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#2162242 - 01/29/18 04:39 PM Beneficial Ownership / CDD Procedures
J_G Offline
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Posts: 259
Has anyone put together their Beneficial Ownership / CDD Procedures yet that they would be willing to share? Or know anywhere I could find some to help get me started on my own? (webinar that provides sample procedures, etc). I've got this portion covered in the policy, but need to get busy on procedures. Thanks.

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#2162245 - 01/29/18 05:12 PM Re: Beneficial Ownership / CDD Procedures J_G
JennKK2 Offline
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Posts: 315
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I'm working on the same area - procedures. though I will reach out to the actual departments - New Accounts, Loan, Bookkeeping - the process I found to be simple. bank personnel are required to gather and identify BO and complete the COB at the time of account opening. if CIP can't be performed on BO, the account can not be opened. we have recently obtained the updates on our core for the BO date to be input; I'm just going thru the motions of how the BO info will be entered, and next will be to confirm the OFAC scan process to catch BO. I need to ask senior management for their blessing on utilizing an enhanced COB so we can capture the % of ownership to align with the OFAC part of the BO regulation.
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#2165048 - 02/16/18 08:21 PM Re: Beneficial Ownership / CDD Procedures J_G
ahkcompliance Offline
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Midwest
I am working on procedures now. First I was going to incorporate into CIP procedures but I am thinking it should be separate. How are others handling?

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#2165067 - 02/16/18 08:59 PM Re: Beneficial Ownership / CDD Procedures J_G
bcompliance Offline
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I listed the basic requirements in the CIP policy relating to beneficial owners and pointed to our procedures to drill down to the specifics. Different departments will be handling it different ways, so they are responsible for compliance with their own procedures, which will be approved by the BSA/Compliance department before they are effective.
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#2165162 - 02/20/18 04:19 PM Re: Beneficial Ownership / CDD Procedures J_G
RockChucker, CAMS Offline
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Joined: Jul 2013
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The Country
The following section is really bothering me:

Section 1010.230(b) Identification and Verification. In the NPRM, FinCEN proposed that covered financial institutions be required to develop customer due diligence procedures that enabled institutions to (1) identify the beneficial owner(s) of legal entity customers by collecting a mandatory certification form provided by the individual opening the account on behalf of the legal entity customer; and (2) verify the identity of the identified beneficial owner(s) according to risk-based procedures that are, at a minimum, identical to the institutions' CIP procedures required for verifying Start Printed Page 29405the identity of customers that are individuals.

This whole time I was under the impression that we could do a "CIP Lite" for BO's.
What am I missing?
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#2165168 - 02/20/18 05:04 PM Re: Beneficial Ownership / CDD Procedures J_G
Adam Witmer Offline
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FinCEN addressed the "identical" issue in the preamble to the final rule:

"FinCEN agrees that it would be impracticable for covered financial institutions to implement the beneficial ownership verification requirement with procedures that are identical to the institution's existing CIP rule procedures for individual customers. Accordingly, § 1010.230(b)(2) has been amended to require that at a minimum, these procedures must contain the elements [44] required for verifying the identity of customers that are individuals under paragraph (a)(2) of Start Printed Page 29408the applicable CIP rule,[45] but are not required to be identical. In addition, the final rule clarifies that in the case of documentary verification, the financial institution may use photocopies or other reproductions of the documents listed in paragraph (a)(2)(ii)(A)(1) [46] of the applicable CIP rule."

When you look at "elements," this would include 1) your core CIP info (name, DOB, address, ID) as well as 2) documentary verification and 3) non-documentary verification.

The core info is collected on the certification form and therefore will only be "CIP Lite" because you will not be getting this information directly from the BO.

Documentary verification has been addressed by the rule allowing the person opening the account to bring copies of documents. Therefore, I really don't see documentary verification typically being very "CIP Lite" other than the fact that you are getting copies from the person opening the account and that you never see the BO.

That said, I can see where most financial institutions will need to make more significant changes for their non-documentary verification which will result in a more significant "CIP Lite." For example, many banks rely on a credit report for non-documentary verification for loan applicants. However, the FCRA prohibits you from pulling a credit report without a permissible purpose, and this would be a conflict for non-applicant beneficial owners. Therefore, most banks will need to amend their non-documentary verification procedures for their beneficial owners, thus creating a "CIP Lite."
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All statements are my opinion, not those of my employer, and should not be taken as legal advice.
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#2165201 - 02/20/18 07:02 PM Re: Beneficial Ownership / CDD Procedures J_G
RockChucker, CAMS Offline
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The Country
Thank you Adam! I wish the would just get this right the first time so we don't have so much confusion and so many documents to review to figure out what they are trying to say.
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#2165414 - 02/22/18 02:39 PM Re: Beneficial Ownership / CDD Procedures J_G
lucyc Offline
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lucyc
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Since I am new to the BSA area, how are we supposed to address the non-documentary verification? Especially since the beneficial owners will more than likely not be present when the information is being collected.

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#2165522 - 02/22/18 09:01 PM Re: Beneficial Ownership / CDD Procedures J_G
Cape Codder Offline
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If you're using your existing CIP requirement as a guideline, you'd still be obtaining documentary ID (e.g., license, state-issued ID, passport, etc.) The difference is that you're allowed to accept a photocopy of these items from the person opening the account. You won't be able to compare the photo on the ID to the individual it belongs to (unless, of course, the beneficial owner is the person opening the account . . .)
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#2165722 - 02/23/18 10:04 PM Re: Beneficial Ownership / CDD Procedures RockChucker, CAMS
Elwood P. Dowd Offline
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"CIP Lite" is the idea that banks will:
* accept a photocopy of identification as documentary verification (my youngish looking daughter, now 30, couldn't buy a beer with a photocopy of her drivers license) and
* make no attempt to verify the beneficial owner's name/SSN combination. (The SSN is the only unique identifier that might be tied to an individual's name; i.e. it's really the best source of verification.)

This conversation illustrates the fact that under the proposed regulation FinCEN would have required banks to use their "full strength" CIP. However, several commenters pointed out that was literally an impossibility. Many banks use nondocumentary verification for name/TIN verification; e.g. commercial consumer report or IRS TIN verification services. Those banks could not legally use those methods on a person who is only a beneficial owner.

So, now better informed, FinCEN came back with the idea that banks could just use something "like" their CIP. Miller Lite is "like" Miller Beer, but few are silly enough to pretend it's the same thing.
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#2165725 - 02/23/18 10:20 PM Re: Beneficial Ownership / CDD Procedures J_G
Elwood P. Dowd Offline
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Next to Harvey
Quote:
Has anyone put together their Beneficial Ownership / CDD Procedures yet that they would be willing to share?


Your bank's policy is like a list of ingredients in a recipe. A person doesn't have to know much about your kitchen to pick them up at the grocery. The procedures tell you their appropriate measurements, when they are to be combined, and how long to cook them. For that, someone would have to know how your kitchen is laid out and what utensils you already have.

There can be nearly generic policies. There are no generic procedures.
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#2165726 - 02/23/18 10:22 PM Re: Beneficial Ownership / CDD Procedures J_G
Daisy Doodle Offline
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Southern U.S.
If your bank uses EFunds, you can select to run just ID verification and not the Chexsystems credit report. That's what I had in mind for our BO's. That is non-documentary verification of name TIN match.

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#2165737 - 02/24/18 10:28 AM Re: Beneficial Ownership / CDD Procedures Daisy Doodle
Elwood P. Dowd Offline
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I cannot comment on the claims of a specific vendor. However, determine whether your bank is willing to refuse an account based on the fact that a vendor says an individual's information does not match. If so, you definitely need to inquire more deeply into exactly why your query would not be described as generating a consumer report requiring you to give written notice of where the information came from.

No commercial vendor can "verify" a name/SSN match. At one time, they could confirm when and where an SSN was issued, but their ability to do even that has been constantly eroding since SSA began its randomization of SSN assignments in 2011.
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#2165743 - 02/24/18 04:39 PM Re: Beneficial Ownership / CDD Procedures J_G
Daisy Doodle Offline
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Southern U.S.
Efunds just checks to see if that name and TIN have been used together in the past in commercially searchable databases (which would include among others, consumer credit reports). It has always been considered an acceptable non documentary verification for other natural persons by examiners.

I don't know about everyone else, but we don't refuse a prospective customer based on a non-match, we would request additional explanation and documents.

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