10-RA-05 / February 2010
Interagency Guidance on Obtaining and Retaining Beneficial Ownership Information
Federally Insured Credit Unions
Dear Board of Directors,
This Regulatory Alert is to inform you of the issuance of the interagency guidance entitled, Guidance on Obtaining and Retaining Beneficial Ownership Information. This attached guidance is intended to assist credit unions in developing and implementing an effective Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program regarding obtaining beneficial ownership information for certain accounts and member relationships.
A “beneficial owner” is defined as the individual(s) who have a level of control over, or entitlement to, the funds or assets in the account that, as a practical matter, enables the individual(s) directly or indirectly, to control, manage, or direct the account. Money launderers, criminals, tax evaders and terrorists may create front companies designed to conceal the nature and purpose of illicit transactions, as well as the identity of the persons involved in them. These front companies may establish accounts at credit unions with the credit union being unaware of the illicit ownership or control. Consequently, heightened risks may arise as identifying the beneficial owner(s) of some business entities, trusts and foundations may be challenging.
The adoption and implementation of internal controls including comprehensive customer due diligence (CDD) policies, procedures and processes for all members, is a strong cornerstone of a strong BSA/AML compliance program. A credit union’s CDD process should be commensurate with its BSA/AML risk and should be developed to identify members that pose heightened money laundering or terrorist financing risks.
CDD procedures should be designed to identify and verify the identity of the beneficial owner(s) of an account, as appropriate, based on the evaluation of risk pertaining to the account. CDD procedures may include the following:
Determining whether the member is acting as an agent for or on behalf of another.
Obtaining information about the structure of legal entities not publicly traded in the U.S. (such as an unincorporated association, a private investment company (PIC), or trust or foundation) to determine whether the account’s ownership structure poses heightened risk.
Obtaining information about a trust structure to establish a reasonable understanding to determine the provider of fund and persons or entities that have control over the funds or have the power to remove the trustees.
Accounts identified as posing a heightened BSA/AML risk should be subjected to enhanced due diligence (EDD) procedures designed to ensure compliance with the requirements of the BSA. This may include steps, in accordance with the level of risk presented, to identify and verify beneficial owners, to reasonably understand the sources and uses of funds in the account, and to reasonably understand the relationship between the customer and the beneficial owner.
CDD and EDD information should be used for monitoring purposes and to determine whether there are discrepancies between information obtained regarding the account’s intended purpose and expected account activity and the actual sources of funds and uses of the account.
If you have any questions regarding this guidance, please contact your district examiner, regional office, or state supervisory authority.