In May 2016, the Financial Crimes Enforcement Network (“FinCEN”) issued its final rule on beneficial ownership with respect to customer due diligence ("CDD") requirements. This rule requires financial institutions ("FIs") to adopt due diligence procedures that ensure the FIs verify and identify the beneficial owner(s) of the legal entity each time a new account is opened. FIs have likely determined the procedures that need to be implemented to capture beneficial ownership information for legal entities. However, the challenge for FIs is in determining how to apply these changes within the current products and systems currently supporting their CDD and Bank Secrecy Act ("BSA") monitoring processes. The May 11, 2018 FinCEN applicability deadline for these changes is quickly approaching. There are few AML software products that have developed a functionality enhancement to support beneficial ownership. It can take 3 to 6 months to implement an enhancement or product like this as it will require time to build the interface and upgrade the product to latest release.
What You Can Do
For effective beneficial ownership solution implementation, enhancements to the following technology areas are recommended:
- Customer Onboarding System
- Identify legal entities that are subject to beneficial ownership information
- Identify new accounts that are subject to beneficial ownership information
- Identify and capture beneficial owners and control persons
- Capture the percentage of ownership and type of control persons
- Capture minimum Customer Identification Program ("CIP") information for beneficial owners
- CIP Verification System
- Perform minimum CIP verification of beneficial owners
- Capture the CIP verification
- Risk Scoring and Review System
- Implement risk scoring mechanism based on beneficial ownership information
- Conduct review of beneficial owners as well as customers
- Screening System
- Conduct Office of Foreign Assets Control ("OFAC") screening of beneficial owners
- Bank Secrecy Act (“BSA”) Monitoring System
- Report beneficial owners for Currency Transaction Report (“CTR”) and Suspicious Activity Report (“SAR”) reporting
How ACA Telavance Can Help
ACA Telavance has expertise in implementing BSA, CDD, and OFAC solutions for FIs. ACA Telavance can assist your firm with: Defining rules to identify the legal entities and accounts that are subject to capturing beneficial ownership information; Modifying questionnaires or onboarding systems to capture necessary information required for beneficial owners and controlling persons; Enhancing the interface of existing OFAC and CIP systems to include minimum screening and verification of beneficial owners; Introducing additional risk elements to identify high risk customers based on beneficial ownership information; and Defining rules in BSA and CTR systems to include beneficial owners in SAR and CTR reporting.
Learn more about the beneficial ownership rule on our archived webcast: FinCEN Beneficial Ownership Rule: Overview and Implementation
About the Author
Sandhya Miryala is a Business Analyst at ACA Telavance with over 12+ years in AML and Banking. At ACA, she has been involved in AML solution implementation and model validation projects for various financial institutions. The solutions include BSA monitoring, Customer Due Diligence, Watch List Monitoring and Currency Transaction Reporting. Her focus is on implementing onboarding processes, CDD, EDD, and customer risk management processes.
For More Information
For more information, please contact Mahesh Viswanathan at ACA Telavance or your regular ACA Telavance consultant.