Fincen exempts certain accounts from 'beneficial owner' rule

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WASHINGTON — Banks now have some relief from an area of contention in a new anti-money-laundering rule that requires them to collect data on the true owners of accounts.

The Financial Crimes Enforcement Network said late Friday that it would not require banks to collect "beneficial ownership" information for certain existing accounts that automatically renew or roll over, such as certificates of deposit or commercial credit cards.

The change was in response to industry concerns that keeping tabs on beneficial owners of such accounts would be overly burdensome and could result in banks losing legitimate business accounts after going back to question existing account holders.

“The current industry practice for renewing or extending these types of account relationships is generally automated and does not require an affirmative action from the customer,” Fincen, a bureau of the Treasury Department, said in its final decision Friday. “Any delay by the customer in providing the required beneficial ownership information could result in account closure and a corresponding loss of needed liquidity or financial stability (in the case of a loan account) or loss of investment benefit (in the case of a CD).”

The broader Fincen rule on collecting beneficial ownership information requires all banks to collect and verify the names of any beneficial owner of at least 25% of a business opening a “new” account. The rule took effect May 11, but Fincen delayed the one part of the rule on rollover accounts twice before it retracted that requirement Friday.

Fincen also exempted loans and commercial credits that are automatically renewed or modified and do not require new underwriting approvals as well as existing safe deposit box rentals.

The agency cautioned, however, that the exception “does not relieve financial institutions from their obligation to collect sufficient information to understand the nature and purpose of customer relationships in order to develop a customer risk profile, as needed as part of the AML program requirement.”

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