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2024 Beneficial Ownership Rules Explained: How FIs Can Stay Compliant and Avoid Penalties

Having a strong KYC and KYB program is vital for FIs to fight fraud and risk. And now, this is becoming less of an option. In an effort to combat financial crimes such as money laundering and terrorist financing, new beneficial ownership rules have been implemented for deposit accounts at financial institutions (FIs). These rules require FIs to identify and verify the beneficial owners of account owners for both new and existing deposit accounts.

So, what exactly is a beneficial owner? A beneficial owner is any individual or business who directly or indirectly owns 25% or more of a deposit account or has significant control over it. This could also include individuals such as executives, directors, or shareholders.

Under the new rules, FIs are required to collect identifying information for beneficial owners, including their full name, date of birth, address, and social security number or passport number. Action is also required to verify this information through reliable sources, such as government-issued identification or publicly available information.

While these rules may seem like an inconvenience for consumers and businesses opening new deposit accounts, they serve an important purpose in preventing financial crimes. By identifying the beneficial owners, FIs can better assess the risks associated with these customers and monitor their transactions for suspicious activity.

Additionally, these rules help ensure a level playing field for businesses by preventing anonymous ownership and promoting transparency. This can help build trust in the financial system and prevent using FIs for illicit activities.

It's important to note that these rules only apply to new deposit accounts at banks. Existing accounts are not affected by the new rules, although banks may choose to update their customer information as part of their ongoing customer due diligence.

In conclusion, the new beneficial ownership rules for new deposit accounts at banks may seem like a hassle to some, but they play an important role in preventing financial crimes and promoting transparency in the financial system. By identifying and verifying the beneficial owners of legal entity customers, banks can better assess the risks associated with these customers and prevent the use of banks for illicit activities.

FIs have done so much; this should be one less thing to worry about.

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Stan Cowan

Stan Cowan

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04 Oct 2022

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RegTech

Regulatory technology, is a new technology that uses information technology to enhance regulatory processes. With its main application in the Financial sector, it is expanding into any regulated business with a particular appeal for the Consumer Goods Industry. Often regarded as a subcategory under FinTech, RegTech puts a particular emphasis on regulatory monitoring, reporting and compliance and is thus benefiting the finance industry.


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