August 9, 2018
Authored by: Barry Hester
The temporary exception that FinCEN extended to autorenewing CDs and loans established prior to the May 11, 2018 compliance effective date of its beneficial ownership requirements was scheduled to expire on August 9, 2018. On August 8, FinCEN published a short release in which it announced the extension of this relief through September 8, 2018. FinCEN noted that it was providing this extension in order to further consider the issues raised by the application of these aspects of its Customer Due Diligence (CDD) rules to such products.
As a reminder, this exception only applies to CDs and loans that (i) automatically rollover or renew and (ii) were established prior to May 11, 2018. Such accounts or loans established subsequent to this date (and older accounts that are renewed on new or modified terms) are fully subject to the CDD rules, and all accounts are subject to its general due diligence and monitoring requirements. In particular, institutions should continue to collect or update beneficial ownership information as other “risk events” warrant for particular customers–including those whose autorenewing CDs or loans or other accounts were established prior to May 11, 2018. FinCEN has given as an example of such risk or “trigger” events an unexplained spike in cross-border wire transfers. Moreover, as we noted previously, OFAC’s strict liability framework continues to apply to any U.S. person that does business with a sanctioned party, so institutions that do not collect beneficial ownership information may be exposed to this type of risk.
We will continue to monitor FinCEN’s consideration of this issue and provide updates accordingly.