New 5th Pillar Testing Expected for Credit Unions and Banks

With the enactment of the Corporate Transparency Act (CTA) on January 1, 2024, small and medium sized businesses will need to register their beneficial ownership information directly with FinCEN - not just with their primary financial institution. Failure to report BOI data to FinCEN could result in daily fines of up to $500 per day if not completed by the end of 2024. While banks and credit unions have been collecting BOI information for their business clients since 2018 under rules set forth by FinCEN, this is a brand-new requirement for those same business clients to independently report their own BOI information directly to FinCEN themselves. Accordingly, not only should banks and credit unions spread the word to their own small and medium-sized business clients about FinCEN's new BOI data submission requirement, but we expect the compliance departments of banks and credit unions will have a new 5th pillar testing requirement to validate the newly submitted data. To explain further, as a regulatory compliance consulting firm for the banking industry, we annually examine the anti-money laundering compliance programs for our bank and credit union clients. As a key element of those annual test procedures, we always test the efficacy of their internal "5th Pillar" program to be sure they are complying with FinCEN's updated "know your customer" mandates. Going forward and starting in 2024, it would be a reasonable standard to expect that the BOI information collected by the institution matches the BOI information that businesses independently submit to FinCEN. Examiners will also be looking to see that you have checked in with your business clients BOPI data regularly, (especially in 2024) to be sure you have the most recent BOI data on file at your institution and that it matches the FinCEN submissions. BSA Compliance Tip: When businesses finalize their BOI data submission, they can print out a record of the data submission. We recommend that bank and credit union compliance managers obtain the BOI data submission form and include it in their own know your customer documentation. In this way, you can ensure your organization has the most recent and accurate BOI data available for your business customers and thereby head-ff questions or criticisms from examiners and independent auditors like us. An efficient way to collect the BOI submission forms might be in connection with the annual underwriting review performed by the institutions credit department. For more information on the Corporate Transparency Act please check out this blog here: Navigating the Corporate Transparency Act: A Guide to Beneficial Ownership Information Reporting - Hauser Jones and Sas