ACAMS Greater Philadelphia Chapter Learning Event September 7, 2017 BENEFICIAL OWNERSHIP ACAMS Greater Philadelphia Chapter Learning Event September 7, 2017

AGENDA Welcome & Introduction – ACAMS Board Panelists – Tina Bottaro, Adina Himes – FRB Philadelphia, William Schlameuss - ARC and Dennis Ansbro – Capital One The Basics of the new CDD rule on Beneficial Ownership - William Schlameuss An Overview of FinCEN’s Customer Due Diligence Rule – Tina Bottaro Panel Discussion on Implementing the Rule in Practice – Moderator/Panel Open Q&A with the Panel – Moderator/Panel Thank You & Close Out – ACAMS Board

PURPOSE OF THE RULE Enhance transparency of legal entities. Demonstrate US leadership & credibility in combatting financial crime. Protect US & international financial system. Support enforcement of AML, sanctions, tax regulations, and combatting terrorist financing. Support financial institution monitoring efforts. Codify existing regulatory expectations concerning customer due diligence (CDD) Adds requirement to identify & verify beneficial owners of legal entity customers Subject to some exclusions & exemptions With an optional model form to assist in collection

THE 5TH PILLAR Appropriate risk-based procedures for conducting ongoing CDD to: Understand the nature and purpose of customer relationships; Conduct ongoing monitoring to identify and report suspicious transactions; and On a risk basis, to maintain and update customer information

YOU WILL … BEFORE 11 MAY 2018 Prepare for implementation: A Process for Obtaining Beneficial Ownership or Control Info for 1-5 Individuals. New Accounts During Customer Monitoring Supporting Polices & Procedures Customer Risk Profile Development Training Development and targeted training

… AND AFTER 11 MAY 2018 New accounts opened for new or existing legal entity customers. Beneficial ownership information obtained for monitored accounts in normal course of business. Customer risk profile is updated based on obtained information.

WHO IS A BENEFICIAL OWNER? Ownership Prong: Individual (persons, not entities) that own directly or indirectly 25% or more of equity interest of a legal entity customer. Control Prong: Individual with significant responsibility to control, manage or direct a legal entity customer. 4 owners + 1 (manager) = 5 maximum The Certification of a Beneficial Owner form can be found in Appendix A of the rule. Any person or entity included under either prong is subject to OFAC check. No additional checking required under 314(a) FIs may rely on beneficial ownership supplied by the customer, provided FI has no knowledge of facts that would reasonably call into question the reliability of the information

“CONTROL PRONG” Only the Control Prong of the Beneficial Ownership test is necessary for the following: Charities Nonprofits Non-excluded pooled investment vehicles Key to Control Prong: Significant responsibility to control, manage, or direct the company. Not just the first ‘titled’ individual available.

AND GOING FORWARD Initial information records a point in time No obligation for continuous update  Updates are based on the risk profile  Updates are event driven, when determined in the normal course of monitoring.

LEGAL ENTITY VS. NOT A LEGAL ENTITY Corporation Limited Liability Company Partnership, including limited partnerships Business Trusts (Registered) Not a Legal Entity Natural Person Sole Proprietorship Unincorporated Associations Unregistered Trust An Excluded Entity A legal entity is created by filing of public document with domestic or foreign government. Legal Entity Exclusions: Financial institutions with a federal functional regulator SEC or CFTC Registered Entities (various) Insurance Company Bank Holding Companies Private Bank Subject to 31 CFR 1010.620 (Foreign & $1 Million Minimum)

EXEMPTIONS

THINGS TO DO … Policies Procedures Forms Onboarding Processes System Changes Training Other???

PANEL DISCUSSION ON IMPLEMENTING THE RULE IN PRACTICE

OPEN Q&A WITH THE PANEL

THANK YOU FOR ATTENDING OUR SEPTEMBER LEARNING EVENT!

WILLIAM SCHLAEMUESS William Schlameuss has over 20 years’ experience in regulatory compliance, including BSA/AML/OFAC with a wide range of US branches of major foreign banking organizations from all continents, both as a CCO and a consultant. Mr. Schlameuss has extensive experience with State and Federal Banking regulators in examination preparation, assistance and response, including assistance in the remediation of written agreements for clients. Mr. Schlameuss speaks often on BSA/AML related topics, both for in-person trainings and online webinars.