I received a response from FinCEN. They indicated that *technically* an when individual that is strictly a beneficial owner later opens a personal account, FI's will need to perform CIP again. However, according to the representative I spoke with, FI's can rely upon the documentation they previously collected when performing CIP procedures upon them due to their being BO's (provided the reliance is reasonable). The FinCEN representative claimed the same logic related to customer's with previously closed loans applies to the situation I described.

BUT, if you relied on a photocopy of an ID under the BO rules, I would recommend that you verify the actual valid ID if that is what your CIP requires... Just to be sure. Remember, FinCEN does not perform exams.

How many institutions have an employee look at the actual Drivers License? I have seen institutions that accept Fax copies of DL as part of their CIP. When I try to point out that the institution is NOT using "Documentary verification", because they aren't looking at the actual document, I have had that opinion edited out of the final report.

When I was still at a bank, my CIP required the actual ID, no copies. Some banks maintain a copy as their record, which we did not do. We recorded the information into our system, but we required the actual ID and it had to be non-expired. Look to your policy and see what it requires. If it does not require an actual ID, you may have an issue. Proof of the need for an actual ID is evidenced in the new BO rules that actually allows photocopies for the BO identification. You will not see this allowance in regular CIP requirements.

How do you handle accounts opened online where there is no face-to-face contact?

^ Non-documentary identity verification method.

From what I've read, there is no difference between record retention requirements when obtaining a reproduced photo ID instead of an actual physical photo ID. The Federal Register indicates that FI's may implement or should consider the quality of the reproduction, but beyond that, once a reproduced ID is accepted it is treated the same as one that was presented in person.

Document (not PDF) page 58 of the final rule states that "The definition [of Legal Entity Customer] would also not include trusts (other than statutory trusts created by a filing with a Secretary of State or other similar office)." I've posed a state-specific question in the Massachusetts forum, but was wondering in general how others plan to address this particular exclusion. Am trying to determine the most efficient, accurate way for frontline staff to identify a "statutory trust" in order to ensure that beneficial ownership information is obtained as appropriate. Thoughts anyone?

On every trust account you open, ask the trustee for the purpose of the account. If he indicates it is for estate planning, wealth preservation, avoiding probate or some otherwise non business purpose, you are entitled to rely on that statement. However, if response is "business," that would suggest it would be appropriate to see if this is a statutory trust that has filed with the state.

Throughout the preamble, they allow you to rely on statements made by the person opening the account; it is not going to be necessary for new accounts personnel to understand every exclusion. If the bank has no information to the contrary, it can accept that offered by the person opening the account. They said that very clearly in one specific instance:

FinCEN does not expect front-line employees of covered financial institutions to engage in any type of legal analysis to determine the applicability of this exclusion. Rather, FinCEN expects covered financial institutions to rely upon the representations of such customers, absent knowledge to the contrary.

Presumably, it applies to all exclusions. Otherwise, banks are going to need a lawyer sitting next to each CSR. (Make no mistake, the lawyers would be researching some of them.)

I do believe auditors will require a trail of some kind as to why Appendix A or the information it requires was not obtained.

[To others: Statutory trusts exist in MA. They do not exist in many other states. Check your SOS web site; do not plan for something you will never see unless its from another state.]

FYI -

I received a response from FinCEN regarding 314(a) scanning of beneficial owners and controllers.

I asked them to confirm if the following statement from pg. 46 of the original 2016-10567 (pre-FR version) means that FI's will not be required to scan their systems for 314(a) matches:

“The rule implementing Section 314(a), set forth at 31 CFR 1010.520, does not authorize the reporting of beneficial ownership information associated with an account or transaction matching a named subject.”

They confirmed that FI's will in deed, NOT need to scan beneficial owners/controllers.

Whether FI's should or will scan anyway is a different matter. Most FI's that CIP authorized signers and retain data electronically are arguably voluntarily scanning non-accountholders for 314(a) because it is logistically easier and complies with the spirit of the process. I anticipate that, due to logistics, controllers and beneficial owners will be treated the same way for scanning purposes.

Re the discussion above on photocopying IDs - if that's your institution's practice, remember that it's against the law to photocopy government ID, including military IDs. You can record the information on the ID card, but no imaging.

From page 51 (document, not pdf) of the BSA/AML Examination Manual:

Footnote 49 A bank may keep photocopies of identifying documents that it uses to verify a customer’s identity; however, the CIP regulation does not require it. A bank’s verification procedures should be risk-based and, in certain situations, keeping copies of identifying documents may be warranted. In addition, a bank may have procedures to keep copies of the documents for other purposes, for example, to facilitate investigating potential fraud. However, if a bank does choose to retain photocopies of identifying documents, it should ensure that these photocopies are physically secured to adequately protect against possible identity theft. (These documents should be retained in accordance with the general recordkeeping requirements in 31 CFR 1010.430. Nonetheless, a bank should be mindful that it must not improperly use any documents containing a picture of an individual, such as a driver’s license, in connection with any aspect of a credit transaction. Refer to Frequently Asked Questions Related to Customer Identification Program Rules issued by FinCEN, Federal Reserve, FDIC, NCUA, OCC, and OTS, April 28, 2005.

There is a poorly worded legal prohibition against photocopying military IDs for fraudulent purposes that many read literally and conclude that they cannot be copied under any circumstance. Since 1) some military personnel get "excited" when its done and 2) it was never required anyway, it's just a good idea not to do it.