The BSA regulatory landscape is continually changing. The Financial Crimes Enforcement Network (FinCEN) issued two of three key rulemakings in conjunction with implementing the Corporate Transparency Act’s (CTA) beneficial ownership reporting provisions. Here are a few takeaways from the changes to beneficial ownership reporting.
The first rule, the Beneficial Ownership Information (BOI) Reporting Rule, requires certain legal entities registered to do business in the United States to report information about their beneficial owners to FinCEN. The effective date for the rule was January 1, 2024. The rule describes who must file, what information must be reported, and deadlines. The rule defines beneficial ownership, and the terms “substantial control” and “ownership interest” as it relates. It is important for credit unions to note that the definition is different from FinCEN’s existing Customer Due Diligence Rule from 2016 (the “CDD Rule”).
The second rule establishes a framework for access to and protection of the BOI within FinCEN’s registry. FinCEN will take a phased approach to provide access to BOI in 2024, prioritizing federal agencies engaged in law enforcement and national security, as well as State, local, and Tribal law enforcement partners, intermediary federal agencies, and finally to financial institutions. Credit unions are an authorized recipient of BOI for their AML programs to include customer identification, Suspicious Activity Report filing, enhanced customer due diligence requirements, and sanction screening. Credit unions would be required to obtain consent for such disclosure from their business members and adhere to security and confidentiality requirements.
An anticipated third rulemaking will revise FinCEN’s CDD Rule for financial institutions to align with the requirements of the CTA. The final piece of the beneficial ownership regulation is expected sometime in 2024 to reconcile differences with the current BOI requirements. The existing CDD and beneficial ownership requirements that took effect with the CDD Rule still apply for credit unions.
It is important for credit unions to keep pace with CDD regulatory changes, impact, and compliance implementation. Although little has changed in the immediate for credit unions and their AML programs, it is important to understand the legislation, its effect on business members, and what is on the horizon. Stay up to date with FinCEN on regulatory changes, impact, and guidance.