Learn More - Click Here!

New Reply Thread Options
#2258648 - 08/25/21 01:46 PM Weird examiner question on Beneficial Ownership
Anonymous
Unregistered

Examiners can ask some pretty weird things sometimes. It's important to remember that asking a bank for something doesn't create a requirement for the bank to have it or do that action. Here are the questions that I was asked today:

Are your beneficial owners checked against OFAC?
Are they checked when you perform a 314(a) records search?

(In other words: when you collect beneficial ownership data on a paper form, and some of the individuals who are beneficial owners are not customers in any sense and their only connection to your bank in any way is that they are the ultimate beneficial owners of an LLC or corporation which is your customer, do you then create a customer record for those beneficial owners, so that your system will check their names automatically every time you do an OFAC search and every time you run 314(a) twice a month?)

I'm thinking: who said we need to be doing that in the first place? Let's say I had an exact OFAC match on a beneficial owner on a new account. Would that be enough to cause me to have to take action?

Let's say I had a 314(a) match on a non-customer who was only a beneficial owner of a customer. Would 314(a) require me to respond to that a positive match?

I rather doubt it.

Return to Top Reply Quote Quick Reply Quick Quote
#2258657 - 08/25/21 02:32 PM Re: Weird examiner question on Beneficial Ownership Anonymous
ACBbank Offline
Power Poster
ACBbank
Joined: Jul 2006
Posts: 3,959
New York City
If you have an OFAC match on beneficial owner you would need take action. Depending on the ownership you could make a strong argument that the OFAC sanctioned party is the owner of the funds and the funds could be subject to being blocked/rejected along with the appropriate OFAC reporting requirements.

Even though OFAC screening isn't specifically required there is a reason many, many banks screen beneficial owners against the SDN List.
_________________________
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

Return to Top Reply Quote Quick Reply Quick Quote
#2258663 - 08/25/21 03:08 PM Re: Weird examiner question on Beneficial Ownership ACBbank
Anonymous
Unregistered

Originally Posted by ACBbank
Even though OFAC screening isn't specifically required there is a reason many, many banks screen beneficial owners against the SDN List.

Op here: That's my concern, right there. If OFAC screening isn't required, then we shouldn't be doing it. (To clarify: OFAC doesn't require any screening of any type; we're just required to figure out a way to avoid violating OFAC. But I want to know if having a non-customer BO on a FinCEN form would in fact violate OFAC.)

In other word, I'm trying to get to the heart of whether this bank would be hypothetically violating OFAC by having a beneficial owner who is on the OFAC list. I'm not looking for a best practice, or a strong argument in favor of or against checking BOs against OFAC, but want to know whether this would explicitly violate OFAC. Because if it doesn't, then we shouldn't be checking beneficial owners against OFAC, because there would be no action we could legally take if we found such a person to be on the OFAC list. For instance, if the bank can't legally block, reject, or freeze funds on the basis of who the BO is, then we should not be checking BOs against OFAC.

And I don't want to screen thousands of BOs per year until the day comes that it appears that we have an exact match, and then figure it out. I'd want to instead intentionally exclude non-customer BOs from OFAC screenings.

Return to Top Reply Quote Quick Reply Quick Quote
#2258667 - 08/25/21 03:50 PM Re: Weird examiner question on Beneficial Ownership Anonymous
P*Q Offline

Power Poster
P*Q
Joined: May 2001
Posts: 8,437
Somewhere
BO's are entered into our system with that role and anyone in our system is scanned each night so we don't have this concern.

Return to Top Reply Quote Quick Reply Quick Quote
#2258671 - 08/25/21 04:10 PM Re: Weird examiner question on Beneficial Ownership P*Q
Anonymous
Unregistered

Originally Posted by P*Q
BO's are entered into our system with that role and anyone in our system is scanned each night so we don't have this concern.

Op here. You are still in a similar situation to me though. What if your system detects a match, and the person's only relationship with you is a BO? What could you do with that information? Block/freeze/reject? Or have to call OFAC to find out?

Return to Top Reply Quote Quick Reply Quick Quote
#2258672 - 08/25/21 04:13 PM Re: Weird examiner question on Beneficial Ownership Anonymous
ColoradoAML Offline
100 Club
Joined: Mar 2018
Posts: 233
If a sanctioned person owns 50% or more of an entity, that entity is also sanctioned, regardless of whether they're listed. So yes, you risk violating OFAC by not screening BOs. https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/1521#:~:text=OFAC%27s%2050%20Percent%20Rule%20states,blocked%20persons%20are%20considered%20blocked.

The beneficial ownership rule did not change 314(a) screening requirements, so you are not required to screen BOs against 314(a). See question 24: https://www.fincen.gov/sites/default/files/2016-09/FAQs_for_CDD_Final_Rule_%287_15_16%29.pdf

Return to Top Reply Quote Quick Reply Quick Quote
#2258689 - 08/25/21 05:17 PM Re: Weird examiner question on Beneficial Ownership Anonymous
Anonymous
Unregistered

OP: Great, and thanks for the links

Return to Top Reply Quote Quick Reply Quick Quote
#2258693 - 08/25/21 05:33 PM Re: Weird examiner question on Beneficial Ownership Anonymous
Anonymous
Unregistered

OP here: Going forward my forms will require a record be made that OFAC was checked for all owners owning 50% or more.

Return to Top Reply Quote Quick Reply Quick Quote
Quick Reply:
HTML is disabled
UBBCode is enabled




Moderator:  MagicCity, P*Q, Truffle Royale