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#2103203 - 10/17/16 01:59 PM FATF Report on Beneficial Ownership
Elwood P. Dowd Offline
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The FATF Report on Beneficial Ownership was published last week. It offers some insight into just how important the issue of identifying a legal entity's owners is to this international standard setting organization:

In 2003, the FATF became the first international body to set international standards on beneficial ownership which focused on legal requirements for financial institutions and other gatekeepers to collect and verify information on the ownership of legal persons and arrangements, and on measures to ensure that reliable information on their beneficial ownership is available to investigators.

FATF's 2016 mutual evaluation of the U.S. should be an interesting read. FinCEN never claimed that the new CDD regulation would bring the U.S. into compliance with Recommendation #24, only that it would "advance" the cause. We'll see.
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#2103207 - 10/17/16 02:05 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
rlcarey Offline
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"other gatekeepers to collect and verify information"

It appears that FinCEN forget the last two words of this statement in their designs, as without governmental requirements for this information to be gathered by some governmental agency, such as the States in which the entities are registered under severe penalty for falsification, the gatekeepers have no ability to verify any information they may be required to gather.
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#2103211 - 10/17/16 02:17 PM Re: FATF Report on Beneficial Ownership rlcarey
Elwood P. Dowd Offline
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We're just going to be writing down what people say. The U.S. reg is the regulatory equivalent of The Emperor's New Clothes, nothing more.
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#2103580 - 10/18/16 09:50 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
Princess Romeo Offline

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Originally Posted By Ken_Pegasus
We're just going to be writing down what people say. The U.S. reg is the regulatory equivalent of The Emperor's New Clothes, nothing more.


There's a Monty Python skit in there somewhere....
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#2104063 - 10/21/16 03:34 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
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You stay here and guard the Prince.....
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#2104072 - 10/21/16 03:59 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
Wildcat Rampage Offline
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Ken - you mean you don't believe that Tony Soprano is going to tell us that he's a mafia boss and that the purpose of his account is to launder money?

I may lose faith in the government's ability to write rules.
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#2104400 - 10/25/16 10:13 AM Re: FATF Report on Beneficial Ownership Wildcat Rampage
Elwood P. Dowd Offline
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The "beneficial ownership" element of the fifth pillar is intended to give FinCEN something to say in response to to FATF's pending mutual evaluation. The FATF report will likely note our nation's complete failure to respond to Recommendation #24 over the last 10 years. (The report from the mutual evaluation was scheduled for possible plenary discussion in October, 2016. So, it should be out soon.) FinCEN will parade the big plan in response.

Almost all of the FinCEN representatives I've met over the years have been smart people. (One was a complete doofus.) I cannot believe that when they get together to write rules they have an attack of "group stupid." I cannot believe that they really think collecting "information" without verifying its accuracy is of any real value no matter what the wordy and academic preamble to the final regulation says.

As suggested by the metaphor mentioned above, I think FATF will see right through it.
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#2117895 - 02/10/17 09:14 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
McGruff Offline
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What gets me is that they say they want "direct or indirect owners", but also say that we don't have to wade through multiple legal entities owned by other legal entities to find indirect owners. Seems to me that's the best way to find an indirect owner....

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#2119461 - 02/24/17 05:53 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
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McGruff, tied in to that, too... what happens if Customer A comes to open an account. It's owned 75% by me, and 25% by Business 1. Business 1 is owned equally between 4 people (25% each). How do we handle that? They say there will be a max of 4 people on the form, so do you not report Business 1 as an owner? If not, isn't that a potentially huge loophole?
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#2119501 - 02/24/17 08:01 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
John Burnett Offline
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Technically, the individual completing the form would only report you, the 75% owner, because you are the only individual with a 25% or more interest in Customer A. Business 1 isn't an individual. If Business 1 were 100% owned by me, then you and I would be the only individuals with a 25% or greater ownership interest in Customer A.
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#2119502 - 02/24/17 08:05 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
John Burnett Offline
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The rule is a sham, designed to say something to FATF, if only "there's no freakin' way we can do what you want under current law." It will be very interesting to see if the bill proposed by the former Treasury Department hierarchy sees any action in the current Congress. It might even be recalled by the current administration.
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#2119503 - 02/24/17 08:08 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
Daisy Doodle Offline
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I wonder if we would be criticized for including at least the name of Business 1 on the form for our own information. It wouldn't take anything away from the other information. I often use (or wish I could use) ownership info if I can figure it out in my own investigations.

I will ask my examiner in May.

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#2119504 - 02/24/17 08:18 PM Re: FATF Report on Beneficial Ownership Daisy Doodle
Elwood P. Dowd Offline
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I'm intrigued by how much attention this "entity owned by an entity" possibility captures...

Those who think it should be planned for should just modify the form to accommodate it.
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#2119513 - 02/24/17 08:46 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
rlcarey Offline
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I'm intrigued by how much attention this "entity owned by an entity" possibility captures.

It should gather a lot. Layered LLCs are not uncommon. Sometimes four or five layers involving a dozen or more LLCs. Ultimate ownership is any one's guess.
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#2119514 - 02/24/17 08:50 PM Re: FATF Report on Beneficial Ownership rlcarey
Elwood P. Dowd Offline
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I don't think so. We are a long way out with lots of nuts and bolts to worry about before we focus on something that happens 1 in XXX times.

Now, about series LLC's...naahh, too early for that too.
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#2119516 - 02/24/17 08:54 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
rlcarey Offline
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something that happens 1 in XXX times.

You might be surprised by how often you see it.
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#2119525 - 02/24/17 09:05 PM Re: FATF Report on Beneficial Ownership rlcarey
Elwood P. Dowd Offline
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I've done enough new account seminars in different states to be comfortable with my perspective. Whether it's 1 in XX or 1 in XXXXX, it's not the thing to be focusing on 15 months out when there is a remedy in modifying the form. FinCEN is working on a second Q & A and heaven help them if they do not address this issue.
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#2119545 - 02/24/17 09:53 PM Re: FATF Report on Beneficial Ownership John Burnett
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Originally Posted By John Burnett
The rule is a sham, designed to say something to FATF, if only "there's no freakin' way we can do what you want under current law." It will be very interesting to see if the bill proposed by the former Treasury Department hierarchy sees any action in the current Congress. It might even be recalled by the current administration.

I had typed up virtually the same comment (of course much less eloquently than John) but didn't hit submit. The proposed rule is nothing more than a pinkie promise that the person opening the account is telling the truth and there is virtually no way to confirm that they are. I think the great unknown for financial institutions is how the requirements of the rule are going to "enhanced" by the regulators and the exam process.
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#2119555 - 02/24/17 10:28 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
ACBbank Offline
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I apologize if I'm missing the obvious here, but what's so interesting about an entity owned by another entity (This happens quite often by the way)? Entities are not beneficial owners. In instances where ownership is diluted, you still identify a control person. Any one who read the rule knows it's not accomplishing what FinCEN set out to do.
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#2119559 - 02/24/17 10:36 PM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
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I was about to make reference to Top Gun next month since there are a number of sessions centering around the new rule and due diligence expectations...and I see John has it in his signature.
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#2119808 - 02/28/17 05:12 PM Re: FATF Report on Beneficial Ownership thomasj
John Burnett Offline
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Originally Posted By thomasj
The proposed rule is nothing more than a pinkie promise ....


I have a higher regard for most "pinkie promises" than I have of the value of the BO info certification.

As I think of it, "BO" is a pretty apt abbreviation for this requirement. Either way, BO stinks.
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#2120159 - 03/02/17 12:00 AM Re: FATF Report on Beneficial Ownership Elwood P. Dowd
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^^^ - I saw what you did there!
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