Agency offers ‘exceptive relief’ from ‘beneficial ownership requirements’ under CDD

Premium finance lending products that allow for cash refunds have been extended “exceptive relief” from the application of the “beneficial ownership requirements” under customer due diligence rules that took effect Friday, the Financial Crimes Enforcement Network (FinCEN) said.

FinCEN issued an administrative ruling Friday afternoon announcing the “exceptive relief.” In the ruling, the Treasury law enforcement agency noted that premium finance lenders provide loans to businesses to cover insurance premiums.

“In the normal course of business, premium finance lenders process a significant number of cash refunds each year,” the agency said.

It stated that the Beneficial Ownership Rule currently exempts covered financial institutions from the requirements to identify and verify the identity of the beneficial owner of legal entity customers at account opening to the extent that the legal entity customer opens the account for the purpose of financing insurance premiums and for which payments are remitted directly by the financial institution to the insurance provider or broker unless there is a possibility of cash refunds.

FinCEN said the ruling provides exceptive relief to covered financial institutions from the requirements to collect and verify the beneficial owner of a legal entity customer opening such premium financing account when there is a possibility of a cash refund. “This ruling also reminds covered financial institutions of their obligation to comply with all other applicable BSA requirements, including the filing of suspicious activity reports,” the ruling states.

Administrative Ruling: Premium Finance Cash Refunds and Beneficial Ownership Requirements for Legal Entity Customers