Q: Are covered financial institutions limited to the Internal Revenue Code (IRC) definitions of charities, non-profits, or similar entities when assessing their eligibility for exclusion from the definition of legal entity customer?
A: No. The exclusion from the definition of legal entity customer for charities and non-profit entities is not limited to those entities that meet the definition or description of charitable, nonprofit, or similar entities under the IRC. The Rule does not rely on the tax-exempt status of an entity as described in the IRC. All nonprofit entities—whether or not tax-exempt—that are established as a nonprofit, or nonstock corporation, or similar entity that has been validly organized with the proper State authority are excluded from the ownership/equity prong of the requirement because nonprofit entities generally do not have ownership interests. Financial institutions, however, are required to collect beneficial ownership information under the control prong from any such entity.
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: