In May 2016, the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury issued a rule to strengthen the customer due diligence (CDD) efforts of “covered financial institutions.”
Covered financial institutions refer to companies like banks, federally insured credit unions, broker-dealers, mutual funds, and futures commission merchants. FinCEN set the implementation (or compliance) deadline for May 11, 2018.
The FinCEN Beneficial Ownership Compliance rule requires covered financial institutions to collect, verify, and record information about beneficial owners from certain non-exempt legal entities. Beneficial owners are persons who own at least 25% of a legal entity.
FinCEN Beneficial Ownership Compliance requires institutions to collect information like a beneficial owner’s name, date of birth, address, and identifying number (e.g. social security number). More details were recently released in April 2018 in a document titled, Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions, published by FinCEN.
At Electronic Merchant Systems (EMS), agent resellers are responsible for obtaining beneficial ownership information when they sign up a new merchant account.
In the past two years, EMS revised the merchant application to accommodate this new FinCEN requirement.
According to Sandy Spring Bank, “While ultimately it is the Beneficial Owners and the Controller providing the information, it is the person authorized by the legal entity opening the account that will be certifying the accuracy of the information on the Beneficial Owner Certification Form.”
If you are an agent reseller, prospects may ask why they need to provide information regarding other partners (i.e. beneficial owners). You should be prepared to discuss the change with merchants who have not contracted with a provider since the rule was implemented. If you are asked why the rule was implemented, the main reasons are to combat financial crimes like money laundering, tax evasion, and other forms of corruption and fraud.
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