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#2221927 - 09/19/19 06:33 PM CIP and beneficial ownership
Susan Offline
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We are having a discussion about CIP and beneficial ownership.

There is an opinion that for beneficial owners who have no other relationship with the bank, that having the beneficial ownership certification saying they are a beneficial owner, and having a photocopy of their ID, is sufficient to verify that individual's ID.

There is also an opinion that for the same situation for that same beneficial owner, we must verify that individual's ID using a system like FIS or similar, where data we input gets compared to a database, like we would use for CIP.

Opinions? Thoughts?

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#2221936 - 09/19/19 07:26 PM Re: CIP and beneficial ownership Susan
rlcarey Online
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You gather the information - you have no responsibility to verify it.
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#2221939 - 09/19/19 07:43 PM Re: CIP and beneficial ownership rlcarey
Susan Offline
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I understand that we don't verify whether or not the stated owners are owners or not, etc. But we don't verify the identity of the individuals?

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#2221943 - 09/19/19 07:59 PM Re: CIP and beneficial ownership Susan
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A covered financial institution may rely on the information supplied by the legal entity customer regarding the identity of its beneficial owner or owners, provided that it has no knowledge of facts that would reasonably call into question the reliability of such information.
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#2221950 - 09/19/19 09:07 PM Re: CIP and beneficial ownership Susan
Adam Witmer Offline
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Originally Posted by Susan1432
I understand that we don't verify whether or not the stated owners are owners or not, etc. But we don't verify the identity of the individuals?

You are still required to "verify" the individual by forming a reasonable belief that you know the true identity of the beneficial owner. There has been some debate on this (as you have experienced), but the best we have to go off is FAQ 4 from the April 2018 FAQs. Among other things, FAQ 4 states:

"Although the CDD Rule’s beneficial ownership verification procedures must contain the same elements as existing CIP procedures, they are not required to be identical to them...........A financial institution’s CIP must contain procedures for verifying customer identification, including describing when the institution will use documentary, non-documentary, or a combination of both methods for identity verification. Covered financial institutions may use the same methods to verify the identity of the beneficial owner of a legal entity customer..............Non-documentary methods of verification may include contacting a beneficial owner; independently verifying the beneficial owner’s identity through the comparison of information provided by the legal entity customer (or the beneficial owner, as appropriate) with information obtained from other sources; checking references with other financial institutions; and obtaining a financial statement............... Financial institutions should conduct their own risk-based analysis to determine the appropriate method(s) of verification and the appropriate documents or types of photocopies or reproductions to accept in order to comply with the beneficial owner verification requirements."

So, this means your policy (driven by your risk assessment) should outline what you do. What does your policy say?
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#2221951 - 09/19/19 09:11 PM Re: CIP and beneficial ownership Susan
Buddy the Elf Offline
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I disagree with Randy on this one. Verification of the identity of the individual beneficial owners is required but their status as beneficial owners is not. On page 40 of the Final Rule, it states, "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 required for verifying the identity of customers that are individuals under paragraph (a)(2) of the applicable CIP rule, 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." It goes on to say that the verification must be completed within a reasonable time after the account is opened.

How that verification is completed (either by obtaining a copy of a driver's license or using an ID verification database) should be specified in your procedures.
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#2221952 - 09/19/19 09:18 PM Re: CIP and beneficial ownership Susan
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The original question was "we must verify that individual's ID using a system like FIS or similar,"

The answer to that is no. If they give you a copy of their ID, you are done. You don't even have to do that under CIP.
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