Can I Make Changes to FinCEN’s Beneficial Ownership Model Form?

By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP; and Rhonda Castaneda, CRCM

Q My bank has developed its own form to collect beneficial ownership information. The bank has added questions to the model form asking about anticipated check cashing activity, wire transfer activity, and other types of money service business activity such as sales of prepaid cards. Does the beneficial ownership rule permit modification of the model form in this manner?

A Banks may, but are not required to, use the model form in the Financial Crimes Enforcement Network’s beneficial ownership rule. Financial institutions can use their own forms or can obtain the information by any other means, provided the person opening the account and providing the information certifies that it is accurate.

What is helpful about the model form is that it is designed to collect all the information the bank must obtain to comply with the beneficial ownership requirement. In addition, the model form includes an explanation to help customers understand why the bank is asking for the information. Finally, the model form includes a certification section, thus making it easier for banks to demonstrate compliance with the certification of accuracy.

We’ve heard that some banks plan to use the model form as it is, since it is straightforward and will do just what is needed. Whether the bank includes additional questions is a business decision, but if it does, it should be prepared to explain to the examiner how the changes to the form are consistent with the bank’s overall customer due diligence efforts. (Response provided January 2018.)

 

Q I have been told that there is no presumption of privacy between applicants regarding credit report information and that such information may be included in the Regulation B adverse action notice. Is that true?

A Correct. The adverse action notice can explain to the applicant that the application was denied due to the co-applicant’s liens, judgments or other negative credit history. However, credit scores are confidential and may not be shared, even among joint applicants. Thus, banks providing an applicant’s credit score because it was used in making an adverse decision, as required under §615(a)(2)(B) of the Fair Credit Reporting Act, should only provide it to the person to whom the credit score relates. If both reside at the same address, for example, separate envelopes containing credit scores could be inserted into the adverse action notice envelope. (Response provided January 2018.)

 

Q Must customers stopping payment on a check or ACH item provide the bank with a reason for the stop payment? If so, is “insufficient funds in my account” a valid reason?

A Neither Regulation E (Electronic Fund Transfer Act) nor the UCC requires customers to provide a reason for requesting that payment be stopped. Indeed, customers may request a stop payment for any reason and, if timely made and with sufficient information, the bank must stop payment. For example, under §1005.10(c) of Regulation E, customers may stop payment of a preauthorized electronic fund transfer by notifying the bank orally or in writing at least three business days before the scheduled date of the transfer. For checks, banks need sufficient information to identify the item, such as the payee name and the amount and/or number of the check. (Response provided January 2018.)

 

Q Our bank wants to send a letter to pre-screened customers as a reminder to respond to a marketing letter that was sent out several months ago. The bank plans to include the terms of the initial offer as part of the reminder. Is the reminder letter considered a prescreened solicitation requiring the opt-out notice? What if the bank removes the offer terms and just sends a reminder?

A The question is whether the reminder letter is a “solicitation” under the Fair Credit Reporting Act. The term “solicitation” is not defined. However, from the customer’s standpoint, a reminder—with or without the terms of the offer—might be viewed as a solicitation. Moreover, the purpose of the opt-out notice is to allow consumers to choose not to receive any solicitations based on prescreened lists, not just those related to one specific offer. (Response provided January 2018.)

 

Answers are provided by Leslie Callaway, CRCM, CAFP, director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, compliance analyst, ABA Center for Regulatory Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.