Intersection of AML-OFAC Requirements with FATCA Requirements - FinCen, Customer Onboarding & More

Why Should You Attend:

FinCen’s proposed rule on beneficial ownership (“Customer Due Diligence Requirements for Financial Institutions”) and the EU’s Fourth Anti-Money Laundering Directive both set the threshold for identifying an entity’s individual beneficial owners at 25% (or otherwise exercises control). Yet, FATCA has a 10% threshold while OFAC’s threshold could be even lower. How should financial institutions cope with these divergent requirements?

With the growth of AML fines by the Government (State and Federal) including Standard Chartered’s $300 million settlement and BNP Paribas’ $10 billion settlement, financial institutions need to exercise greater care than ever to prevent inadvertent violations. One of the fundamental concepts in AML is KYC/CDD – Know Your Customer/Customer Due Diligence. Despite the fact that is appears that FinCEN is about to codify the 25% threshold, the industry is still faced with FATCA’s 10% trigger for foreign entities to determine a “Substantial U.S. Owner”. This session will explore the different requirements and provide specific suggestions to avoid running afoul of these regulatory requirements.

Areas Covered in the Webinar:

• Review which types of financial institutions are covered by FinCEN proposed regulations
• Analyze FinCEN definition of “Legal Entity” and implications of such definition
• Overview of EU requirements and status of directive
• Assess FATCA requirements and relevance to AML practices
• Evaluate OFAC requirements on “Shadow SDNs”, differences between regulations and Q+A
• Compare and contrast different regulatory regimes (FinCEN, EU, FATCA, OFAC)
• Evaluate exemptions in FinCEN proposed regulations, compare to EU directive
• Review recommended “best practice” CDD procedures to be applied

Who Will Benefit:

• Compliance and legal personnel
• Internal Auditors
• Consultants
• Operations (onboarding) personnel
• Management levels responsible for Internal Audit, Compliance or Onboarding
• External Auditors

Instructor Profile:

STEVEN G. LEWIS, CPA, MBA, CAMS

Senior Manager, WeiserMazars, LLP

Steven has over 35 years of experience performing operational, financial, and regulatory compliance projects in the financial services industry. He is a WeiserMazars Practice Leader in BSA/AML and is well-versed in capital markets, compliance and Sarbanes-Oxley. Steven has extensive experience in BSA/AML controls reviews, internal control audits, regulatory compliance reviews, policy and procedure development, bank operations, capital markets, investment portfolio management, trading fraud prevention, and risk management programs.

Topic Background:

One of the fundamental concepts in AML is KYC/CDD – Know Your Customer/Customer Due Diligence. Long-standing guidance requires financial institutions as part of their KYC program, to know who ultimately owns or controls its legal entity customer (specified by FinCEN as “corporations, limited liability companies, partnerships or other similar business entities”). For the sake of simplicity and because it felt that existing risk based CDD approaches were appropriate, FinCEN excluded trusts from the scope of the proposed regulations although trusts are still covered by the EU directive. Until recently, there has never been any formal guidance as to the level of ownership needed before triggering the requirement to identify the beneficial owners of legal entity customers, although 25% was a widely used trigger.

Despite the fact that is appears that FinCEN is about to codify the 25% threshold, the industry is still faced with FATCA’s 10% trigger for foreign entities to determine a “Substantial U.S. Owner”. In addition, OFAC just revised its guidance on “Shadow SDNs”, which deals with entities that are directly or indirectly owned by one or more blocked persons whose ownership percentage aggregates at least 50%. OFAC’s Q+A #401 Example 3 deals with a 40% owner and a 10% owner. That would seem to imply a 10% threshold, similar to FATCA, but the actual regulations do not specify a threshold. Thus, a literal reading of the regulations would seem to indicate that any ownership percentage counts when aggregating multiple owners for purposes of the 50% test.

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