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Is your bank ready for the new beneficial ownership requirement? 3 mistakes to avoid

Ensure your organization is prepared to go live by avoiding three common mistakes and providing the support your teams need.

Is your bank ready for the new beneficial ownership requirement? 3 mistakes to avoid

The new beneficial ownership rule that was announced by FinCEN in 2016 goes live on May 11, 2018. On that day, all financial institutions will be required to identify the ultimate beneficial owners, and a control person of their entity customers.

This new requirement has wide-reaching impact within your institution: policies, procedures, technology, education, communications, as well as your front-line and back-office staff. Your organization has likely spent many hours discussing the nuances of the rule and pulled in resources from across the bank. But are you ready to go live? Have you truly positioned your institution for success?

Your readiness plan should have defined areas of impact, key stakeholders, and a roadmap to take you through day one or go-live. But, this plan will only be successful if the key requirements are sustained beyond day one.   

Throughout the industry, there are common questions and concerns about the implementation of the new rule. Essentially there is a struggle to pivot from the “what” – the new beneficial ownership information to collect – to “how” this data gathering will work in practice, and how to make sure it’s done well and consistently. While these questions can be applied to many aspects of the rule, there are three common pitfalls that we have seen in the industry that top- performing institutions are considering when planning:

  1. Lack of clear processes and procedures

  2. Ineffective technical integration

  3. Failing to sufficiently educate the front line

Mistake 1: Lack of Clear Processes & Procedures

The most common pitfall, is not having clearly defined or easy-to-follow processes and procedures. While it is up to compliance and risk teams to determine how an institution will comply with the new requirement from FinCEN, the burden ultimately falls to the front line to collect the appropriate information. If your processes are not clear and easy-to-follow, your institution runs the risk of collecting incomplete or inaccurate data, leading to employee confusion and negatively impacting the customers’ experience.

To avoid this, front-line team members should be included in discussions to define processes and procedures so that they meet requirements, while minimizing disruption. These team members can provide insight into what will work given how they already collect information from customers and what gaps must be addressed prior to go-live. The front line should also participate in a pilot of the processes and procedures to ensure that the expected outcome aligns with the actual outcome and can be repeated every time information is collected.  

A prime example of this is with non-profit customers. If a not-for-profit business customer wants to open an account, does your front line know that they do not need to collect ultimate beneficial ownership information and should focus instead on identifying the control person? In fact, if the front line were not aware of this and a process is not in place to make this determination, a customer may be turned away because ultimate beneficial ownership information cannot be provided. In this instance, the customer is likely to find another institution that is asking for the right information and can better facilitate opening an account. Alternatively, if the banker ends up collecting ultimate beneficial ownership information on an individual to satisfy a data collection requirement, they will end up with inaccurate data.  

By having a clear process in place, such as a decision tree, the front line can ensure a seamless account opening where the right questions are asked, and the appropriate information is collected.

To be sure, an exhaustive list of every possible scenario will not be developed. Rather, to prepare for the unknowns, a clear and quick escalation path should be put into place for the front line. If they exhaust all resources and the path forward is still unknown, they should be able to quickly identify an expert resource who can provide a definitive solution.

The Bottom Line: Clear, easy-to-follow processes will prevent front-line staff from pursuing a partially accurate path and gathering inaccurate data. It also ensures a better customer experience by providing quick resolutions and a seamless experience.

Mistake 2: Ineffective Technical Integration

Many institutions have utilized the new beneficial ownership requirement as an opportunity to update their technology. Others have decided to integrate the new requirement into their current systems. Regardless of the category your institution falls into, it is imperative that your newly defined policies and processes drive your technology requirements as opposed to technology driving your processes. If it does not, you run the risk of inappropriate data collection, as well as inaccurate data screening and monitoring.  

To ensure that your technology integration is in lockstep with your new processes and procedures, build backstops into the system to prevent the collection of inaccurate data. Also, be sure to include the front line in business requirements development and user acceptance testing so you can incorporate the perspective of those who will ultimately use the system. This will ensure that whatever changes or updates you are introducing can be integrated into the already existing processes in perpetuity. The goal should be to enhance the data that is already being collected from entity customers without disrupting the level of service that your institution’s customers have come to expect.

The new certification form that will be required as part of beneficial ownership is a great example of the potential to misalign technology with policies and processes. Under the updated regulation, front-line staff must obtain an attestation from the customer stating that the information they have provided is true and accurate to the best of their knowledge. If you use the sample form provided by FinCEN, then this form will allow for the collection of the core CIP data required for all identified ultimate beneficial owners and the control person. Further, if your institution has decided to collect this information and the attestation using a paper form instead of an e-document, you must be sure that the data makes its way into your client onboarding system. Per the rule, the information must be screened and monitored. If you do not have the required fields in your system, information collected on paper may not ultimately be screened and/or monitored. This is a critical gap as your institution is liable for information collected, regardless of whether it is captured via paper or an electronic system.

The Bottom Line: By using technology to support the collection of beneficial ownership information or, at a minimum, ensuring that there are no gaps between the data collected by the front line, you will create a more efficient process and avoid missing individuals that should be identified and addressed through screening and monitoring.   

Mistake 3: Failing to sufficiently educate the front line

As we’ve stated, much of the burden to comply with the new beneficial ownership requirement will fall to the front line. These will be the people responsible for working with customers to obtain the necessary information while still providing top-tier service. In addition to clearly defining policies and processes and updating technology, developing a clear communication and training plan ensures that your front lines are prepared for the new requirement. To do this, you will need to communicate often and provide targeted training, as well as an ongoing support system for after go-live to sustain the changes.

Communications should clearly define the changes that are coming as well as why the changes are being made. Because line staff have a plethora of policies and processes that they need to incorporate into their daily lives, minimizing the information transfer to key elements of change insures messages are not lost. Taking this a step further and making these communications customer facing is even better. Additionally, specific training materials should be developed and delivered to the appropriate resources so that people are only getting the information they need. Lastly, escalation paths for post go-live should be clearly defined and published to address questions or special cases that the front line may encounter.

Without consistent communication and targeted training, you will end up with a frustrated front line that struggles to comply with the new requirements and collect the necessary information. Additionally, if there is no formal support system in place for the front line after the requirement goes live, the front line may collect inaccurate or unnecessary information, or take an extended amount of time to resolve customer issues.

The importance of education is highlighted when dealing with challenging clients that may not want to provide information regarding the entity they are representing. Instead of just telling the customer that the information is required, or the account will not be opened, the right education will arm the banker with the ability to explain why the information is required. Education also allows the front line to collect only the most appropriate information for the entity type and proposed product.

While education is easy to deprioritize when there are competing priorities for resources, it is a critical component of ensuring your institution is not only ready for the implementation of the new regulation, but that the implementation is successful over time.


Though on the surface, the new beneficial ownership rule appears straight forward, the reality is that it is deceptively challenging to implement. To be successful, you must have clearly defined and easy-to-follow process and procedure. Technology changes or updates must support those processes by facilitating data collection, and a thorough education and communications strategy will ensure your front-line staff are equipped with the resources they need to manage their clients. Though you may believe that you are ready for go-live, to be successful, be sure that you do not fall prey to any one of these pitfalls and take the time to ensure that that what works on day one will also work after year one.

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