Q: If an individual named as a beneficial owner of a new legal entity account is an existing customer of the covered financial institution subject to the financial institution’s CIP, is a covered financial institution still required to identify and verify the identity of this individual, or may it rely on the CIP identification and verification of the individual that it previously performed?
A: In general, covered financial institutions must identify and verify the identity of the beneficial owner(s) of legal entity customers at the time each new account is opened. However, if the individual identified as the beneficial owner is an existing customer of the financial institution and is subject to the financial institution’s CIP, a financial institution may rely on information in its possession to fulfill the identification and verification requirements, provided the existing information is up-to-date, accurate, and the legal entity customer’s representative certifies or confirms (verbally or in writing) the accuracy of the pre-existing CIP information.
For example, a representative of X Corp opens a new account for the company at a covered financial institution and identifies John Doe, who has a personal account at the institution, as a 25 percent equity owner of X Corp. As required under the CIP rule, the institution identified and verified John Doe’s identity at the time the personal account was established. In this situation, a covered financial institution may rely on the pre-existing CIP identification and verification information it maintains for John Doe, provided that X Corp’s representative certifies or confirms (verbally or in writing) the accuracy of the pre-existing information on John Doe in order to comply with the Rule. The covered financial institution’s records of beneficial ownership for the new account could cross-reference the relevant CIP records and the verification of information would not need to be repeated.
The above FAQ was included in FinCEN’s 2nd set of CDD FAQs that were released in April 2018. The FAQs are provided to assist financial institution in understanding the scope of the customer due diligence / beneficial ownership rule. The 2018 FAQs may be found here: