Beneficial Ownership & Cash Mgmt Services

Posted By: TryingtoComply

Beneficial Ownership & Cash Mgmt Services - 03/12/18 11:00 PM

The term account includes cash management services. My understanding is that if a customer opens an account today, but does not request cash management services until a later time, that a new Certification is required when the customer makes the request for the services.

Anyone disagree?
Posted By: Elwood P. Dowd

Re: Beneficial Ownership & Cash Mgmt Services - 03/13/18 02:27 PM

Yes.

My company executed the documents to open a line of credit today. One year later we transferred money from the line to our checking account. We still opened the account today.
Posted By: TryingtoComply

Re: Beneficial Ownership & Cash Mgmt Services - 03/13/18 04:41 PM

Ken,

When customers sign up for treasury (cash) management services at our bank they sign an agreement for the types of services that they want. I get that the account that the services will be used in conjunction with was opened on a certain date; however, TM services are not standard with the opening of a business checking account.

For example, a customer might open an account today and two months from now we might determine that they are a good candidate for Remote Deposit Capture. We contact them and if they are interested they sign our RDC agreement.

We have many other "services" for which a business customer must sign an agreement. ACH, merchant services, lockbox, cash vault, etc.

So, my question is, should we be obtaining a COB if the service is not requested at the same time the deposit account is opened?
Posted By: TryingtoComply

Re: Beneficial Ownership & Cash Mgmt Services - 03/13/18 05:54 PM

I was talking with a peer and she jogged my memory. The definition of account for this rule is the same as it was for CIP. Since a customer cannot have cash management services without already having an account, we don't need to worry about obtaining a certification.

(a)Account. For purposes of § 1020.220:
(1)Account means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.

If we offered such services without the existence of an account then it would apply. Not sure when that would ever occur.
Posted By: bcompliance

Re: Beneficial Ownership & Cash Mgmt Services - 03/13/18 08:16 PM

It's not a new account. That would be like asking for a certification when a customer adds a debit card or online banking onto their account. It's just a product that is offered with an account type.
Posted By: TryingtoComply

Re: Beneficial Ownership & Cash Mgmt Services - 03/13/18 09:18 PM

I said the same thing in a different way.
Posted By: Madawaska

Re: Beneficial Ownership & Cash Mgmt Services - 03/14/18 02:44 PM

Originally Posted By TryingtoComply
Ken,

When customers sign up for treasury (cash) management services at our bank they sign an agreement for the types of services that they want. I get that the account that the services will be used in conjunction with was opened on a certain date; however, TM services are not standard with the opening of a business checking account.

For example, a customer might open an account today and two months from now we might determine that they are a good candidate for Remote Deposit Capture. We contact them and if they are interested they sign our RDC agreement.

We have many other "services" for which a business customer must sign an agreement. ACH, merchant services, lockbox, cash vault, etc.

So, my question is, should we be obtaining a COB if the service is not requested at the same time the deposit account is opened?



I am under the same understanding -- if the service is not initiated/"opened" at the same time, and there is an agreement to be signed, this is the same as opening a new account, and the BO certification is required.

I was considering defining what the Bank defines, on a risk basis, what defines a "new account". I was also working on this for what the Bank defines, on a risk basis, what defines a "trigger event".

The fifth pillar states "RISK-BASED procedures for conducting ongoing CDD to understand the nature and purpose of customer relationships and to conduct ongoing monitoring to identify and report suspicious transactions, and on a RISK BASIS, to maintain and update customer information."
Posted By: TryingtoComply

Re: Beneficial Ownership & Cash Mgmt Services - 03/14/18 04:03 PM

Madawaska,

Consider making it a requirement that a deposit account be opened prior to or simultaneously to cash management services being provided. Then you don't have to worry about it.
Posted By: gonetobeach

Re: Beneficial Ownership & Cash Mgmt Services - 04/11/18 10:06 PM

I am still confused - our cash management sales team is continually seeking sign up business customers for additional products or services offered through our Commercial Cash Management Group. is the addition of a cash management service considered a "new account" or is the initial cash management agreement considered the "new relationship established". A customer may open a basic business checking account (and we would get the ownership information at that time). If, six months later, the cash management team signs this customer up for Remote Deposit Capture or Wire Transfer services, would we require certification of ownership at that time?

I am hung up on the term cash management 'services'. Should I be focused more on the 'establishment' of the account?

Please help me understand so that I can talk our cash management team off the edge.
Posted By: TryingtoComply

Re: Beneficial Ownership & Cash Mgmt Services - 04/11/18 10:54 PM

Look at it this way. Cash management services require an account.

(a)Account. For purposes of § 1020.220:
(1)Account means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.

If you offered such services without the existence of an account then it would apply. There may be banks that do this, but if your customer must have a deposit account with your bank to obtain cash management services, then you do not need to obtain a CBO when the cash management agreement is signed.
Posted By: Compliance Risk

Re: Beneficial Ownership & Cash Mgmt Services - 06/04/18 03:13 PM

An examiner told me if someone sends a wire, we do not have to deal with beneficial owners. If they sign up for reoccurring wires, then we need to comply with the beneficial ownership requirements. We also need to comply if they sign up for online banking, ACH and RDC. I did not ask about a debit card. A consulting service is saying these services do not meet the definition of an account. I have requested clarification from FinCEN, but I have not heard back from them. How long does it usually take to get a response?

Do you collect beneficial owner information if they request a debit card after account opening?

Are you collecting BO information for ACH, RDC and reoccurring wires?
Posted By: Adam Witmer

Re: Beneficial Ownership & Cash Mgmt Services - 06/04/18 03:36 PM

I agree that these services do not meet the definition of an account, but it sounds like your examiner is considering these situations to be a risk-based "triggering event" where the examiner is justifying the updating of the BO information.

Question 14: Obligation to solicit or update beneficial ownership information absent specific risk-based concerns

Q. Are covered financial institutions required to obtain or update beneficial ownership information during routine periodic reviews of existing accounts, absent risk-based concerns; that is, are such reviews a trigger for the application of the Rule’s beneficial ownership requirements?

A. No. Covered financial institutions do not have an obligation to solicit or update beneficial ownership information as a matter of course during regular or periodic reviews, absent specific risk-based concerns. 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. As stated in response to Questions 13 and 16, the obligation to obtain or update information is triggered when, in the course of normal monitoring, a financial institution becomes aware of information about a customer or an account, including a possible change of beneficial ownership information, relevant to assessing or reassessing the customer’s overall risk profile. Absent such a risk-related trigger or event, collecting or updating of beneficial ownership information is at the discretion of the covered financial institution. Financial institutions may exercise this discretion to collect or update beneficial ownership information on customers as often as they deem appropriate.

Originally Posted By Compliance Risk
I have requested clarification from FinCEN, but I have not heard back from them. How long does it usually take to get a response?

Last time I reached out to them, they replied in less than a week.
Posted By: JC (Darth HMDA)

Re: Beneficial Ownership & Cash Mgmt Services - 09/05/18 10:51 PM

Any updated answers on this? We treat as a triggering event - but if there any updates saying otherwise that would be preferable.
Posted By: Southern Banker

Re: Beneficial Ownership & Cash Mgmt Services - 10/24/18 03:39 PM

Tagging on to this to see if an answer was received from FinCEN. Thanks!
Posted By: totallyconfused

Re: Beneficial Ownership & Cash Mgmt Services - 11/20/18 02:32 PM

I would like to know as well. I know the 9/4/2018 FinCEN didn't answer this about RDC. I have heard both yes do certification and no it is not a new account. Did FinCEN get back to anyone??
Posted By: Pat Patriot Act

Re: Beneficial Ownership & Cash Mgmt Services - 11/27/18 04:59 PM

I think the most relevant answer was provided by the FFIEC in their 2005 CIP FAQ and in the current IT Examination Handbook:

Quote:

[bold]3. Are data processing, data warehousing, and data transmission on behalf of a person an
“account?”[/bold]

“Account” is defined to mean “a formal banking relationship established to provide or engage in
services, dealings, or other financial transactions including a deposit account, a transaction or
asset account, a credit account, or other extension of credit. Account also includes a relationship
established to provide a safety deposit box or other safekeeping services, or cash management,
custodian and trust services.” The examples provided in 31 C.F.R. § 103.121(a)(1) of formal
banking relationships included within the meaning of “account” focus on bank products and
services that relate to the deposit, lending or custody of funds or other assets on behalf of a
customer. [bold]Data processing, warehousing, and transmission services generally do not involve a
service, dealing, or financial transaction that, taken alone, constitutes a “formal banking
relationship” within the meaning of 31 C.F.R. § 103.121(a)(1). [/bold] If, however, any of these
services are part of the establishment of a formal banking relationship, then the CIP rule in 31
C.F.R. § 103.121 would apply. (April 2005)


The FFIEC's IT Examination Handbook defines remote deposit capture as stated below:

Quote:
Remote Deposit Capture (RDC), the digital [bold]processing[/bold] of paper checks and monetary instruments at remote locations for deposit and clearing through the check (image) or ACH networks


In sum, RDC alone does not trigger any BO requirement because it's a data processing service. A cash management account opening triggers BO, but not RDC itself. Same logic applies for ACH and wire origination.
Posted By: Qapla

Re: Beneficial Ownership & Cash Mgmt Services - 02/08/19 09:52 PM

I would like to ask if anyone has heard back from FinCen on this.

I can make arguments either way for Cash Management Services. But the point being that we cannot provide cash management services without the customer opening a deposit account. Why is signing the cash management agreement considered a trigger event for B.O. rules, they are not opening a new account at this time and hence should not be considered trigger event.
Posted By: TryingtoComply

Re: Beneficial Ownership & Cash Mgmt Services - 02/11/19 09:27 PM

Write into your procedures that CMSs cannot be obtained without an existing account. If the existing account is opened >May 11, 2018 then you obtain a CBO. Otherwise, it's not required if a pre-BO customer requests it.