than one regulatory deadline, so this realignment may come later than expected. Additionally, the CDD rule was effective in 2018 — two years after the regulation was finalized. As a result, it’s unclear whether FIs will face any near-term deadlines related to this issue. Immediate Changes for Banks and Credit Unions? For financial institutions in the U.S. and their AML programs, the bottom line is that very little has changed at this point: • The existing CDD and beneficial ownership requirements that took effect with the 2016 CDD rule still apply. FinCEN’s draft of a rule realigning the CDD rule with the new BOI definitions and requirements is expected sometime in 2024. • Banks and credit unions are not responsible for their business clients complying with the new BOI reporting requirements. • Beginning Feb. 20, 2024, staged access to the registry will begin, but FIs will be the last group added and the date hasn’t been determined. • FIs must certify that the BOI will be held securely and that the FI has received approval from the reporting entity to access their ownership details. FinCEN has not given guidance on obtaining BOI access consent and so far is leaving that up to individual FIs. Now is the time to begin considering how to request consent, whether via a change in disclosures or a more targeted method. • Be prepared to write procedures around access to the BOI database once more details are rolled out. Educate Clients on BOI Changes and Fraudsters As noted above, financial institutions are not responsible for client compliance with beneficial ownership information reporting. BOI registration is the responsibility of the 35 million reporting companies. However, most of these firms are likely unaware of the new requirements and may not even be familiar with FinCEN. Even if familiar with the requirements, many company owners won’t know how to register because detailed guidance isn’t written. There is no finalized reporting form or instructions on how to register. FinCEN Director Andrea Gacki said during a briefing on the final access rule that the form will most likely not be confirmed until at least February 2024. Mandated reporting can be confusing for businesses that have never been under this type of government requirement. It’s important for them to understand the role of BOI registration in safeguarding the U.S. financial system and our global reputation. FinCEN is conducting outreach to educate businesses by holding national briefings and issuing fact sheets, a Q&A and videos. It also has a Small Entity Compliance Guide for BOI reporting. Banks and credit unions are encouraged to direct clients to the FinCEN website for comprehensive information. Additionally, Director Gacki said at the recent ABA FinCrime Conference that FinCEN welcomes assistance from financial institutions in educating their clients. Collaboration on education is crucial. Proactively engaging with business clients on BOI requirements establishes trust while also demonstrating proficiency in navigating new regulations. Remember, failure to register BOI could lead to federal penalties for reporting entities. Safeguarding your business clients from such risks not only ensures compliance but also enhances overall goodwill. Financial institutions and their business customers or members should also be aware that illicit actors are already trying to take advantage of uncertainty around the BOI changes. FinCEN warned recently of fraudulent attempts to obtain personal information from reporting entities. The fraudulent emails or letters may be titled “Important Compliance Notice,” and may ask recipients to click on a URL or scan a QR code. FinCEN does not send unsolicited requests and advised against responding to the messages, clicking on any links or scanning any QR codes within them. Remember, there is currently no final reporting form. Transparency is the Goal The CTA became effective on Jan. 1, 2024, and the BOI registry is a reality. Although not much changes immediately for financial institutions, it is critical to understand the legislation and how it affects business clients. The final rule for BOI reporting outlines crucial provisions that reporting companies must adhere to, emphasizing the need for transparency in corporate structures. As financial institutions and their clients navigate these new requirements, the true intent of the registry — to curb illicit activities and enhance financial transparency — remains paramount. Industry leaders eagerly await clarity on access protocols, verification processes and alignment of customer due diligence rules. But the related changes will shape domestic financial practices and resonate globally, reflecting the United States’ commitment to combat money laundering and enhance transparency. Stakeholders are on standby, ready to adapt to the evolving regulatory landscape and its far-reaching implications. Abrigo’s mission is to help financial institutions make BIG things happen. Offerings include compliance, credit risk and lending software solutions at www.abrigo.com. Colorado Banker 10
RkJQdWJsaXNoZXIy MTg3NDExNQ==