Anti-Money Laundering (AML) programs are intended to assist financial institutions with detecting and reporting suspicious activities to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury.
In a newly published FinCEN rule, a state-chartered trust company (i.e. with no functional Federal regulator) must implement an AML program and is further required to comply with the Customer Due Diligence and Beneficial Ownership rules.
Previously, state-chartered trust companies were exempt from AML requirements under 31 CFR § 1010.205(b)(2). Further, state-chartered trust companies were not considered a “covered financial institution” under the Customer Due Diligence definitions under 31 CFR § 1010.605(e)(1). Those specific rules have been amended by the final FinCEN rule.
The AML rule change proposal has been in place since 2016, with little discussion of the changes until recently. The final rule included the Customer Due Diligence and Beneficial Ownership rules and was adopted on September 15, 2020 with an effective date as of November 15, 2020; however, the effective date for compliance will be March 15, 2021.
State-chartered trust companies are now required to implement a written BSA/AML Compliance Program, which should capture the following:
- A system of internal controls to ensure ongoing compliance;
- Independent testing of BSA compliance;
- A specifically designated person or persons responsible for managing BSA compliance (BSA Officer); and
- Training for appropriate personnel.
The new rules also require state-chartered trust companies to include as part of their Customer Identification Program (CIP), additional Customer Due Diligence (CDD) and the Beneficial Ownership Rule requirements, which are fairly new to all financial institutions (implemented in 2018). These rules should be an extension of your existing CIP, and require you to verify the beneficial owners of accounts administered by the institution. There are specific rules and carve-outs related to trust accounts depending on the type of account being administered. Refer to the links below for additional information.
Here are some resources to assist you in implementing these requirements:
- FFIEC BSA/AML Manual – Beneficial Ownership for Legal Entity Customers
- FinCEN FAQ – Customer Due Diligence (July 2016)
- FinCEN FAQ – Customer Due Diligence (April 2018)
- FinCEN FAQ – Customer Due Diligence (August 2020)
The above is meant to be a broad summary. If you are interested in learning more or need assistance implementing any of these new FinCEN rules, please feel free to contact Ali Higgs at 206-963-2427 or ali.higgs@complianceservicesgroup.com.
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