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Look and Prepare for your Compliance Future!

If you had a flying Delorean time machine, what would you do with it? Would you go back to medieval times (Not the dinner theater, that would be a waste of time travel resources)? Would you go back and see the Roswell landing and see evidence that aliens exist? Would you use it to find out if there is buried treasure on Oak Island? Maybe, you would take it back to November 5, 1955 so you can see how the flux capacitor was invented and thus time travel as well. You could also visit Hill Valley and see Marty McFly’s parents attend the Enchantment Under the Sea dance. How many of you would rather go back and see the thrilling event of watching the original writing of the Truth in Lending Act?

Well I am hoping we won’t have to go back in time, but rather look and prepare for your compliance future! I want to provide a reminder of FinCEN’s Customer Due Diligence (CDD) rule that is becoming effective in the near future. If you haven’t heard about the new rule or haven’t prepared yet, don’t worry, you will not have to use Doc Brown’s time machine to ensure your credit union is ready for these new requirements. Rather, you have a little over a month to prepare for compliance of the CDD rule, as it becomes effective on May 11.

Per FinCEN, the rule was created to “impose new requirements for financial institutions to identify and verify the identity of beneficial owners of legal entity customers.” Your credit union will need to ensure that it is able to identify and verify beneficial owners of each legal entity customer at the time a new account is opened.

What are some general areas of concern you should acknowledge before May 11 to be prepared for the new CDD requirements? I would recommend the following:

  1. Ensure all policies and procedures have been updated to identify and verify the identity of beneficial owners, which includes:
    1. Each individual, if any, who, directly or indirectly, owns 25% or more of the equity interests of a legal entity customer (i.e., the ownership prong); and
    2. A single individual with significant responsibility to control, manage, or direct a legal entity customer, including an executive officer or senior manager (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer); or any other individual who regularly performs similar functions.
  2. Verify all new account software has been updated, if possible, to help collect information on beneficial owners. Software may include programs that help staff or may include programs utilized for account opening on your website.
  3. Ensure all new account documents have been updated to allow for collection and retention of the identification and verification of the identity of beneficial owners.
  4. Ensure all staff have received training on the new requirements and have been made aware of your procedures for identifying and verifying the identity of these beneficial owners.

By taking these necessary steps to know the rule and ensure you are prepared, you will not need to travel 88 miles per hour or figure out a way to produce 1.21 jigawatts of power to get you back in time to prepare your credit union for the new CDD rule. At the very least these steps may help prevent you from falling into a Clayton Ravine size error, or was it the Eastwood Ravine? Either way, ensure you have prepared your credit union for the new CDD rule.

At the very least, I hope I have given you the itch to go back and watch Back to the Future or that you now have Huey Lewis and The News’ hit song “Back in Time” in your head.

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