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#2258661 - 08/25/21 02:57 PM Verification of identity of Beneficial Owners
Anonymous
Unregistered

Our examination experience was that we need to make a record of how we verified the identity of each beneficial owner (BO). I'm struggling with this. The beneficial ownership form (which we obtained from a major nationwide vendor) does not have a place for us to record the method we used to verify the identity of a BO. It specifically asks for a passport number for non-US persons, but our examiner insists that we also need to be recording the ID type, number, issue date, and expiration date for every BO, not just non-US persons. I searched the reg and I cannot disagree.

I'm trying to incorporate that record onto the BO form, for future account openings. The BO rules say that we can use methods similar to what we would use for CIP. One obstacle is that under FCRA we do not have a permissible purpose to pull credit on a BO just to verify their identity (maybe that's a grey area, but I definitely wouldn't pull credit on a non-present, non-customer BO, such as BO#4 when only BO#1 is in front of me).

So I look to our CIP policy for other options. Of course, the first/best would be a copy of a DL or passport for each BO, but it is absurd to think that every time someone goes to open a business account, they are going to know to bring such a copy for up to four different BOs. I'm trying to find more options for identity verification other than seeing that copy of a photo ID. Our CIP policy written nearly 20 years ago allows things like "contacting or visiting the customer" but I'm struggling to understand how that would be a valid substitute for seeing a photo ID. I'm picturing that conversation:

Banker: Do you have a copy of your ID?
BO: Nope.
Banker: Oh. That's okay. Under our CIP, I'm allowed to verify your identity by "contacting" you. I'm contacting you now, by seeing you face to face, so at this point I can consider your identity to have been verified.
or:
Banker: You don't have a photocopy of the ID of BO #4? That's okay. I'll call her up. Hi, are you Karen Q. Public? You are? Great, I just needed to verify your identity really quick. Thanks, bye."

Questions:

1. If the beneficial owner happens to be an existing customer (has a personal account), do the BO rules specifically require us to re-verify their driver's license or passport information at the time of the new business account opening? I know for a fact that CIP does not require it, but do BO rules require it? If not, then wouldn't a simple notation of "Existing customer" be valid, for a record of how we verified the BO's identity?


2. Occasionally we'll see BO #1 in person but BO #2, 3, or 4 does not come in to open the account. They also don't send over a copy of their driver's license or answer the phone when we call to get them to send it to us. What methods do you allow at your institution, of verifying that not-present, non-customer BO's identity, other than seeing a government-issued photo ID? Are you using credit reports? Financial statements? Merely "contacting" the individual?

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#2258662 - 08/25/21 02:59 PM Re: Verification of identity of Beneficial Owners Anonymous
Anonymous
Unregistered

Originally Posted by Anonymous
our examiner insists that we also need to be recording the ID type, number, issue date, and expiration date for every BO, not just non-US persons.

OP here: and issuing authority (state or country)

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#2258842 - 08/27/21 02:26 PM Re: Verification of identity of Beneficial Owners Anonymous
Anonymous
Unregistered

Op here: any takers?

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#2258844 - 08/27/21 02:36 PM Re: Verification of identity of Beneficial Owners Anonymous
praBSA Offline
Gold Star
Joined: Aug 2018
Posts: 269
Our policy is written that we require an up to date ID for listed beneficial owners, no exceptions. They get entered onto our core, risk scored, OFAC checked, and ID info saved to their profile. I have seen larger banks incorporate the ID information onto their BO forms to make life easier. If a customer won't do that, we won't bank them, we take a risk-averse approach. We have never had a problem with a customer refusing.

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#2258845 - 08/27/21 02:41 PM Re: Verification of identity of Beneficial Owners Anonymous
Bankwoman1 Offline
Platinum Poster
Joined: Dec 2015
Posts: 743
Midwest
We also require up to date ID's for BO's - no exceptions. Our BO forms have a space for ID information to be listed. I thought this was the standard form provided when collecting BO information started, so I'm surprised your form does not have a place for it to be listed. Once we receive the BO's information they are created in our system as a person record, OFAC'd and attached to the organization as a BO & or Control Person.

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#2258855 - 08/27/21 03:29 PM Re: Verification of identity of Beneficial Owners Anonymous
one deer Offline
Member
Joined: Aug 2004
Posts: 71
Any where but work
I made a simple form that we complete per the data/information on BO Certification.

BO Name_________________________________ SSN__________________
Photo ID State Issued _______________________ ID# __________________
ID Expiration Date______________________________________
OFAC Search, printout attached - SSN Validation, print out attached.

Same info collected for Manager if not a BO.

Perhaps it is to simple but has sufficed so far.

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#2258966 - 08/30/21 10:31 PM Re: Verification of identity of Beneficial Owners Anonymous
Justin Case Offline
Platinum Poster
Justin Case
Joined: May 2002
Posts: 970
first lily pad on the right
We do non-documentary ID verification for Beneficial Owners who US citizens and are not customers. It's not a credit pull, it is ID verification and OFAC only. The ID verification report is scanned into our archive system along with the Beneficial Ownership form.

If non-doc ID verification fails, we require a copy of the driver's license, passport, etc (dependent upon what the failure was) and record all of the required information (doc type, doc number, state issued, issued date, expiration date). We do not retain the copy of the document, only the description. For non-US citizens who are not customers, we require a copy of the passport and have a checkbox on the Beneficial Ownership form that the passport was viewed.
_________________________
CAMS

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#2259345 - 09/08/21 01:19 PM Re: Verification of identity of Beneficial Owners Anonymous
Anonymous
Unregistered

Op here. So far we've had Best Practices-type answers. Thank you. But am very interested if anyone knows the answer to the below, because "Best Practices" are what the examiner is using to examine us, and I don't think that's a valid exam standard. It's basically, "Well, the last bank I visited did X, so you better start doing X too." Very slippery slope that can lead to endless "improvements" that are no longer in line with the intent of the BO law. I appreciate the input sincerely, but, for anyone else reading this:

1. If the beneficial owner is an existing customer (has a personal account), do the BO rules specifically require us to re-verify their driver's license or passport information at the time of the new business account opening? Wouldn't a simple notation of "Existing customer" be valid, for a record of how we verified the BO's identity? It's valid for CIP, and BO processes should be based on CIP. (Some examiners might say the "Best Practice" is to get updated ID info for CIP too, but I say that's nonsense. CIP is "once-and-done," not "every time we see you, in perpetuity.")

2. For a not-present B.O., what other methods do you allow at your institution, of verifying that not-present, non-customer BO's identity, other than seeing a government-issued photo ID, if any? Are you using credit reports? Financial statements? Merely "contacting" the individual?

(For those who said, "Get ID, no exceptions," are you saying your staff would deny the account request, when there are 4 BOs and only 3 have sent over an ID? And/or delay the account opening until that 4th BO's ID is received? Seems a) extreme and b) unlikely to really be happening at the branch level, depending on the volume of accounts you open.)

Also just want to point out that checking OFAC is only required for BOs who own 50% or more. If a BO owns less than that then there is no OFAC action you could take, even if you found a 100% exact match. (See https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/1521#:~:text=OFAC%27s%2050%20Percent%20Rule%20states,blocked%20persons%20are%20considered%20blocked.)

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#2259353 - 09/08/21 02:55 PM Re: Verification of identity of Beneficial Owners Anonymous
ColoradoAML Offline
100 Club
Joined: Mar 2018
Posts: 233
https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf

1. See question 7

2. See question 4 for guidance on verification. Since your question is what we do, I'll answer along with everyone else who gave you best practices: we require our staff to view an ID or a facsimile of an ID, as the regulation suggests. If they fail to do so, our procedures lay out the process by which an account or relationship is closed.

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