets of rules.
  • In their next subsequent rulemaking, FinCEN will develop rules for who may access the BOI repository and for what purposes. The CTA and FinCEN’s related press releases indicate that access will be given to covered financial institutions for beneficial ownership verification
  • In their final related rulemaking, FinCEN will revise the specific beneficial ownership rules codified in 31 CFR 1010.230(b)-(j). However, they will not remove the general requirement to maintain procedures for identifying and verifying beneficial owners (31 CFR 1010.230(a)). In other words, beneficial ownership obligations will remain intact for covered financial institutions, but the detailed regulations governing when and how beneficial ownership requirements are fulfilled will be revised substantially depending upon how the reporting rules and repository access rules materialize.

TIMING

The proposed rules are open to public comment for 60 days; and reporting companies will have one year from the effective date of the final regulations to begin complying. However, the exact timeframe in which this will affect financial institutions is not yet determined. FinCEN has a one year deadline from the effective date of this final rule to propose changes to the CDD Rules. It may be several years before the current obligations for covered financial institutions change as a result of FinCEN’s efforts under the CTA, but BSA/AML professionals should continue to pay close attention to developments in this area.

 

About Sheshunoff Risk Management’s BSA/AML Services
Sheshunoff Risk Management’s seasoned BSA/AML Audit professionals have extensive backgrounds both as auditors and working directly within BSA/AML Departments at financial institutions. Using this deep subject matter understanding, we are able to readily identify and prioritize issues then provide practical and cost-effective recommendations to resolve them or mitigate their risks. In addition, we maintain an extensive set of proprietary audit programs that can cover a diverse array of higher risk areas (e.g., marijuana banking, third-party payment processing, etc.) and small to mid-sized banks and credit unions. Combined with our strong project management culture and efficient processes, our practice can ensure you keep your expenses low while keeping the quality of your independent testing high. https://risk.smslp.com/service/bank-secrecy-act-anti-money-laundering-audit/ 

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