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New Consumer Due-diligence Requirements Mean Credit Unions Have to Change Bank Secrecy Act (BSA) Procedures

Starting May 11, 2018, credit unions and other financial institutions are required to have new procedures in place when it comes to customer/member due-diligence, primarily involving “beneficial owners” and “legal entity” members, reminded CUNA.
But the trade association reported that the new requirements do not mean credit unions have to update member information on a continuous or periodic basis.
“The rule does not require credit unions to update member information on a continuous or periodic basis. The updating requirement is event-driven and only occurs as a result of detecting unusual activity through normal monitoring,” CUNA stated.
The new procedures required by May 11, 2018, are:
  • Procedures to identify and verify beneficial owners of legal entity members. 
  • Procedures for making and maintaining a record of all the identification and verification information collected for beneficial owners of legal entity members. 
  • Appropriate risk-based procedures for conducting ongoing member due diligence. 
  • Updated recordkeeping procedures to record, any identification information obtained, a description of any document relied upon, any non-documentary methods used; and any measures taken in response to any substantive discrepancies, as well as the results of those actions.
According to CUBA, the rule also provides two new definitions:
  • “Beneficial owner:” Ownership criteria (25% or more equity interest) and/or control criteria (has significant responsibility to control the legal entity). 
  • “Legal entity:” Accounts owned by legal entities, rather than natural-person accounts.

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