THE WORKS Blog, Credit Union Compliance News & Views

      Additional Interpretive Guidance for the CDD Rule

      By Jeremy Smith · Apr 18, 2018

      As I write this blog, I realize that TV spinoffs are not a great recipe for continued viewer success. Just look at “Joanie Loves Chachi” (“Happy Days” spinoff), or the critically panned “Joey” (“Friends” spinoff), or the Bob Golic headed “Saved by the Bell: The College Years” (“Saved by the Bell” spinoff). Yep you read that last one right, I was speaking of the show starring the famous Notre Dame alum, Bob Golic. (You weren’t expecting me to mention Tiffani-Amber Thiessen, Mark Paul Gosselaar, Mario Lopez, or Dustin Diamond were you?) Well, each of these shows were meant to capitalize on the success of their respective original shows, unfortunately they either did not connect with the audience or were not great TV to begin with. Sorry Bob.

      The good thing, is that for every terrible spinoff, there have been some good ones as well. I am looking at you “Frazier” (“Cheers” spinoff), “Trapper John, M.D.” (“M.A.S.H.” spinoff), or the pre -“Golden Girls” Bea Arthur lead “Maude” (“All in the Family” spinoff). I am hoping my blog today can be a good spinoff from my last blog post. At the very least, I hope it will be a helpful spinoff.

      Following up on my last post and our trip in the Delorean time machine and how to best prepare for the new FinCEN Customer Due Diligence (CDD) rule effective, May 11th, I wanted to update you on some additional information that has been released by FinCEN. On April 3rd, FinCEN released additional interpretative guidance for the CDD rule through a new FAQ document.

      This guidance was released to provide further clarity to questions that have been raised since the first guidance FAQ document was released. Some of the highlights from the new guidance, include that credit unions can implement more stringent policies and procedures for collection of beneficial ownership information than the requirements of the CDD rule. If your credit union may want to collect information on all owners of a legal entity, regardless of whether they own 25% or more equity in the business, the credit union can do that. I would recommend setting your policies and procedures to include the requirements you find necessary based on the level risk of accounts you may service.

      Another clarification is that the credit union is not required to utilize the Certification Form (from Appendix A of the rule). The form is optional to use, but could prove to be very helpful in requesting and obtaining the information you need to document any beneficial owners of a legal entity. FinCEN has released fillable and non-fillable versions of this document for you to use.

      Lastly, FinCEN also clarified that credit unions will not be required to conduct retroactive reviews to collect or update beneficial ownership information for any accounts opened prior to May 11th. However, “when a financial institution becomes aware of information about the customer during the course of normal monitoring relevant to assessing or reassessing the risk posed by the customer, and such information indicates a possible change of beneficial ownership,” then you do have an obligation to obtain or update the beneficial information on the legal entity accounts.

      Take the time and look over this new guidance, as it may answer some of those outstanding questions you may have. It may also help you put some final touches on your preparation and implementation of the CDD rule. Hopefully, my take on a spinoff has been helpful and hopefully much better than the “Baywatch” spinoff disaster, known as “Baywatch Nights.”