Shearman & Sterling LLP | FinReg | <span ><font >FinCEN Provides Temporary Exception Under the Beneficial Ownership Rule for CDs and Loan Accounts that Automatically Rollover or Renew</font ></span >
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  • FinCEN Provides Temporary Exception Under the Beneficial Ownership Rule for CDs and Loan Accounts that Automatically Rollover or Renew
    05/16/2018

    The U.S. Financial Crimes Enforcement Network announced that it was granting a 90-day exception from compliance with the beneficial ownership requirements under its Customer Due Diligence Requirements for Financial Institutions rule.  The exception is limited to certain financial products and services (i.e., certificates of deposit and loan accounts) that automatically rollover or renew and were established prior to the Beneficial Ownership Rule’s compliance date of May 11, 2018.  The Beneficial Ownership Rule requires covered financial institutions to identify and verify the identity of each natural person who directly or indirectly owns 25% or more of the equity interests of a legal entity customer, as well as one natural person with “significant responsibility to control, manage or direct” the legal entity customer.  These requirements apply each time a new formal banking relationship with a legal entity customer is created, which includes each time a certificate of deposit is rolled over or a loan is rolled over or renewed.  In granting this exceptive relief, FinCEN noted that some covered financial institutions have expressed concerns with their ability to comply with the Beneficial Ownership Rule with respect to these products, because the institutions have not been treating these rollovers or renewals as new accounts and have established processes to automatically rollover or renew these products.  FinCEN will use the 90 days for which the exception is applicable to determine whether further exceptive relief is appropriate for these types of products that were established prior to the May 11, 2018 compliance date.  The 90-day exceptive period is set to expire on August 9, 2018.

    View full text of the FinCEN ruling.