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#2164925 - 02/16/18 04:34 PM Beneficial Owner Cert. on an Event Driven Basis
DebbieB Offline
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Hi, Can you give me a few examples of events that would trigger a bank to ask an existing customer to complete a beneficial ownership certification form.

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#2164926 - 02/16/18 04:36 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Elwood P. Dowd Offline
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Next to Harvey
* Opening a new account
* Annual review for a "higher risk" customer

Beyond that, a solid waste of time and effort.
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#2164934 - 02/16/18 04:49 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
McFly Offline
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In addition to the items above: Change in customer NAICS code, increase in customer risk rating, addition of new TM product, suspicious activity, significant address change (to foreign address), etc.

Agree with Ken that you would not want to write your policy and procedures to require updating BOCP information due to the items above, but those are situations where you might consider it.
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#2165043 - 02/16/18 07:57 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
John Burnett Offline
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I'd resist the temptation to make more of the BO requirements than they deserve.
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#2165210 - 02/20/18 07:52 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Jennifer Offline
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What about loan renewals and/or modifications?

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#2165221 - 02/20/18 08:47 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Adam Witmer Offline
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By definition, a modification is not a new account and, therefore, BO identification and verification would not apply.

I have seen the term "renewal" used too many different ways to clearly answer the question. If a "renewal" meets the definition of new account in 1020.100, then it would require a new certification. If not, no new certification would be required.

The definition of an account under 1020.100 can be found here:
https://www.law.cornell.edu/cfr/text/31/1020.100
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#2165223 - 02/20/18 09:14 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Mel in WA Offline
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As of now, there is a big debate on obtaining a BO certification for automatic CD renewals. In fact, we have a BSA examiner here now that indicated we should until it's been clarified. A renewal, whether a CD or loan, is not a "new account", IMO.

Thoughts?

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#2165235 - 02/20/18 09:36 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
bcompliance Offline
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Mel, when I called FinCEN I got a response that indicated if the customer comes into the bank that would be a good time to get a new certification. If the CD or loan is renewed and the customer didn't come in, you wouldn't need to get a new certification. The representative said this would be clarified in the second round of FAQs. I believe others have posted about receiving the same canned statement from FinCEN. If you want an official answer, I suggest contacting the helpline.
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#2165265 - 02/21/18 12:40 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
John Burnett Offline
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Wouldn't it be great if FinCEN releases the updated/new FAQ at BOL Conferences BSA/AML Top Gun Conference next week?
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#2165351 - 02/21/18 07:19 PM Re: Beneficial Owner Cert. on an Event Driven Basis John Burnett
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John, would be even better if they released it BEFORE the Top Gun Conference so we could hear your comments on the second FAQ's.
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#2165358 - 02/21/18 07:54 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Q Offline
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Where does it say that a bank would need get a BO certification form from an existing customer besides in the event of a new account being opened?

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#2165362 - 02/21/18 08:10 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Adam Witmer Offline
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From the May 11, 2016 Final rule:

"When a financial institution detects information (including a change in beneficial ownership information) about the customer in the course of its normal monitoring that is relevant to assessing or reevaluating the risk posed by the customer, it must update the customer information, including beneficial ownership information. Such information could include, e.g., a significant and unexplained change in the customer's activity, such as executing cross-border wire transfers for no apparent reason or a significant change in the volume of activity without explanation. It could also include information indicating a possible change in the customer's beneficial ownership, because such information could also be relevant to assessing the risk posed by the customer. This applies to all legal entity customers, including those existing on the Applicability Date.

This provision does not impose a categorical requirement that financial institutions must update customer information, including beneficial ownership information, on a continuous or periodic basis. Rather, the updating requirement is event-driven, and occurs as a result of normal monitoring.
"
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#2165376 - 02/21/18 09:22 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
John Burnett Offline
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Under some of those "events." Adam, would you ask the entity to provide a new B.O. certification, or would you try to obtain info on a change in some other way and annotate your records? I'm trying to imagine the conversation --

Banker: We need an update on the beneficial ownership of your business, Ms. Gatekeeper.

GK: Didn't I give you that information in May when I opened the account for Slippery Slope LLC?

B: Yes, you did. But we need to know if there's been any change in ownership.

GK: You #$%^& bankers! Always poking around in our business! Yes, Mr. Slope has passed, and Sonof Slope is our new managing member.

B: Can I email you a form for certification of the new information? If you print it out, fill it in and sign the certification, you can either mail it back or scan it and email it back to me.

GK: I'm not sending you any such thing back via email after you gave me such a tongue lashing over including our account number in an email wire transfer request last week! I haven't gotten over that unpleasantness, yet.

B. I'll mail the form to you with a business reply envelope. I'll look forward to getting it back, signed. Thanks and goodbye.

(B hangs up)

GK: #$%^&# banks! Hey Sonof, the bank's wise to the new Slippery Slope LLC regime.
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#2165379 - 02/21/18 09:41 PM Re: Beneficial Owner Cert. on an Event Driven Basis John Burnett
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laugh
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#2165393 - 02/21/18 11:12 PM Re: Beneficial Owner Cert. on an Event Driven Basis John Burnett
Adam Witmer Offline
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You'd be lucky, to get the conversation that far, John. Calling a business customer to tell them their account is fine but additional BO documents are needed for no reason they can understand will be about as effective as calling a customer to tell them their account is overdrawn or that their payment is late. wink

Originally Posted By John Burnett
Under some of those "events." Adam, would you ask the entity to provide a new B.O. certification, or would you try to obtain info on a change in some other way and annotate your records?
Great question. IMHO, the key in this is the first part of the section I quoted: "When a financial institution detects information (including a change in beneficial ownership information) about the customer in the course of its normal monitoring that is relevant to assessing or reevaluating the risk posed by the customer...".

I read this to say that you will update the information on a risk-based approach. The examples they provide are clear examples of an elevated relationship risk and would typically warrant SAR consideration. In addition, I see this increased risk as an opportunity for the bank to conduct EDD and evaluate their relationship and specifically, the bank's ongoing ability to manage the new risk posed by the customer. To me, this would be an appropriate time to request updated BO information and probably request an updated certification form. (I should note that this would be a rare event at most smaller financial institutions.)

When the risk is not as clearly elevated, however, I would see no reason to request a new BO certification. Rather, an "update" of the information in the customer's file would seem appropriate as the rules don't demand a new certification but state to "update the customer information."

As you know, this section is primed for regulatory creep and it will be interesting to see what the expectations of examiners are 10 years from now.
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#2166941 - 03/06/18 10:35 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
TryingtoComply Offline
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Reviving this thread.

So, I'm just wondering if anyone has sent the CBO form to their high risk customers requesting that they complete it? The instructions to the form indicate that it is required when a new account is being opened. If you have already sent the form to existing customers as part of your annual high risk review process, did you have any issues with customers complying with the request?

My concern is that many customers do not have a clue that we have categorized them as high risk. They will likely be wondering why they are being requested to complete the form.
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#2173090 - 04/11/18 08:36 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Mel in WA Offline
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We are coming down to the final countdown and developing our "triggering events" for training retail staff. I agree that the rule is clear in that a new CBO is required for: 1) opening of a new account 2) annual review of a high risk customer..

So, if an existing legal entity customer walks into a branch and tells you ownership percentage and/or control person have changed, Do you obtain a new CBO, even though neither one of the two "triggering events" has occurred??

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#2173096 - 04/11/18 08:44 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Daisy Doodle Offline
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We have four 'trigger' events in our procedures

1. Change of signers
2. Bank obtains knowledge of a change of ownership
3. Adding of a service such as Treasury Mgmt
4. Significant transaction is deemed to indicate a possible change of ownership.

We didn't include automatically for a high risk review, although last year I did our MSB's just because the form was out.

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#2173130 - 04/11/18 11:06 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
TryingtoComply Offline
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Why #3?
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#2173148 - 04/12/18 12:55 PM Re: Beneficial Owner Cert. on an Event Driven Basis Mel in WA
Adam Witmer Offline
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Originally Posted By Mel in WA
I agree that the rule is clear in that a new CBO is required for: 1) opening of a new account 2) annual review of a high risk customer.
As Daisy pointed out, I don't see the rules automatically requiring certification of BOs for an annual review of a high risk customer.

Maybe I am missing something, but new FAQ 14 states the following:
"Financial institutions are required to develop and implement risk-based procedures for conducting ongoing customer due diligence, including regular monitoring to identify and report suspicious activity and, on a risk basis, to maintain and update customer information. Thus, periodic reviews are not by themselves a trigger to obtain or update beneficial ownership information."

IMHO, I view this as saying that high risk reviews are not a trigger in and of themselves. That said, if a high risk customer review identifies activity that would elevate their risk profile, only then will the high risk review become a triggering event. In fact the final rule (which I quoted in post #2165362 of this thread) provides two examples of when a high risk customer review would become a triggering event: 1) a significant and unexplained change in the customer's activity (such as executing cross-border wire transfers for no apparent reason or a significant change in the volume of activity without explanation) or 2) information indicating a possible change in the customer's beneficial ownership (because such information could also be relevant to assessing the risk posed by the customer).

Again, I don't see every high-risk-customer review as being a trigger for a new BO certification.
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#2173152 - 04/12/18 01:16 PM Re: Beneficial Owner Cert. on an Event Driven Basis DebbieB
Daisy Doodle Offline
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I'm going to leave addition of TM services in our 'trigger' list because it makes sense to me to do this. Our TM customers tend to be the largest and most active of our business customers. I have not laid them up against our high risk list, but I think they might line up well.

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