UBO Rule: A Compliance Checklist

Topics: Client Relations, Corporate Legal, Regulation & Compliance, Risk Management, Thomson Reuters

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It’s been more than a month since the Financial Crimes Enforcement Network (FinCEN) began enforcement of its Customer Due Diligence (CDD) Final Rule — otherwise known as the “Ultimate Beneficial Ownership” (UBO) Rule — to help fight money laundering and terrorist financing. Compliance departments in covered financial institutions have been working overtime to ensure they have updated their policies to incorporate the new requirements and provide additional training to employees.

Compliance officers are fully aware they must now identify and verify the identity of the beneficial owners of all legal entity customers.

More specifically that means identifying:

  •         Every individual that has 25% or more Beneficial Ownership in the Legal Entity; and
  •         A single individual who controls the legal entity.

What are Covered Financial Institutions?

Covered entities required to comply include:

  •         banks;
  •         brokers or dealers in securities;
  •         mutual funds;
  •         futures commission merchants; and
  •         brokers in commodities.

FinCEN’s only exception pertains to premium finance lending products that allow for cash refunds “because of the low risk of money laundering presented by these loans.”

How Can You Ensure Your Organization is UBO Compliant?

Even though the 2018 compliance deadline of May 11 has come and gone, that is only the beginning of the story. Financial institutions will continue to grapple with implementation challenges and will need to keep their ears to the ground on enforcement actions. As we move through the first year of the UBO implementation, the challenge will continue for financial institutions to ensure they are fully compliant.

Brett Wolf, Thomson Reuters Senior Financial Crime Correspondent, helped us create a 10-point checklist on how to ensure ongoing compliance. From running test pilots and doing gap analysis to preparing for the worst-case scenario, Wolf explains how important it is to be ready for examiners to come into your financial institutions. The key is preparedness.

For more information, listen to our recent podcast with Wolf, Holly Sais Phillippi, Partner Director in Governance, Risk & Compliance at Thomson Reuters, and Jim Richards, founder of RegTech Consulting and a former Wells Fargo executive in its financial crimes unit.


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