Update on FIN-2018-R002 (BO on Auto Renewal CDs)

While it is not quite August 9, 2018, has anyone heard of any updates to FIN-2018-R002 regarding Beneficial Ownership on auto renewal products opened prior to May 2018? I called FinCEN about a week ago and have not heard back.

No.

https://www.fincen.gov/sites/default/fil...tive_Relief.pdf

extended to 9/8/18

Way to kick the ball about 10 feet down the road....

Wow! Really starting to question the credibility of this agency.

Thank you bcompliance!

here is a link to what appears to be an announcement to be made. when I click to view the pdf I'm getting a page not found error https://www.fincen.gov/resources/statute...icial-ownership

link is now active: https://www.fincen.gov/sites/default/fil...final%20508.pdf

It's now live, and it is more wonderful than we had hoped.. There is exceptive relief applies to any of the following events occurring on or after May 11, 2018:

• A rollover of a certificate of deposit (CD) (as defined below);
• A renewal, modification, or extension of a loan (e.g., setting a later payoff date) that does not require underwriting review and approval;
• A renewal, modification, or extension of a commercial line of credit or credit card account (e.g., a later payoff date is set) that does not require underwriting review and approval; and
• A renewal of a safe deposit box rental.

Permanent exceptive relief from CD renewals, Loan renewals and modifications that do not have new underwriting and safe deposit renewals.

YeeeHaw!!!! Great way to end a Friday!

The pizza is going to taste even better tonight.

It sounds great on the surface; however, for institutions that allow deposits/withdrawals during grace periods, I'm not so sure this will apply based on the definition in the Covered Product Descriptions and Characteristics.

All loan renewals at our bank require underwriting and approval, so no relief here for us.

As for safe deposit boxes, I had never intended to obtain a CBO anyway. The rental is ongoing provided the customer pays their rent via an automatic debit from a deposit account.

The CD part is great - there are very few loan products I have ever heard of that just "automatically" renew without some type of underwriting review and approval.

Basically it does nothing for loans. It's something - but not much....

Back in the day we would write inventory purchase loans for seasonal businesses here in tourist country. It was one large note before the start of the season, with 30- or 60-day renewals and reductions and an understood final maturity in the fall. The only underwriting (I don't think we called it that back then) occurred at the front end. That would have fit the exceptive relief to a T.

It does seem that FinCEN made a genuine effort to learn about the business it is trying to control since May. It's really too bad there wasn't more dialogue with the industry during the preliminaries for this rule. I'll lay that at the feet of both FinCEN and the industry.

With respect to CDs, I just want to make sure there is no issue if we allow customers to make deposits/withdrawals during the grace period. There is interaction with the customer and an opportunity to collect beneficial ownership information if this occurs.

The definition of a CD for purposes of the rule indicates that if there are no withdrawals without a penalty or deposit during the TERM, the relief applies.

Does anyone see an issue with deposits/withdrawals during the GRACE PERIOD?

As usual, I'm probably over-thinking this.

I see a problem, since the grace period is part of the next term of the CD. Given the strict wording of the FinCEN definition of a CD for the purpose of exceptive relief, I don't think that you can treat a renewal in which the legal entity customer adds to or withdraws from the CD (possibly excepting interest) as an rollover covered by the exceptive relief.

Don't all loans need approval?

"that does not require underwriting review and approval;"

Or is this indicating "approval" of the underwriting review?

John,

Thank you for responding. I too am very concerned about how they defined a CD covered by the rule. As I stated earlier, a withdrawal or deposit will involve interaction with the customer and provide an opportunity to obtain a certification.

What is everyone's thoughts about CDs that change term and/or rate at the customer request without closing the CD? We we be covered if we have the "notify" us wording on the BO form?

So - is anyone else struggling with how to know when a loan modification, extension or renewal did not require new underwriting? My QA team simply does not have time to read each loan document to find the answers..............

I would also like to know if anyone has clear definition of underwriting and approval - Is that approval by the originating loan officer or a higher level of approval? Is just pulling credit and reviewing it considered underwriting?

See thread recently started here: https://www.bankersonline.com/forum/ubbt...als#Post2192123

If a CREDIT DECISION is made by anyone at any level before the loan/line is renewed, I would consider that "underwriting and approval."

I wouldn't get to caught up in some complex definition.

The exemption applies to CD rollovers, does this mean only automatic rollovers? I understand that if the CD renews and there is no withdrawal/deposit action, that would most likely be covered by the exemption. My guidance to the team is that if the customer comes in and does anything with it, we should get the certification. Would that be accurate?
What if there is just a rate or term change, say we adjust the rate at renewal (or even during the term) the customer does not come in for that, we are updating a computer screen, would that be considered exempted?

My interpretation of the permanent exceptive relief is that does apply to all rollovers, etc. because FinCEN broadened the language describing the applicability of the exception in the last update and indicated that the most recent guidance supersedes the previous ones. The two previous extensions did have language that arguably limited the exception to automated events, whereas this guidance does not. The material part of the guidance, the first sentence in the second paragraph of the "Conclusion" section, does not include anything suggesting the exception applies only to automated rollovers.

Thank you Pat Patriot Act. Anyone else want to opine?

I agree. Go to the definition of CD or Certificate of Deposit in the ruling to see what's included. No early or partial withdrawals without penalty and no additions allowed during the term. That's it.