Originally published on May 11, 2016, FinCEN's "CDD Rule" laid out how covered financial institutions should handle ascertaining details on the identity of individuals who own or control legal entities, citing the innate anonymity surrounding being a controlling party and beneficial owner of an entity.
The FAQ goes in to beneficial ownership threshold and whether or not a covered financial institution could enact more stringent policies in comparison to those written by FinCEN, how far "down" a covered financial institution needs to research in terms of complex ownership structures, what means of identity verification are sufficient, collection of physical addresses (residential vs. business), re-identifying an existing customer who becomes a beneficial owner of a new entity with a new account, beneficial ownership information retention, and more.
These types of questions are extremely relevant in today's AML landscape, as bad actors strive to work in the shadows of the existing financial system. Utilizing shell companies with complex ownership structures makes identification of true beneficial ownership difficult for many financial institutions.
This is not only a threat in the United States, but a wide-reaching, global issue. During the Egmont Working Group and Heads of FIU Meeting held in Buenos Aires in March 2018, the current FATF President, Santiago Otamendi, remarked that "improving transparency and the availability of beneficial ownership information is also a high priority for FATF and Egmont" and that these groups are "carrying out a joint project on the risk of abuse of corporate vehicles, legal arrangements, and professional intermediaries."