When to Obtain the Certification of Beneficial Owners

Issue/Inquiry

At what point should the Bank’s lending department have the customer complete the Certification of Beneficial Owner(s) (upon application, loan approval, or at loan closing)?

Response Summary

The Bank should have the Certification of Beneficial Owner(s) completed at loan closing for loans made on or after the applicability date of May 11, 2018. For existing loans renewed on or after the applicability date, the form should be completed at the time of renewal.

Response Detail

Under the Customer Due Diligence Beneficial Ownership Rule, a covered financial institution must identify and verify the identity of the beneficial owners of a legal entity at the time each new account is opened. 31 CFR §1010.230(b)(1).

A covered financial institution may accomplish this by either obtaining a certification using the model form (Appendix A: Certification of Beneficial Owner[s]) from the individual opening the account on behalf of the legal entity customer, or obtaining the required information from the individual by another means, provided that the individual certifies, to the best of the individual’s knowledge, the accuracy of the information. 31 CFR §1010.230(b)(1).

An “account” is 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. A “new account” is each account opened by a legal entity customer on or after the applicability date of May 11, 2018. 31 CFR §1010.230(c),(g).

If the Bank is using the Certification of Beneficial Owner(s) form for loans, such would be completed when the account is opened (i.e., at loan closing).

Consistent with the definition of “account” in the CIP rules, each time a loan is renewed or a Certificate of Deposit (“CD”) is rolled over, a financial institution establishes a new account. For financial services or products established before the May 11, 2018 applicability date, covered financial institutions must obtain certified beneficial ownership information of the legal entity customer at the time of the first renewal following that date.

At the time of each subsequent renewal — to the extent that the legal entity customer and the financial service or product (e.g., loan or CD) remains the same, the customer certifies or confirms that the beneficial ownership information previously obtained is accurate and up-to-date, and the institution has no knowledge of facts that would reasonably call into question the reliability of the information — the institution will not be required to collect beneficial ownership information again. FinCEN, Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions, FIN-2018-G001, Q. 12.

This means that for loans in existence prior to the applicability date, the Bank would have a Certification of Beneficial Owner(s) completed at the time of renewal. For subsequent renewals of such loans and for the renewals of loans made on or after the applicability date, the Bank could rely on the certification or confirmation made by the customer, under the conditions cited.

This entry was posted on Monday, May 7th, 2018 at 6:00 am.