A broker-dealer must comply with certain requirements of customer identification program (CIP) and customer due diligence (CDD) regulations when distributing to a beneficiary of an individual retirement account (IRA) funds inherited as part of a charitable estate, according to a ruling issued Friday.
The Treasury Department’s financial crimes unit, the Financial Crimes Enforcement Network (FinCEN), in an administrative ruling affirmed that its rules require the broker-dealer to collect certain information under the CIP and CDD rules.
The ruling was issued March 5, but was not published until Friday.
“To the extent that [Broker-Dealer 1] requires the opening of an account, FinCEN’s regulations would require [Broker-Dealer 1] to collect information under the CIP and CDD Rules,” FinCEN’s Deputy Associate Director (Policy Division) James Martinelli wrote.
He said that the broker-dealer is subject to the requirements of the Bank Secrecy Act (BSA) and FinCEN’s implementing regulations. “BSA regulations require that broker-dealers implement a written CIP that includes risk-based policies and procedures that enable the broker-dealer to form a reasonable belief that it knows the true identity of each customer. Specifically, for legal entity customers, a broker- dealer must obtain, at a minimum, the name, address, and identification number, specifically an employer identification number, prior to opening an account,” Martinelli wrote.
Regarding CDD, the FinCEN official wrote that BSA regulations require broker-dealers to establish and maintain written procedures to identify and verify the beneficial owners of legal entity customers, including the collection of the elements for beneficial owners at the time a new account is opened.
For nonprofit organizations such as the unnamed organization that sought the ruling, Martinelli wrote, a broker-dealer would be required under the CDD rule to obtain identifying information, including but not limited to a social security number, for a single individual with significant responsibility to control, manage, or direct the organization.
“The CDD Rule cites as examples an executive officer, senior manager, or any other individual who regularly performs similar functions,” he stated.