On August 4, 2014, the Financial Crimes Enforcement Network, otherwise known an FinCEN, published in the Federal Register, the official U.S. federal government daily publication for rules, proposed rules, and notices of Federal agencies, a proposed rule that would require financial institutions that are required to have formal customer identification programs to obtain identifying information on the beneficial owners of legal entities that are establishing accounts at that financial institution.
Currently, banking organizations, securities broker dealers, mutual funds and futures commission merchants and introducing brokers in commodities are required to have such customer identification programs.
Under the proposal, these covered financial institutions would be required to obtain identifying information, and verify such information, on individuals holding 25 percent or more of the equity of the legal entity, and at least one individual with significant responsibility to manage the affairs of the legal entity, such as a chief executive officer. Up to now, there has not been a requirement to regularly obtain and verify such information with respect to all legal entity customers.
The comment period closes October 3rd.
In a September 11, 2014. New York Law Journal column, Proposed Identification of ‘Beneficial Owners’ of Legal Entities, Kathleen A. Scott, senior counsel in the Norton Rose Fulbright New York Office, discusses the proposed rule and a bit of the history behind the customer due diligence requirements.