Certification regarding Beneficial Owners of Legal Entity Customers Lstageorge
May 14, 2018 – The U.S. Treasury Department`s Financial Crimes Enforcement Network („FinCEN“) has released new customer due diligence requirements for financial institutions (the „CDD Rule“, which came into effect on May 11, 2018. When FinCEN published the CSD Rule, it noted that the identification and verification of beneficial ownership of legal entities is one of the fundamental elements of customer due diligence (CDD) and should be a requirement of the anti-money laundering (AML) program of any covered financial institution. The CDD rule contains explicit fixed-term contract requirements for certain financial institutions under the Bank Secrecy Act and requires these financial institutions to identify and verify the identity of the beneficial owners of certain customers of legal entities. 20. June 2018 – As we noted last month, the U.S. Treasury Department`s Financial Crimes Enforcement Network („FinCEN“) released new customer due diligence requirements for financial institutions (the „CDD Rule“), which came into effect on May 11, 2018. Under the new CSD rule, FinCEN had also published a form of certification concerning beneficial ownership of clients of legal entities, but it was not adapted to the syndicated loan market. At the request of members of the LSTA Primary Market Committee, the LSTA worked with SIFMA to develop a BOC form that could be used by its members and credit market participants (BOC form). Since the effective date of the rule, the LSTA has monitored the response to the use of the LSTA-BOC form and held a meeting of the LSTA`s Primary Market Committee (PMC) last week to solicit members` contributions to the use of the form and any revisions made to it. The current form currently states that the borrower is authorized, on behalf of each identified beneficial owner, to provide certification of the form and the potentially confidential and sensitive information attached to the form to the targeted financial institutions of the consortium.
It appears that the parties are considering extending this authorization language in certain circumstances, including when the agent wishes to share the form and attachments directly with other covered financial institutions in the union, although the agent`s practice is not uniform in this regard and no clear practice has yet emerged. The LSTA has engaged external consultants to lead our committee`s work on the privacy issues raised by the sharing of this potentially confidential and sensitive information, particularly in light of the GDPR, which came into effect on May 25. External consultants will attend the next meeting of the Primary Market Committee in July, and members will have the opportunity to discuss relevant data protection issues related to the use and dissemination of the LSTA BOC form and supporting information at that time. We understand that agent banks take different approaches to obtaining beneficial ownership information and sharing it with other syndicated lenders who are also required to receive this information in accordance with the CSD rule. At present, there is no market approach to dealing with this problem, and it seems that banks are proposing to collect and disseminate information in different ways. The PSTA will monitor this issue in the coming weeks and months to see if a market-based approach is developing, but recommends that members carefully consider privacy issues when developing their own internal information-sharing processes (the LSTA has not engaged outside counsel to review the privacy issues raised by the sharing of this potentially confidential information). and sensitive). This form of certification has been adapted to syndicated credit transactions and requires the information that covered financial institutions are required to obtain from legal entities on some of their beneficial owners as part of customer due diligence. Home / Content / Law and Documentation / FinCens Customer Due Diligence Rule – Certification with respect to beneficial ownership of clients of legal entities. FinCEN published a form of certification for beneficial owners of clients of legal persons (BOC form) in conjunction with the new FIXED-term rule, but the form was not adapted to the syndicated loan market.
At the request of the members of the LSTA Primary Market Committee, the LSTA has cooperated with SIFMA to develop an BOC form that can be used by its members and credit market participants who need to receive such information from a borrower/issuer. This version is available here. In addition, we have revised the form of LSTA`s revolving credit facility to address these issues (available here), for example, by extending the conditions precedent to refer to and including an agreement requiring the borrower to provide the certificate). LSTA`s market advice on form BOC, published on May 11, is available here. Home / News & Resources / News / FinCen`s new customer focus.