# FinCEN Guidance FIN-2018-G001: Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2018G001

## Section

- **Citation:** FinCEN Guidance FIN-2018-G001
- **Heading:** Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FinCEN Guidance (alerts, advisories, notices, bulletins, fact sheets) / Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions

## Text

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FIN-2018-G001
Issued:
April 3, 2018
Subject: Frequently Asked Questions Regarding Customer Due Diligence
Requirements for Financial Institutions
The Financial Crimes Enforcement Network (FinCEN) is issuing these Frequently
Asked Questions to assist covered financial institutions in understanding the
scope of the Customer Due Diligence Requirements for Financial Institutions,
published on May 11, 2016, as amended on September 29, 2017 (“CDD Rule”
or “Rule”), available at https://www.fincen.gov/resources/statutes-regulations/
federal-register-notices/customer-due-diligence-requirements. On July19, 2016,
FinCEN published FAQs, available at https://www.fincen.gov/resources/statutes-
regulations/guidance/frequently-asked-questions-regarding-customer-due-
diligence. FinCEN may issue additional FAQs, guidance, or grant exceptive relief
as appropriate.
A covered financial institution with notice of or a reasonable suspicion that
a customer is evading or attempting to evade beneficial ownership or other
customer due diligence requirements should consider whether it should not open
an account, close an account, or file a suspicious activity report, regardless of any
interpretations below.
Frequently Asked Questions (FAQs)
Question 1: Beneficial ownership threshold
Can a covered financial institution adopt and implement more stringent written
internal policies and procedures for the collection of beneficial ownership
information than the obligations prescribed by the Beneficial Ownership
Requirements for Legal Entity Customers (31 CFR 1010.230)?
A. Yes. Covered financial institutions may choose to implement stricter written
internal policies and procedures for the collection and verification of beneficial
ownership information than the requirements prescribed by the Rule.
lection of beneficial ownership
information than the obligations prescribed by the Beneficial Ownership
Requirements for Legal Entity Customers (31 CFR 1010.230)?
A. Yes. Covered financial institutions may choose to implement stricter written
internal policies and procedures for the collection and verification of beneficial
ownership information than the requirements prescribed by the Rule.

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Question 2: Interaction of the beneficial ownership threshold with
other AML program obligations
Are there circumstances where covered financial institutions should consider
collecting beneficial ownership information at a lower equity interest threshold
under the anti-money laundering (AML) program rules with regard to certain
customers?
A. There may be circumstances where a financial institution may determine that
collection and verification of beneficial ownership information at a lower threshold
may be warranted, based on the financial institution’s own assessment of its risk
relating to its customer.

Transparency in beneficial ownership, however, is only one aspect of a covered
financial institution’s customer due diligence obligations. A financial institution
may reasonably conclude that collecting beneficial ownership information at a
lower equity interest than 25 percent would not help mitigate the specific risk
posed by the customer or provide information useful to the financial institution
in analyzing the risk. Rather, any additional heightened risk could be mitigated
by other reasonable means, such as enhanced monitoring or collecting other
information, including expected account activity, in connection with the particular
legal entity customer.

In all cases, however, it is important that covered financial institutions establish
and maintain written procedures that are reasonably designed to identify and
verify the identity of beneficial owners of legal entity customers and to include
such procedures in their AML compliance program.1
1
n, including expected account activity, in connection with the particular
legal entity customer.

In all cases, however, it is important that covered financial institutions establish
and maintain written procedures that are reasonably designed to identify and
verify the identity of beneficial owners of legal entity customers and to include
such procedures in their AML compliance program.1
1.
See 31 U.S.C. § 5318(h); 31 CFR 1010.230(a).

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Question 3: Collection of beneficial ownership information for
direct and indirect owners: Legal entity customers with complex
ownership structures
When a legal entity is identified as owning 25 percent or more of a legal entity
customer that is opening an account, is it necessary for a covered financial
institution to request beneficial ownership information on the legal entity
identified as an owner?
A. Under the Rule’s beneficial ownership identification requirement, a covered
institution must collect, from its legal entity customers, information about any
individual(s) that are the beneficial owner(s) (unless the entity is excluded or the
account is exempted). Therefore, covered financial institutions must obtain from
their legal entity customers the identities of individuals who satisfy the definition,
either directly or indirectly through multiple corporate structures, as illustrated in
the following example.

For purposes of the Rule, Allan is a beneficial owner of Customer because he
owns indirectly 30 percent of its equity interests through his direct ownership
of Company A. Betty is also a beneficial owner of Customer because she owns
indirectly 20 percent of its equity interests through her direct ownership of
Company A plus 16⅔ percent through Company B for a total of indirect ownership
interest of 36⅔ percent. Neither Carl nor Diane is a beneficial owner because each
owns indirectly only 16⅔ percent of Customer’s equity interests through their
direct ownership of Company B
beneficial owner of Customer because she owns
indirectly 20 percent of its equity interests through her direct ownership of
Company A plus 16⅔ percent through Company B for a total of indirect ownership
interest of 36⅔ percent. Neither Carl nor Diane is a beneficial owner because each
owns indirectly only 16⅔ percent of Customer’s equity interests through their
direct ownership of Company B.
Customer
Company A
owns 50%
Allan owns
60%
Betty owns
40%
Company B
owns 50%
Betty owns
33⅓%
Carl owns
33⅓%
Diane owns
33⅓%

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Question 4: Identification and Verification: Methods of verifying
beneficial ownership information
What means of identity verification are sufficient to reliably confirm beneficial
ownership under the CDD Rule?
A. Covered financial institutions must verify the identity of each beneficial owner
according to risk-based procedures that contain, at a minimum, the same
elements financial institutions are required to use to verify the identity of
individual customers under applicable Customer Identification Program (“CIP”)
requirements. This includes the requirement to address situations in which the
financial institution cannot form a reasonable belief that it knows the true identity
of the legal entity customer’s beneficial owners.2
2.
Under the CIP rules, a financial institution’s CIP must include procedures for responding to
circumstances in which the financial institution cannot form a reasonable belief that it knows the true
identity of a customer. These procedures should describe: (1) when the institution should not open
an account; (2) the terms under which a customer may use an account while the institution attempts
to verify the customer’s identity; (3) when it should close an account, after attempts to verify a
customer’s identity have failed; and (4) when it should file a Suspicious Activity Report in accordance
with applicable laws and regulations. See, e.g., 31 CFR 1020.220(a)(2)(iii)
n should not open
an account; (2) the terms under which a customer may use an account while the institution attempts
to verify the customer’s identity; (3) when it should close an account, after attempts to verify a
customer’s identity have failed; and (4) when it should file a Suspicious Activity Report in accordance
with applicable laws and regulations. See, e.g., 31 CFR 1020.220(a)(2)(iii).
Although the CDD Rule’s
beneficial ownership verification procedures must contain the same elements
as existing CIP procedures, they are not required to be identical to them.3
3.
See 31 CFR 1020.220(a)(2); 31 CFR 1023.220(a)(2); 31 CFR 1024.220(a)(2); or 31 CFR 1026.220(a)(2).
For
example, a covered financial institution’s policies and procedures may state that
the institution will accept photocopies of a driver’s license from the legal entity
customer to verify the beneficial owner(s)’ identity if the beneficial owner is not
present, which is not permissible in the CIP rules. (See Question 6.)

A financial institution’s CIP must contain procedures for verifying customer
identification, including describing when the institution will use documentary,
non-documentary, or a combination of both methods for identity verification.4
4.
See 31 CFR 1020.220 (a)(2)(ii).
Covered financial institutions may use the same methods to verify the identity
of the beneficial owner of a legal entity customer. In addition, in contrast to the
CIP rule, the CDD Rule expressly authorizes covered financial institutions to use
photocopies or other reproduction documents for documentary verification.5
5.
See 31 CFR 1010.230(b)(2).
ation.4
4.
See 31 CFR 1020.220 (a)(2)(ii).
Covered financial institutions may use the same methods to verify the identity
of the beneficial owner of a legal entity customer. In addition, in contrast to the
CIP rule, the CDD Rule expressly authorizes covered financial institutions to use
photocopies or other reproduction documents for documentary verification.5
5.
See 31 CFR 1010.230(b)(2).

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6.
See 31 CFR 1020.220 (a)(2)(ii)(A).
Non-documentary
methods of verification may include contacting a beneficial owner; independently
verifying the beneficial owner’s identity through the comparison of information
provided by the legal entity customer (or the beneficial owner, as appropriate)
with information obtained from other sources; checking references with other
financial institutions; and obtaining a financial statement.7
7.
See 31 CFR 1020.220 (a)(2)(ii)(B).

Question 5: Collection of beneficial ownership information:
Required addresses
What address should be obtained for a legal entity customer’s beneficial owner(s)
to comply with the certification requirement – residential or business?
A. The address requirements for certification under the CDD Rule are the same
as those outlined in the CIP rule. For an individual beneficial owner, covered
financial institutions must obtain either a residential or a business street address.
If neither is available, acceptable substitutes may include an Army Post Office
(APO) or Fleet Post Office (FPO) box number, or the residential or business street
address of next of kin or of another contact individual.8
8.
See 31 CFR 1020.220(a)(2)(i)(3); 31 CFR 1023.220(a)(2)(i)(3); 31 CFR 1024.220(a)(2(i)(3)); 31 CFR
1026.220(a)(2)(i)(3)
either a residential or a business street address.
If neither is available, acceptable substitutes may include an Army Post Office
(APO) or Fleet Post Office (FPO) box number, or the residential or business street
address of next of kin or of another contact individual.8
8.
See 31 CFR 1020.220(a)(2)(i)(3); 31 CFR 1023.220(a)(2)(i)(3); 31 CFR 1024.220(a)(2(i)(3)); 31 CFR
1026.220(a)(2)(i)(3).
Question 6: Identification and verification: Legal entity customer
representative
What process should a covered financial institution use to identify and verify the
identity of a beneficial owner of a legal entity customer when the beneficial owner
is unavailable to appear in person during the opening of a new account and chooses
to provide to the legal entity’s representative a copy of a driver’s license?
A. A covered financial institution may identify the beneficial owner(s) of a legal
entity customer either by obtaining a completed Certification Form or equivalent
information from the legal entity customer’s representative and may rely on such
information, provided that it has no knowledge of facts that would reasonably call

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into question the reliability of such information.9
9.
See 31 CFR 1010.230(b)(1).
Furthermore, covered financial
institutions may verify the identity of a beneficial owner who does not appear in
person, through a photocopy or other reproduction of a valid identity document,
or by non-documentary means described in response to Question 4 above
d reasonably call

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into question the reliability of such information.9
9.
See 31 CFR 1010.230(b)(1).
Furthermore, covered financial
institutions may verify the identity of a beneficial owner who does not appear in
person, through a photocopy or other reproduction of a valid identity document,
or by non-documentary means described in response to Question 4 above.
Question 7: Identification and verification: Existing customers as
beneficial owners of new legal entity customer accounts
If an individual named as a beneficial owner of a new legal entity account is
an existing customer of the covered financial institution subject to the financial
institution’s CIP, is a covered financial institution still required to identify and
verify the identity of this individual, or may it rely on the CIP identification and
verification of the individual that it previously performed?
A. In general, covered financial institutions must identify and verify the identity of
the beneficial owner(s) of legal entity customers at the time each new account is
opened. However, if the individual identified as the beneficial owner is an existing
customer of the financial institution and is subject to the financial institution’s
CIP, a financial institution may rely on information in its possession to fulfill the
identification and verification requirements, provided the existing information
is up-to-date, accurate, and the legal entity customer’s representative certifies or
confirms (verbally or in writing) the accuracy of the pre-existing CIP information.

For example, a representative of X Corp opens a new account for the company at a
covered financial institution and identifies John Doe, who has a personal account
at the institution, as a 25 percent equity owner of X Corp. As required under the
CIP rule, the institution identified and verified John Doe’s identity at the time the
personal account was established
e-existing CIP information.

For example, a representative of X Corp opens a new account for the company at a
covered financial institution and identifies John Doe, who has a personal account
at the institution, as a 25 percent equity owner of X Corp. As required under the
CIP rule, the institution identified and verified John Doe’s identity at the time the
personal account was established. In this situation, a covered financial institution
may rely on the pre-existing CIP identification and verification information it
maintains for John Doe, provided that X Corp’s representative certifies or confirms
(verbally or in writing) the accuracy of the pre-existing information on John Doe
in order to comply with the Rule. The covered financial institution’s records of
beneficial ownership for the new account could cross-reference the relevant CIP
records and the verification of information would not need to be repeated.
Question 8: Location of Certification Form or Appendix A to the
final rule
Are covered financial institutions required to use the beneficial ownership Certification
Form (Appendix A to the Rule) and if so, how can they obtain a copy of the Form?

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A. There is no requirement that covered financial institutions use the Certification
Form. Rather, the form is optional and provided for the convenience of covered
financial institutions as one possible method to obtain the required beneficial
ownership information. Financial institutions may choose to comply with
the requirements of the Rule by using another method, such as through the
institutions’ own forms, or any other means that comply with the substantive
requirements of this obligation. Covered financial institutions should retain the
form and not file it with FinCEN.

Covered financial institutions may obtain a fillable and non-fillable copy of the
optional Certification Form in Appendix A of the CDD Rule at
https://www.fincen.gov/resources/filing-information
the
institutions’ own forms, or any other means that comply with the substantive
requirements of this obligation. Covered financial institutions should retain the
form and not file it with FinCEN.

Covered financial institutions may obtain a fillable and non-fillable copy of the
optional Certification Form in Appendix A of the CDD Rule at
https://www.fincen.gov/resources/filing-information.
Question 9: Retention of beneficial ownership information: Multiple
sets of beneficial ownership certification documents
If a covered financial institution has updated the beneficial ownership information
on the account(s) of a legal entity customer, and subsequently a new account is
opened on behalf of the same legal entity customer, is the institution required to
retain all sets of beneficial ownership documentation, thereby retaining up to three
sets of information: the original set collected at account opening, the updated set,
and a third, a duplicate of the second (updated) set for the new account?
A. Yes. Covered financial institutions are required to retain all beneficial ownership
information collected about a legal entity customer. Identifying information,
including the Certification Form or its equivalent, must be maintained for a period
of five years after the legal entity’s account is closed.10
10. See 31 CFR 1010.230(i)(2).
However, all verification
records must be retained for a period of five years after the record is made.11
11. Id.
Therefore, whether a financial institution must retain a set of identification or
verification records is dependent upon the date an account is opened and closed,
or the date a record is made
five years after the legal entity’s account is closed.10
10. See 31 CFR 1010.230(i)(2).
However, all verification
records must be retained for a period of five years after the record is made.11
11. Id.
Therefore, whether a financial institution must retain a set of identification or
verification records is dependent upon the date an account is opened and closed,
or the date a record is made. For example, if a covered financial institution relies
on pre-existing beneficial ownership information in its possession as true and
accurate identification information when opening a new account for a legal entity
customer, the financial institution should maintain the original records, and any
updated information, including a record of any verbal or written confirmation
of pre-existing information (for example, as described in Questions 7 and 10),
until five years after the closing of the new account in order to comply with the
recordkeeping requirements in the regulation. Covered financial institutions must
also retain a description of every document relied on for verification, any non-

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documentary methods and results of measures undertaken for verification, as well
as the resolution of any substantive discrepancies discovered in identifying and
verifying the identification information for five years after the record is made.
Question 10: Identification and verification: Certification when a
single legal entity customer opens multiple accounts
If a legal entity customer opens multiple accounts at a covered financial institution
(whether or not simultaneously), must the financial institution identify and verify
the customer’s beneficial ownership for each account?
A. Generally, covered financial institutions must identify and verify the legal entity
customer’s beneficial ownership information for each new account opening,
regardless of the number of accounts opened or over a specific period of time
nancial institution
(whether or not simultaneously), must the financial institution identify and verify
the customer’s beneficial ownership for each account?
A. Generally, covered financial institutions must identify and verify the legal entity
customer’s beneficial ownership information for each new account opening,
regardless of the number of accounts opened or over a specific period of time.
However, an institution that has already obtained a Certification Form (or its
equivalent) for the beneficial owner(s) of the legal entity customer may rely on
that information to fulfill the beneficial ownership requirement for subsequent
accounts, provided the customer certifies or confirms (verbally or in writing) that
such information is up-to-date and accurate at the time each subsequent account
is opened and the financial institution has no knowledge of facts that would
reasonably call into question the reliability of such information. The institution
would also need to maintain a record of such certification or confirmation,
including for both verbal and written confirmations by the customer.
Question 11: Identification and verification: Accounts for internal
recordkeeping or operational purposes
FinCEN understands that after a covered financial institution (particularly in the
securities and futures industries) opens a new account for a legal entity customer
and identifies its beneficial ownership, the financial institution may subsequently
open one or more additional accounts or subaccounts for that customer – for the
institution’s own recordkeeping or operational purposes and not at the customer’s
specific request – so that the customer may, for example invest in particular products
or implement particular trading strategies. Would such accounts fall within the
definition of “new accounts” for purposes of the beneficial ownership requirement?
A
dditional accounts or subaccounts for that customer – for the
institution’s own recordkeeping or operational purposes and not at the customer’s
specific request – so that the customer may, for example invest in particular products
or implement particular trading strategies. Would such accounts fall within the
definition of “new accounts” for purposes of the beneficial ownership requirement?
A. The beneficial ownership requirement applies to a “new account,” which is
defined to mean “each account opened … by a legal entity customer”12
12. See 31 CFR 1010.230(g). In addition, the term “account” is defined by reference to the definition in
the CIP rules. 31 CFR 1010.230(c).
[emphasis
added]. An account (or subaccount) relating to a legal entity customer will
not be considered a “new account” or an “account” for purposes of the Rule
when a financial institution creates such an account (or subaccount) for its own

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administrative or operational purposes and not at the customer’s request—such
as to accommodate a specific trading strategy—and the financial institution has
already collected beneficial ownership information on such legal entity customer.
The distinction between such accounts opened by customers and those opened
solely by the financial institution is consistent with the Rule’s purpose to mitigate
the risks related to the obfuscation of beneficial ownership when a legal entity tries
to access the financial system through the opening of a new account.13
13
collected beneficial ownership information on such legal entity customer.
The distinction between such accounts opened by customers and those opened
solely by the financial institution is consistent with the Rule’s purpose to mitigate
the risks related to the obfuscation of beneficial ownership when a legal entity tries
to access the financial system through the opening of a new account.13
13. See 68 FR at 25093 (The preamble to the CIP rules provides that “Treasury and the Agencies note
that the [USA PATRIOT] Act provides that the regulations shall require reasonable procedures for
‘verifying the identity of any person seeking to open an account.’ Because these transfers are not
initiated by customers, these accounts do not fall within the scope of section 326.”)

This interpretation is limited to accounts (or subaccounts) created solely to
accommodate the business of an existing legal entity customer that has previously
identified its beneficial ownership. Thus, the following accounts (or subaccounts)
would not fall within this interpretation:
o accounts (or subaccounts) created to accommodate a trading strategy being
carried out by a separate legal entity, including a subsidiary of the existing legal
entity customer; and,
o accounts (or subaccounts) through which the customer of a financial
institution’s existing legal entity customer carries out trading activity directly
through the financial institution without intermediation from the existing legal
entity customer.
Question 12: Collection of beneficial ownership information:
Product or service renewals
Are financial institutions required to have their legal entity customers certify the
beneficial owners for existing customers during the course of a financial product
renewal (e.g., a loan renewal or certificate of deposit)?
A. Yes. Consistent with the definition of “account” in the CIP rules and subsequent
interagency guidance,14
14
eficial ownership information:
Product or service renewals
Are financial institutions required to have their legal entity customers certify the
beneficial owners for existing customers during the course of a financial product
renewal (e.g., a loan renewal or certificate of deposit)?
A. Yes. Consistent with the definition of “account” in the CIP rules and subsequent
interagency guidance,14
14. See “Interagency Interpretive Guidance on Customer Identification Program Requirements under
Section 326 of the USA PATRIOT Act, FAQs: Final CIP Rule,” p. 8 (April 28, 2005).
each time a loan is renewed or a certificate of deposit
is rolled over, the bank establishes another formal banking relationship and
a new account is established. Covered financial institutions are required to
obtain information on the beneficial owners of a legal entity that opens a new
account, meaning (in the case of a bank) for each new formal banking relationship
established, even if the legal entity is an existing customer. For financial services
or products established before May 11, 2018, covered financial institutions must
obtain certified beneficial ownership information of the legal entity customers of

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such products and services at the time of the first renewal following that date. At
the time of each subsequent renewal, to the extent that the legal entity customer
and the financial service or product (e.g., loan or CD) remains the same, the
customer certifies or confirms that the beneficial ownership information previously
obtained is accurate and up-to-date, and the institution has no knowledge of
facts that would reasonably call into question the reliability of the information,
the financial institution would not be required to collect the beneficial ownership
information again
product (e.g., loan or CD) remains the same, the
customer certifies or confirms that the beneficial ownership information previously
obtained is accurate and up-to-date, and the institution has no knowledge of
facts that would reasonably call into question the reliability of the information,
the financial institution would not be required to collect the beneficial ownership
information again. In the case of a loan renewal or CD rollover, because we
understand that these products are not generally treated as new accounts by the
industry and the risk of money laundering is very low, if at the time the customer
certifies its beneficial ownership information, it also agrees to notify the financial
institution of any change in such information, such agreement can be considered
the certification or confirmation from the customer and should be documented and
maintained as such, so long as the loan or CD is outstanding.
Question 13: Collection of beneficial ownership information:
Existing accounts
Are covered financial institutions required to collect or update beneficial ownership
information on customers with accounts opened prior to May 11, 2018, the Rule’s
applicability date?
A. Financial institutions are not required to conduct retroactive reviews to obtain
beneficial ownership information from customers with accounts opened prior to
May 11, 2018. The obligation to obtain or update beneficial ownership information
on legal entity customers with accounts established before May 11, 2018, is
triggered 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.15
15. See 81 FR at 29421
ownership information
on legal entity customers with accounts established before May 11, 2018, is
triggered 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.15
15. See 81 FR at 29421.
Question 14: Obligation to solicit or update beneficial ownership
information absent specific risk-based concerns
Are covered financial institutions required to obtain or update beneficial ownership
information during routine periodic reviews of existing accounts, absent risk-
based concerns; that is, are such reviews a trigger for the application of the Rule’s
beneficial ownership requirements?
A. No. Covered financial institutions do not have an obligation to solicit or update
beneficial ownership information as a matter of course during regular or periodic
reviews, absent specific risk-based concerns. Financial institutions are required to

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develop and implement risk-based procedures for conducting ongoing customer
due diligence, including regular monitoring to identify and report suspicious
activity and, on a risk basis, to maintain and update customer information. Thus,
periodic reviews are not by themselves a trigger to obtain or update beneficial
ownership information. As stated in response to Questions 13 and 16, the
obligation to obtain or update information is triggered when, in the course of
normal monitoring, a financial institution becomes aware of information about
a customer or an account, including a possible change of beneficial ownership
information, relevant to assessing or reassessing the customer’s overall risk profile.
Absent such a risk-related trigger or event, collecting or updating of beneficial
ownership information is at the discretion of the covered financial institution
onitoring, a financial institution becomes aware of information about
a customer or an account, including a possible change of beneficial ownership
information, relevant to assessing or reassessing the customer’s overall risk profile.
Absent such a risk-related trigger or event, collecting or updating of beneficial
ownership information is at the discretion of the covered financial institution.
Financial institutions may exercise this discretion to collect or update beneficial
ownership information on customers as often as they deem appropriate.
Question 15: Processes for monitoring and updating customer
information
Are covered financial institutions required to implement different processes than
currently established to comply with the Rule’s ongoing monitoring and updating
requirement?
A. To the extent that a covered financial institution has monitoring processes in
place that allow the institution to meet the Rule’s requirements, such institution
may use its existing monitoring processes to comply with customer due diligence
monitoring and updating obligations. As the preamble to the Rule states, “current
industry practice to comply with existing expectations for SAR reporting should
already satisfy this proposed requirement.”16
16. 81 FR 29420.
Question 16: Updating beneficial ownership information
If an update to beneficial ownership information is required, can the change(s) be
made in a covered financial institution’s databases without physically obtaining
and re-certifying the information?
A. It depends. A covered financial institution must develop written internal
policies, procedures, and internal controls with respect to collecting,
maintaining, and updating a legal entity’s beneficial ownership information.
The Rule requires that covered financial institutions monitor and, on a risk-
basis, update the customer information, including the beneficial ownership
information, and does not require re-certification when the information is up-
itten internal
policies, procedures, and internal controls with respect to collecting,
maintaining, and updating a legal entity’s beneficial ownership information.
The Rule requires that covered financial institutions monitor and, on a risk-
basis, update the customer information, including the beneficial ownership
information, and does not require re-certification when the information is up-

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to-date and accurate.17
17. See e.g., 31 CFR 1020.210(b)(5)(ii) (for banks); 1023.210(b)(5)(ii) (for brokers or dealers in securities),
1024.210 (b)(5)(ii) (for mutual funds), 1026.210(b)(5)(ii) (for futures commission merchants and
introducing brokers in commodities).
Covered financial institutions may therefore update their
records to reflect a change of information for an existing beneficial owner using
the same or similar processes the institution implemented to record account
information it obtains from customers in connection with the institution’s account
opening processes. For example, if the update were only to a change of address
for an existing beneficial owner whose identity information has already been
collected and verified, then full re-certification would likely not be required. In
this circumstance, it may be reasonable for the covered financial institution to
communicate verbally with the legal entity customer to confirm the accuracy of
the change of address and reflect such information in its databases. If, however,
the updated information were a change of beneficial ownership, then the new
beneficial owner’s identity would need to be collected, certified, and verified.
Question 17: Beneficial ownership information: Identifying and
verifying at account opening compared to updating after a risk-
related trigger

Does FinCEN distinguish between the requirements for identifying and verifying
beneficial owner information at the time of a new account opening and at the time
of a triggering event?
A. No
ntity would need to be collected, certified, and verified.
Question 17: Beneficial ownership information: Identifying and
verifying at account opening compared to updating after a risk-
related trigger

Does FinCEN distinguish between the requirements for identifying and verifying
beneficial owner information at the time of a new account opening and at the time
of a triggering event?
A. No. Whether a covered financial institution identifies and verifies the identity
of the beneficial owner at the time a legal entity initially opens a new account or
at the time of a triggering event, the fundamental elements of identification and
verification are the same. That is, covered financial institutions must identify each
beneficial owner by obtaining their name, date of birth, address, and identifying
number (such as a social security number or other identifying number permissible
under the CIP rule), and verify their identities. However, financial institutions’
written policies, procedures, and processes, as well as the sum of information,
may differ with respect to the collection of information at the time a legal entity
customer initially opens a new account or at the time an existing account is
updated after a triggering event.

On or after May 11, 2018, when a legal entity customer initially opens a new
account or an existing account is updated to incorporate beneficial ownership
information for the first time in response to a triggering event, covered financial
institutions must identify and verify the identity of beneficial owners as set forth
in section 1010.230(b).
ount is
updated after a triggering event.

On or after May 11, 2018, when a legal entity customer initially opens a new
account or an existing account is updated to incorporate beneficial ownership
information for the first time in response to a triggering event, covered financial
institutions must identify and verify the identity of beneficial owners as set forth
in section 1010.230(b).

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Question 18: Collection of beneficial ownership information: Pooled
Investment Vehicles whose operators or advisers are not excluded
from the definition of legal entity customer
Are covered financial institutions required to identify and verify the identity of
the beneficial owners that own 25 percent or more of the ownership interests of a
pooled investment vehicle whose operators or advisers are not excluded from the
definition of legal entity customer?
A. No. Although the Rule requires covered financial institutions to collect and
verify the identity of beneficial owners who own 25 percent or more of the equity
interests of a legal entity customer, in general, institutions are not required to
look through a pooled investment vehicle to identify and verify the identity of
any individuals who own 25 percent or more of its equity interests. Because of
the way in which ownership of a pooled investment vehicle fluctuates, it would
be impractical for covered financial institutions to collect and verify ownership
identity for this type of entity. Therefore, there is no requirement that the financial
institution should request the customer to look through the pooled investment
vehicle to determine and report any individual’s equity interest
of
the way in which ownership of a pooled investment vehicle fluctuates, it would
be impractical for covered financial institutions to collect and verify ownership
identity for this type of entity. Therefore, there is no requirement that the financial
institution should request the customer to look through the pooled investment
vehicle to determine and report any individual’s equity interest. However,
covered financial institutions must collect beneficial ownership information for
the pooled investment vehicle under the control prong to comply with the Rule
(i.e., an individual with significant responsibility to control, manage, or direct
the vehicle; such individuals could be, e.g., a portfolio manager, commodity pool
operator, commodity trading advisor, or general partner of the vehicle).18
18. In cases where such manager, operator or advisor is itself an entity, then it would be necessary to
identify an individual with responsibility to control, manage or direct the manager, operator, advisor
or general partner. See 31 CFR 1010.230(e)(3)(i), 81 FR at 29415.
Question 19: Collection of beneficial ownership information: Trusts
with multiple trustees
When 25 percent or more of the equity interests of a legal entity customer are
owned by a trust that is overseen by co-trustees (multiple trustees), are covered
financial institutions required to identify and verify the identity of all co-trustees?
partner. See 31 CFR 1010.230(e)(3)(i), 81 FR at 29415.
Question 19: Collection of beneficial ownership information: Trusts
with multiple trustees
When 25 percent or more of the equity interests of a legal entity customer are
owned by a trust that is overseen by co-trustees (multiple trustees), are covered
financial institutions required to identify and verify the identity of all co-trustees?

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A. No. If a trust owns directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, 25 percent or more of the equity
interests of a legal entity customer, the beneficial owner under the ownership/
equity prong is the trustee. Where there are multiple trustees or co-trustees,
financial institutions are expected to collect and verify the identity of, at a
minimum, one co-trustee of a multi-trustee trust who owns 25 percent or more of
the equity interests of a legal entity customer that is not subject to an exclusion. A
covered financial institution may choose to identify additional co-trustees as part
of its customer due diligence, based on its risk assessment and the customer risk
profile and in accordance with the institution’s account opening procedures.
Question 20: Collection of beneficial ownership information: Trustee
entity as a beneficial owner
If a legal entity is the trustee (e.g., law firm, bank trust department, etc.) of a trust
that owns 25 percent or more of the equity interests of a legal entity customer, can
that entity be identified as a beneficial owner under the ownership/equity prong or
does a natural person need to be so identified?
A. If a trust owns directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise, 25 percent or more of the equity
interests of a legal entity customer, the beneficial owner for purposes of the
ownership/equity prong is the trustee, regardless of whether the trustee is a
natural person or a legal entity.19
19. See 31 CFR 1010.230(d)(3)
be so identified?
A. If a trust owns directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise, 25 percent or more of the equity
interests of a legal entity customer, the beneficial owner for purposes of the
ownership/equity prong is the trustee, regardless of whether the trustee is a
natural person or a legal entity.19
19. See 31 CFR 1010.230(d)(3).
In circumstances where a natural person does
not exist for purposes of the ownership/equity prong, a natural person would
not be identified. However, a covered institution should collect identification
information on the legal entity trustee as part of its CIP, consistent with the
covered institution’s risk assessment and the customer risk profile. In addition
to the ownership/equity prong, covered financial institutions are also required to
identify and verify a natural person as the beneficial owner of the legal entity
customer under the control prong to comply with the Rule.20
20. See 31 CFR 1010.230(d)(2).

The ownership/equity and control prongs, although related, are independent
requirements. Thus, satisfaction of, or exclusion from, regulatory obligations
under one prong does not mean a covered financial institution’s obligations under
the other prong are also satisfied or excluded.

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Question 21: Verification of claims of exclusion from the definition
of “legal entity customer”
What methods should covered financial institutions use to verify eligibility for
exclusion from the definition of a “legal entity customer”?
A. Several types of legal entity customers are excluded from the collection and
verification requirements of the Rule, under section 1010.230(e)(2), because, for
example, their regulators require the reporting of beneficial ownership information
or such information is publicly available
ncial institutions use to verify eligibility for
exclusion from the definition of a “legal entity customer”?
A. Several types of legal entity customers are excluded from the collection and
verification requirements of the Rule, under section 1010.230(e)(2), because, for
example, their regulators require the reporting of beneficial ownership information
or such information is publicly available. A financial institution may rely on
information provided by the legal entity customer to determine whether the legal
entity is excluded from the definition of a legal entity customer, provided that it
has no knowledge of facts that would reasonably call into question the reliability
of such information. Whether a financial institution has such knowledge would
depend on the facts and circumstances at the time an account is opened. Covered
financial institutions must establish and maintain written risk-based procedures
reasonably designed to identify and verify the identity of the beneficial owners of all
legal entity customers at the time a new account is opened, unless the customer is
otherwise excluded from the definition of legal entity customer. Covered financial
institutions are expected to address and specify, in their risk-based written policies
and procedures, the type of information they will obtain and reasonably rely upon
to determine eligibility for exclusions.
Question 22: Definition of legal entity customer: Sole proprietorship
and unincorporated associations
Are sole proprietorships formed by spouses or other unincorporated associations
considered legal entity customers under the Rule?
A. No. Sole proprietorships—individual or spousal—and unincorporated
associations are not legal entity customers as defined by the Rule, even though
such businesses may file with the Secretary of State in order to register a trade
name or establish a tax account
ns
Are sole proprietorships formed by spouses or other unincorporated associations
considered legal entity customers under the Rule?
A. No. Sole proprietorships—individual or spousal—and unincorporated
associations are not legal entity customers as defined by the Rule, even though
such businesses may file with the Secretary of State in order to register a trade
name or establish a tax account. This is because neither a sole proprietorship
nor an unincorporated association is a separate legal entity from the associated
individual(s), and therefore beneficial ownership is not inherently obscured.21
21. See 81 FR, 29398, 29412 (May 11, 2016).
Question 23: Definition of charities, non-profits or similar entities
Are covered financial institutions limited to the Internal Revenue Code (IRC)
definitions of charities, non-profits, or similar entities when assessing their
eligibility for exclusion from the definition of legal entity customer?

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A. No. The exclusion from the definition of legal entity customer for charities and
non-profit entities is not limited to those entities that meet the definition or
description of charitable, nonprofit, or similar entities under the IRC. The Rule
does not rely on the tax-exempt status of an entity as described in the IRC. All
nonprofit entities—whether or not tax-exempt—that are established as a nonprofit,
or nonstock corporation, or similar entity that has been validly organized with
the proper State authority are excluded from the ownership/equity prong of the
requirement because nonprofit entities generally do not have ownership interests.22
22. See 81 FR at 29412.
Financial institutions, however, are required to collect beneficial ownership
information under the control prong from any such entity.23
23. Id.
Question 24: Definition of legal entity customer: Publicly traded
companies and entities listed on foreign exchanges
ship/equity prong of the
requirement because nonprofit entities generally do not have ownership interests.22
22. See 81 FR at 29412.
Financial institutions, however, are required to collect beneficial ownership
information under the control prong from any such entity.23
23. Id.
Question 24: Definition of legal entity customer: Publicly traded
companies and entities listed on foreign exchanges.
Are companies publicly traded in the United States and entities listed on foreign
exchanges excluded from the definition of legal entity customer and, therefore,
excluded by the Rule?
A. Companies traded publicly in the United States are excluded from the definition
of legal entity customer. Specifically, the Rule excludes from the definition of legal
entity customer certain entities that are considered “exempt persons” under 31
CFR 1020.315(b). This includes any company (other than a bank) whose common
stock or analogous equity interests are listed on the New York Stock Exchange,
the American Stock Exchange (currently known as NYSE American), or NASDAQ
stock exchange.24
24. See 31 CFR 1020.315 (b)(4).
The Rule also excludes a U.S. entity when at least 51 percent of
its common stock or analogous equity interest is held by a listed entity.25
25. See 31 CFR 1020.315 (b)(5).
These
U.S. companies are excluded from the Rule because they are subject to public
disclosure and reporting requirements that provide information similar to what
would otherwise be collected under the Rule.

Companies listed on foreign exchanges are not excluded from the definition of
legal entity customer. Such companies may not be subject to the same or similar
public disclosure and reporting requirements as companies publicly traded in the
United States and, therefore, collecting beneficial ownership information for them
is required.
to what
would otherwise be collected under the Rule.

Companies listed on foreign exchanges are not excluded from the definition of
legal entity customer. Such companies may not be subject to the same or similar
public disclosure and reporting requirements as companies publicly traded in the
United States and, therefore, collecting beneficial ownership information for them
is required.

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Question 25: Collection of beneficial ownership information: Legal
entities listed on foreign exchanges
May covered financial institutions take a risk-based approach for collecting
beneficial ownership information from legal entity customers listed on foreign
exchanges?
A. No. Financial institutions may not take a “risk-based approach” to collecting the
required beneficial ownership information from legal entity customers that are
listed on foreign exchanges, because such institutions are not excluded from the
definition of legal entity customer. However, as they may with regard to other
legal entity customers, whether listed or not, covered institutions may rely on the
public disclosures of such entities, absent any reason to believe such information is
inaccurate or not up-to-date.
Question 26: Foreign financial institutions
Does the exclusion for foreign financial institutions from the Rule’s definition of
“legal entity customer” depend on whether the beneficial ownership requirements
applied by such institution’s foreign regulator match U.S. requirements?
A. No. For purposes of beneficial ownership identification, the Rule excludes
from the definition of “legal entity customer” a foreign financial institution
created in a non-U.S. jurisdiction when the foreign regulator for that financial
institution collects and maintains information on the beneficial owner(s) of the
regulated institution.26
26. See 31 CFR 1010.230(e)(1)(xiv)
requirements?
A. No. For purposes of beneficial ownership identification, the Rule excludes
from the definition of “legal entity customer” a foreign financial institution
created in a non-U.S. jurisdiction when the foreign regulator for that financial
institution collects and maintains information on the beneficial owner(s) of the
regulated institution.26
26. See 31 CFR 1010.230(e)(1)(xiv).
The rule does not require covered financial institutions to
research the specific transparency requirements imposed on a foreign financial
institution by its regulator and compare them with those imposed on U.S.
financial institutions by U.S. Federal functional regulators. However, if the
foreign regulator does not collect and maintain beneficial ownership information
on the foreign financial institution it regulates, then U.S. financial institutions
will have to collect and maintain beneficial ownership information on accounts
opened by foreign financial institutions in compliance with the Rule. As with any
exclusion, covered financial institutions may rely on the representations of its legal
entity customer as to whether an exclusion applies, provided that they have no
knowledge of facts that would reasonably call into question the reliability of such
representation. (See Question 21.)

For purposes of existing customer due diligence requirements, covered financial
institutions that maintain correspondent accounts for foreign financial institutions
are already required to establish and maintain specific risk-based due diligence
procedures and controls for such accounts that include consideration of all
question the reliability of such
representation. (See Question 21.)

For purposes of existing customer due diligence requirements, covered financial
institutions that maintain correspondent accounts for foreign financial institutions
are already required to establish and maintain specific risk-based due diligence
procedures and controls for such accounts that include consideration of all

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relevant factors,27
27. See 31 CFR 1010.610(a)(2)(iv).
and are required to identify beneficial ownership for certain
high-risk foreign banks.28
28. See 31 CFR 1010.610(b)(3).
These correspondent accounts will continue to be
subject to these existing requirements rather than the requirements set forth in the
AML Program requirements contained in the Rule.
Question 27: Exclusion from the definition of legal entity customer:
U.S. Government list of foreign regulators that maintain beneficial
ownership information
Will the U.S. Government maintain a list of non-U.S. jurisdictions where the regulator
of financial institutions within that jurisdiction maintains beneficial ownership
information regarding the financial institutions they regulate or supervise?
A. No. Covered financial institutions should contact the relevant foreign regulator
or use other reliable means to ascertain whether the foreign regulator maintains
beneficial ownership information for the financial institutions that it regulates or
supervises.
Question 28: Exclusion from the definition of legal entity customer:
Non-U.S. governmental department, agency, or political subdivision
engaged only in governmental activities
What types of entities would be considered a “non-U.S. governmental department,
agency or political subdivision that engages only in governmental rather than
commercial activities”29
29. 31 CFR 1010.230(e)(2)(xv).
such that they would qualify for exclusion from the
definition of a legal entity customer?
A. Examples of legal entity customers that would be considered non-U.S
rnmental activities
What types of entities would be considered a “non-U.S. governmental department,
agency or political subdivision that engages only in governmental rather than
commercial activities”29
29. 31 CFR 1010.230(e)(2)(xv).
such that they would qualify for exclusion from the
definition of a legal entity customer?
A. Examples of legal entity customers that would be considered non-U.S.
governmental entities engaged in only governmental and not commercial activities
include entities that are owned and operated by a non-U.S. government agency
or political subdivision, such as embassies or consulates, as well as entities
that are instrumentalities of a foreign government, such as government-owned
enterprises engaging in activities that are exclusively governmental in nature,
that is, activities involving the direct exercise of legislative, executive, or judicial
authority and which do not involve taking profits from the endeavor. Those
State-owned enterprises engaged in profit-seeking activities, including, among
others, sovereign wealth funds, airlines, or oil companies, would not qualify for
the legal entity customer exclusion. Generally, many State-owned enterprises
may not have an individual that owns at least a 25 percent equity interest because
a governmental department, agency, or political subdivision holds such interest.

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In these circumstances, a covered financial institution would only be required
to identify an individual under the control prong. Similarly, with respect to a
State-owned enterprise that is a pooled investment vehicle not subject to another
exclusion, financial institutions would be required to obtain beneficial ownership
information under the control prong but not under the ownership/equity prong of
the definition of beneficial owner
institution would only be required
to identify an individual under the control prong. Similarly, with respect to a
State-owned enterprise that is a pooled investment vehicle not subject to another
exclusion, financial institutions would be required to obtain beneficial ownership
information under the control prong but not under the ownership/equity prong of
the definition of beneficial owner.

Furthermore, similar to other instances of identification and verification within
the Rule’s context, a covered financial institution may reasonably rely upon the
representations of the legal entity customer, absent knowledge of facts that would
call into question the reliability of the beneficial ownership information provided
to the financial institution.
Question 29: Private label retail credit accounts established at the
point of sale
Does the point of sale exception only apply to accounts opened at the cash register
or does it refer to all applications for credit accounts that are for use at the private
label retailer only?
A. The Rule provides an exemption from the requirements for a covered financial
institution that “opens an account for a legal entity customer that is: [a]t the point-
of-sale to provide credit products, including commercial private label credit cards,
solely for the purchase of retail goods and/or services at these retailers, up to a
limit of $50,000.” The point of sale exemption is provided for retail credit accounts
opened to facilitate purchases made at the retailer because of the very low risk
posed by opening such accounts at the brick and mortar store.
Question 30: Equipment Finance and Lease Exemption: Definition
of equipment
What kind of businesses and equipment are covered under the equipment finance
exemption?
A. The Rule reflects FinCEN’s understanding that businesses require financing to
obtain equipment to conduct ongoing business operations
cause of the very low risk
posed by opening such accounts at the brick and mortar store.
Question 30: Equipment Finance and Lease Exemption: Definition
of equipment
What kind of businesses and equipment are covered under the equipment finance
exemption?
A. The Rule reflects FinCEN’s understanding that businesses require financing to
obtain equipment to conduct ongoing business operations. Many such businesses,
including both large and small businesses, open accounts solely for the purpose of
financing the purchase or lease of that equipment. Subject to certain limitations,
the Rule provides an exemption from the requirement to identify and verify the
identity of a legal entity customer’s beneficial owners for equipment finance and
lease accounts established at a covered financial institution because of the low
risk for money laundering posed by these accounts.30
30. See 31 CFR 1010.230(h)(1)(iv).
The exemption is intended

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to cover business equipment such as farm equipment, construction machinery,
aircraft, computers, printers, photocopiers, and automobiles that a business
purchases or leases. The Rule does not limit the exemption to small businesses.
Regardless of the application of the exemption, a covered financial must comply
with all other applicable BSA/AML obligations, which may include the obligation
to file SARs where there is a suspicion that the equipment may be used to facilitate
criminal activity.
Question 31: Equipment Finance and Leasing Exemption: Accounts
opened to finance the purchase or leasing of equipment
Does the equipment lease and purchase exemption apply when the customer leases
directly from the covered institution?
A. Yes, consider the following. Aviation LLC, which operates several flight training
schools, visits Aircraft Vendor to acquire five aircraft for its flight training schools
uipment Finance and Leasing Exemption: Accounts
opened to finance the purchase or leasing of equipment
Does the equipment lease and purchase exemption apply when the customer leases
directly from the covered institution?
A. Yes, consider the following. Aviation LLC, which operates several flight training
schools, visits Aircraft Vendor to acquire five aircraft for its flight training schools.
Aviation LLC selects the aircraft and contacts the Lessor Covered Financial
Institution to obtain the necessary equipment finance to acquire the aircraft.
After a review of the aircraft and Aviation LLC’s business, the Lessor Covered
Financial Institution agrees to purchase the aircraft from Aircraft Vendor and then
lease them to Aviation LLC for a specified rent amount and duration. The Lessor
Covered Financial Institution purchases the aircraft, pays the purchase price
directly to Aircraft Vendor, and obtains title to the aircraft as collateral. The Lessor
Covered Financial Institution then enters into a lease agreement with Aviation
LLC, which opens an account at the financial institution solely for the purpose of
obtaining the aircraft and making periodic rent payments. There is no possibility
of a cash refund to Aviation LLC under the lease terms.

The equipment lease and purchase exemption would apply because the account
established at the covered financial institution meets all of the requirements of the
exemption, which are that (1) the account’s purpose is to finance the purchase or
leasing of equipment, (2) payments are remitted directly by the financial institution
to the vendor or lessor, and (3) there is no possibility of a cash refund on the
account activity. First, Covered Financial Institution remit full payment directly to
the vendor and obtained title to the equipment in order to lease the equipment to
the legal entity customer. Second, Aviation LLC opened the account solely for the
purpose of financing an equipment lease to acquire aircraft for its training schools
or, and (3) there is no possibility of a cash refund on the
account activity. First, Covered Financial Institution remit full payment directly to
the vendor and obtained title to the equipment in order to lease the equipment to
the legal entity customer. Second, Aviation LLC opened the account solely for the
purpose of financing an equipment lease to acquire aircraft for its training schools.
Finally, there is no possibility of a cash refund to Aviation LLC. As noted in the
final rule, accounts created to provide financing for equipment lease or purchase,
subject to certain conditions, are exempt from the beneficial ownership requirement
because they present a low risk for money laundering and terrorist financing.31
31. Id.

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Question 32: Currency Transaction Report (CTR) and aggregation of
transactions
Under what circumstances should the transactions of a legal entity customer and
those of the beneficial owner(s) be aggregated for purposes of filing a CTR? Are
financial institutions required to proactively cross-check beneficial ownership
information to comply with the CTR aggregation requirement?
A. As a general matter, financial institutions are required to aggregate multiple
currency transactions “if the financial institution has knowledge that [the multiple
transactions] are by or on behalf of any person and result in either cash in or cash
out totaling more than $10,000 during any one business day.”32
32. 31 CFR 1010.313.
With respect
to legal entity customers that may share a common owner, unless there is an
affirmative reason to believe otherwise, covered financial institutions should
presume that different businesses that share a common owner are operating
separately and independently from each other and from the common owner
t totaling more than $10,000 during any one business day.”32
32. 31 CFR 1010.313.
With respect
to legal entity customers that may share a common owner, unless there is an
affirmative reason to believe otherwise, covered financial institutions should
presume that different businesses that share a common owner are operating
separately and independently from each other and from the common owner.
Thus, absent indications that the businesses are not operating independently (e.g.,
the businesses are staffed by the same employees and are located at the same
address, the accounts of one business are repeatedly used to pay the expenses
of another business or of the common owner), financial institutions should not
aggregate transactions involving those businesses with those of each other or with
those of the common owner for CTR filing.33
33. See FinCEN Ruling 2001–2, “Currency Transaction Reporting: Aggregation,” (Aug. 23, 2001) and
FinCEN Guidance 2012-G001, “Currency Transaction Report Aggregation for Businesses with
Common Ownership,” (March 16, 2012), respectively. See also 81 FR at 29409.
Question 33: Listing beneficiaries on CTRs
When completing a CTR for a business (i.e., corporations, limited liability
companies, and general partnerships) will beneficial owners now need to be listed as
beneficiaries in such CTRs? If yes, would this also include trust and estate accounts?
A. No. The Rule does not change the existing currency transaction reporting
requirements or any guidance FinCEN published pursuant to this reporting
requirement. Thus, a covered financial institution is not required to list the
beneficial owners of a business, or trust or estate account, when completing a CTR
as a matter of course
? If yes, would this also include trust and estate accounts?
A. No. The Rule does not change the existing currency transaction reporting
requirements or any guidance FinCEN published pursuant to this reporting
requirement. Thus, a covered financial institution is not required to list the
beneficial owners of a business, or trust or estate account, when completing a CTR
as a matter of course. A financial institution must list a beneficial owner in Part 1
of the CTR only if the financial institution has knowledge that the transaction(s)
requiring the filing is made on behalf of the beneficial owner and results in either
cash in or cash out totaling more than $10,000 during any one business day.

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Question 34: Impact of the Rule on the AML program Board of
Directors or senior management review process
Are covered financial institutions now required to follow specific procedures
to approve changes to AML programs or require Boards of Directors or senior
management to approve such changes? Can Federal functional regulators direct
financial institutions within their jurisdiction to follow a specific approval process?
A. Covered financial institutions may continue to follow their existing internal
procedures for approving AML program changes, including changes that
incorporate the Rule’s new program requirements. However, these procedures
should be consistent with the requirements and expectations of the institution’s
Federal functional regulator.
Question 35: Documenting nature and purpose of customer
relationship on a risk-basis
The Rule requires financial institutions to understand “the nature and purpose
of customer relationships to develop a customer risk profile.” What type of
information should financial institutions collect to satisfy this requirement and
may the documentation of the nature and purpose of a customer relationship be
made on a risk-basis?
A
e and purpose of customer
relationship on a risk-basis
The Rule requires financial institutions to understand “the nature and purpose
of customer relationships to develop a customer risk profile.” What type of
information should financial institutions collect to satisfy this requirement and
may the documentation of the nature and purpose of a customer relationship be
made on a risk-basis?
A. Understanding the nature and purpose of a customer relationship in order to
develop a customer risk profile is an important part of ongoing customer due
diligence, and is required for all customers and accounts. An understanding based
on category of customer means that for certain lower-risk customers, a financial
institution’s understanding of the nature and purpose of a customer relationship
can be developed by inherent or self-evident information, such as the type of
customer or type of account, service, or product or other basic information about
the customer including information obtained at account opening.

The profile may, but need not, include a system of risk ratings or categories of
customers. Accordingly, the documentation that is required to demonstrate an
understanding of the nature and purpose of a customer relationship would vary
with the type of customer, account, service, or product.
Question 36: Use of information on customer risk profile
Once the nature and purpose of a customer relationship has been established, what
are FinCEN’s expectations concerning the use of this information?
he documentation that is required to demonstrate an
understanding of the nature and purpose of a customer relationship would vary
with the type of customer, account, service, or product.
Question 36: Use of information on customer risk profile
Once the nature and purpose of a customer relationship has been established, what
are FinCEN’s expectations concerning the use of this information?

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A. Understanding the nature and purpose of a customer relationship—the
information gathered about a customer at account opening—is essential to
developing a customer risk profile. This information should be used to develop
a baseline against which customer activity, such as the customer’s expected use
of wires or typical number of deposits in a month, can be assessed for possible
suspicious activity reporting. If account activity changes, particularly with
regard to what should be anticipated based on the original nature and purpose
of the account, risk-based monitoring may identify a need to update customer
information, including, as appropriate, beneficial ownership.
Question 37: The nature and purpose of customer relationship
In understanding the nature and purpose of customer relationships, are financial
institutions required to develop and document customer risk profiles for self-
evident products or customer type (e.g., a safe deposit box)?
A. Financial institutions must implement risk-based procedures as part of their AML
program to demonstrate an understanding of the nature and purpose of customer
relationships to develop customer risk profiles. Customer risk profiles refer “to
the information gathered about a customer at account opening used to develop a
baseline against which customer activity can be assessed for suspicious activity
reporting. This may include self-evident information such as the type of customer,
or type of account, service or product.”34
34. 81 FR 29398, 29398 (May 11, 2016)
to develop customer risk profiles. Customer risk profiles refer “to
the information gathered about a customer at account opening used to develop a
baseline against which customer activity can be assessed for suspicious activity
reporting. This may include self-evident information such as the type of customer,
or type of account, service or product.”34
34. 81 FR 29398, 29398 (May 11, 2016).
It is reasonable that in the case of certain
products, such as safety deposit boxes, the nature and purpose are self-evident
and therefore no additional documentation would be needed to demonstrate an
understanding of their nature and purpose, beyond the documentation to establish
the particular type of account.
###
For Further Information
Additional questions or comments regarding the contents of this Guidance should be
addressed to the FinCEN Resource Center at FRC@fincen.gov, (800) 767-2825, or (703)
905-3591. Financial institutions wanting to report suspicious transactions that may
relate to terrorist activity should call the Financial Institutions Toll-Free Hotline
at (866) 556-3974 (7 days a week, 24 hours a day). The purpose of the hotline is to
expedite the delivery of this information to law enforcement. Financial institutions
should immediately report any imminent threat to local-area law enforcement officials.

F I N C E N G U I D A N C E
2 4
FinCEN’s mission is to safeguard the financial system from illicit use and
combat money laundering and promote national security through the
collection, analysis, and dissemination of financial intelligence and
strategic use of financial authorities.

## Nearby sections

- [FinCEN Guidance FIN-2006-G002 Guidance to Financial Institutions on the Provision of Financial Services to Belarusian Senior Regime Elements Engaged in Illicit Activities](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G002.md)
- [FinCEN Guidance FIN-2006-G003 Frequently Asked Questions Foreign Bank Recertifications under 31 C.F.R. § 103.177](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G003.md)
- [FinCEN Guidance FIN-2006-G004 Frequently Asked Question regarding Customer Identification Programs for Futures Commission Merchants and Introducing Brokers (31 CFR 103.123)](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G004.md)
- [FinCEN Guidance FIN-2006-G005 Frequently Asked Questions Businesses Cashing Their Own Checks](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G005.md)
- [FinCEN Guidance FIN-2006-G006 Registration and De-Registration of Money Services Businesses](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G006.md)
- [FinCEN Guidance FIN-2006-G007 Frequently Asked Question Customer Identification Program Responsibilities under the Agency Lending Disclosure Initiative](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G007.md)
- [FinCEN Guidance FIN-2006-G008 Application of the Regulations regarding Special Due Diligence Programs for Certain Foreign Accounts to NSCC Fund/SERV Accounts](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G008.md)
- [FinCEN Guidance FIN-2006-G009 Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to the Securities and Futures Industries](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G009.md)
- [FinCEN Guidance FIN-2006-G010 Frequently Asked Questions Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Insurance Companies](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G010.md)
- [FinCEN Guidance FIN-2006-G011 Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to Certain Introduced Accounts and Give-Up Arrangements in the Futures Industries](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G011.md)
- [FinCEN Guidance FIN-2006-G012 Frequently Asked Questions Conducting Independent Reviews of Money Services Business Anti-Money Laundering Programs](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G012.md)
- [FinCEN Guidance FIN-2006-G013 Frequently Asked Questions Suspicious Activity Reporting Requirements for Mutual Funds](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G013.md)
- [FinCEN Guidance FIN-2006-G014 Potential Money Laundering Risks Related to Shell Companies](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G014.md)
- [FinCEN Guidance FIN-2006-G015 Frequently Asked Question Customer Identification Programs and Banks Serving as Insurance Agents](https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2006G015.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FINCEN_FIN2018G001. Check the current official text before relying on it. Not legal advice.