Guidance Intended to Help Institutions Fight Money Laundering, Terrorist Financing

March 8, 2010

The Financial Crimes Enforcement Network (FinCEN) and several other financial institution regulators issued guidance to clarify and consolidate existing regulatory expectations for obtaining beneficial ownership information for certain accounts and customer relationships—information that the agencies said can help financial institutions better understand and address money laundering and terrorist financing risks, protect themselves from criminal activity, and assist law enforcement with investigations and prosecutions.

 

As part of an institution’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program, a financial institution should establish and maintain customer due diligence (CDD) procedures that are reasonably designed to identify and verify the identity of beneficial owners of an account, as appropriate, based on the institution’s evaluation of risk pertaining to an account. CDD procedures may include:

 

  • Determining whether the customer is acting as an agent for or on behalf of another, and if so, obtaining information regarding the capacity in which and on whose behalf the customer is acting.
  • Where the customer is a legal entity that is not publicly traded in the U.S., such as an unincorporated association, a private investment company (PIC), trust or foundation, obtaining information about the structure or ownership of the entity so as to allow the institution to determine whether the account poses heightened risk.
  • Where the customer is a trustee, obtaining information about the trust structure to allow the institution to establish a reasonable understanding of the trust structure and to determine the provider of funds and any persons or entities that have control over the funds or have the power to remove the trustees.

 

The guidance says that certain trusts, corporate entities, shell entities and PICs are examples of customers that may pose heightened risk. In addition, FinCEN rules establish particular due diligence requirements concerning beneficial owners in the areas of private banking and foreign correspondent accounts. With respect to accounts that have been identified by an institution’s CDD procedures as posing a heightened risk, these accounts should be subjected to enhanced due diligence  that is reasonably designed to enable compliance with the requirements of the BSA.

 

Questions about the guidance may be directed to FinCEN’s Regulatory Helpline at 800-949-2732 or the financial institution’s appropriate regulatory agency.

 

FinCEN issued the guidance jointly with the Federal Reserve, the FDIC, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the SEC, in consultation with staff of the Commodity Futures Trading Commission.

 

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