There has been a lot of discussion in our user group about whether to open a CIF for Beneficial Owners that are not signers on the account. The banks that are going to open these CIFs state that this is the only way we can answer the CDD questions and risk rate the BO.
The banks that are not going to open a CIF for non signers state that the regulation only requires us to collect the information required on the Certification form.
Can I get your thoughts?

Welcome to BankersOnline.

I am in the camp of inputting the non-signer BOs into the core since any BO with over 50% ownership interest is also subject to OFAC sanctions. Ongoing OFAC screening of BO's is going to be a challenge if they are not on your core.

We are creating CIFs for our non-signer Bene Owners, for the OFAC rationale described by Brian and to identify other account linkages of the Bene Owner to other accounts for identifying potentially suspicious activity.

So they will be on Core in the entity CIF. Our core vendor added BO information that can be added to each CIF. OFAC is done there. So that should take care of OFAC. I don't think we need to ask CDD questions- or risk rate. Are they a customer if there are not a signer on the account?

No they are not a customer based on only being a beneficial owner of an entity customer.

My one concern with hanging all this extra stuff on your CIF for the entity customer is whether someone at the bank will be confused and make more of a connection between the BO individuals and the business .... a connection like providing account information or account access when there's no contract or agreement providing for it.

We have BO fields and will be adding them to the system. My concern is that we want to do a "CIP Lite" for these people, but once they're on the system we're less likely to follow up and get full CIP when they open an account or something.

For that reason, and because of our size and customer mix, we plan to complete CIP on BOs at this time.

Heidi,

You note that your question began in a users group... That's the perfect environment because everyone in the room is dealing with the same software and the same ramifications. I find it impossible to generalize about the positive and negative effects of adding beneficial owners to a CIF because the effects vary from one platform to the next. The conversation about adding BO's to the CIF originated with a "need" to periodically do full file comparisons against the OFAC list. It seems to have expanded unnecessarily.



Agreed.

The sole purpose of gathering due diligence information is to have a baseline for comparison to future transactions. Unless these people are also customers, there aren't going to be any future transactions. All gathering this information would do is lengthen the account opening process and fill your files with even more unverifiable information.

Risk rating is intended to allow you to intelligently allocate monitoring efforts. These people aren't going to get any monitoring for the reason already stated, they are not going to have any activity unless they are also customers.

At some point, the people implementing this thing should just stop and think...

It's tempting to conflate CIP and verification of identity for beneficial owners. But if you verify John Smith's identity as an owner of legal entity customer Smith's Hardware, LLC, in May, and Smith comes in to open an account of his own on July, you still need to complete the CIP process in July because Smith doesn't have an open account with you. And, because he's applying to do business with you in July on his own behalf, you will be able to pull a credit report (if that's part of your CIP) and possible do a validity check on his SSN if it's an interest-bearing account (if that's part of your CIP), neither of which you could legitimately have done when opening the Smith's Hardware, LLC, account.