1. What Constitutes a “Triggering Event?”
Presentation Deck
Beneficial Ownership
What Constitutes a “Triggering Event?”
October 4, 2017
Amanda

2. Beneficial Ownership - What Constitutes a “Triggering Event?”
October 4, 2017
Amanda

3. \
The views and opinions expressed here are those of the speakers. They do not represent an official position of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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5. Ally Financial Virginia Credit Union
Megan Hodge Chris Gumm
Ally Financial Virginia Credit Union

6. Amends BSA to add “5th Pillar”
There are four key elements of customer due diligence (CDD):
Current CIP
Customer Identification and Verification
Beneficial ownership identification and verification
Risk-based procedures for conducting ongoing customer due diligence:
Understanding the nature and purpose of customer relationships to develop a customer risk profile; and
Conducting ongoing monitoring to identify and report suspicious transactions and, on a risk-basis, to maintain and update customer information. Customer information shall include information regarding the beneficial owners of legal entity customers
NEW! 31 CFR
Amends BSA to add “5th Pillar”
Focus of today

7. What Does the Final Rule Require?
A financial institution must update customer information, to include beneficial ownership information, when it detects information about the customer in the course of its normal monitoring that is relevant to assessing or reevaluating the risk posed by the customer.
Applies to all legal entity customers, including those existing on the Applicability Date.
Does not require a periodic update of customer information
Updating requirement is event-driven and should occur as a result of normal monitoring.

8. Examples in the Final Rule of events requiring updates to Beneficial Ownership:
Information indicating a possible change in the customer’s beneficial ownership, because such information could also be relevant to assessing the risk posed by the customer
A significant and unexplained change in the customer’s activity, such as executing cross- border wire transfers for no apparent reason or a significant change in the volume of activity without explanation

9. Are these Triggering Events
Are these Triggering Events? Potential Triggering Events from the Front Line:
Opening a new account including loans
Loan extensions or renewals
Change in signers and/or beneficial owners
Change in ownership structure of business
Knowledge that the beneficial owners have changed
Address changes or other updates to account/relationship records

10. Are these Triggering Events
Are these Triggering Events? Potential Triggering Events from the Back Office:
Increase in Currency Transaction Report (CTR) filings
Knowledge that the beneficial owners have changed
Designation of Exemption (CTR Exemptions)
314(a) Positive match
314(b) Inquiries
Criminal subpoenas/law enforcement inquiries

11. Are these Triggering Events
Are these Triggering Events? Potential Triggering Events from Transaction Monitoring:
Significant and unexplained change in customer activity/ deviation in expected activity
Filing a Suspicious Activity Report (SAR)
High risk clients

12. Practical Tips to Identifying Triggering Events:
DO:
Stay focused on events that are relevant to the risk posed by the customer
Identify events that have a “bright line”
Focus on relevant processes within your institution
Keep it simple
DON’T:
Don’t include too many triggering events
Don’t over-complicate the process
Don’t feel pressure to adopt every triggering event you hear about
Don’t forget to follow through to ensure beneficial ownership has been updated

13. Next Steps to Ensure Success:
Discuss various potential Triggering Events with business and select the ones that best fit your institution, based on your business, process and clients
Update policy and relevant procedures
Define controls and, as needed, reporting, to allow management to track updates required by Triggering Events
Conduct training for impacted associates and departments
Define oversight protocols to monitor the new process after the effective date