FinCEN Regulation to Reduce Risk of Money Laundering and Corruption
In case you missed it, the Financial Crimes Enforcement Network (FinCEN) published the Customer Due Diligence Requirements for Financial Institutions Rule, or the CDD Rule, on May 11, 2016. The goal of this new regulation is to reduce the risk of money laundering and corruption through business entities and nonprofits. The Rule requires that financial institutions collect and verify the identity of Legal Entity Customers’ beneficial owners.
A Legal Entity Customer is any entity created by filing documents with a Secretary of State or similar regulator. Examples of Legal Entity Customers include registered business merchants and nonprofit organizations. As it relates to business merchants, a beneficial owner is someone who owns 25% or more of the business's equity.
For business merchants, information will be collected for up to five individuals, including up to four beneficial owners and the financial administrator. The business representative who signs up for your platform’s payments solution will submit basic information on all beneficial owners — WePay will not reach out to additional beneficial owners directly.
For nonprofit organizations a beneficial owner is someone with significant responsibility to control, manage, or direct the organization (e.g., a Chief Executive Officer, Vice President, or Treasurer), or a controller. Information will only be collected from one individual from a nonprofit organization.
If your platform uses WePay’s onboarding iframes or redirects your merchants to wepay.com to onboard, WePay will update our forms to collect beneficial owner information from your merchants. For both of these scenarios, there is no need for further action by your platform.
For platforms that use WePay’s Know Your Customer (KYC) API, you will need to upgrade your API version to collect beneficial owner information from merchants. The API upgrade must be completed by April 30, 2018. We’ll reach out to impacted partners with the API version and documentation once it is available, which will be on or before March 30, 2018.
See below for more information on the new regulation and what you need to do.
Who is impacted?
Information will be collected for new merchants that your platform onboards. There is no impact to existing merchants that have onboarded successfully. However, if KYC information needs to be modified for an existing user (e.g., if there is a change in tax identification number), they will have to provide KYC information again and provide beneficial ownership information, as appropriate.
What information needs to be collected on beneficial owners?
The same information required from your existing merchants – such as name, address, and date of birth – will be asked of beneficial owners.
What do I need to do to ensure that my platform is compliant with this new requirement?
As previously mentioned, if you use WePay’s merchant onboarding iframes or redirect to wepay.com for onboarding, no action is required. If your platform uses our KYC API, you will need to upgrade your API version.
When do I need to do this by?
WePay will release our new API version on or before March 30, 2018. If your platform uses our KYC API, you will need to complete the upgrade by April 30, 2018. Your Technical Account Manager or Field Technical Services Manager will reach out to you as soon as the new API version is available.
What happens if I don’t upgrade my API version in time?
For platforms that use WePay’s KYC API that do not upgrade within the required timeframe, users will be unable to onboard after the enforcement date of May 11, 2018. Once your platform upgrades to the correct API version, the block will be automatically lifted.
Where can I get more information on the regulation?
We recommend the below links for added context and information on the regulation:
Who should I contact if I have additional questions?
If you have additional questions, reach out to your Technical Account Manager or e-mail email@example.com.