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Middesk recently participated in a webinar hosted by American Banker, where experts discussed the latest changes announced by the Financial Crimes Enforcement Network (FinCEN) and their implications for financial institutions. The panelists—Middesk's CEO and co-founder Kyle Mack and Debra Geister from Socure—shared their insights on these updates and the strategies organizations should consider to stay compliant. If you missed the webinar, here are the 6 key takeaways from their conversation.
1. Beneficial Ownership Reporting is Here to Stay
One of the main topics of the webinar was the Corporate Transparency Act (CTA), which introduced the requirement for companies to report beneficial ownership information (BOI) to FinCEN. As of January 2024, entities like corporations and LLCs must disclose owners who hold at least 25% or more of a company or exercise significant control. BOI reporting aims to enhance transparency, deter money laundering, and combat illicit financial activities. However, many financial institutions are still grappling with the complexities of access to FinCEN’s registry and how these changes impact customer onboarding and compliance practices. Read more about the latest BOI reporting requirements from FinCEN, including key takeaways from their recent webinar.
2. The Growing Role of Technology in AML Compliance
As FinCEN continues to modernize its Anti-Money Laundering (AML) framework, technology is becoming a critical enabler for institutions to meet the increasing demands of AML compliance. Geister emphasized the need for financial institutions to leverage data, tools, and technologies to identify suspicious activity and maintain a more accurate understanding of who is behind each business transaction. Additionally, companies should start considering more advanced business verification methods beyond traditional, non-documentary approaches – such as integrating third-party data sources for a more comprehensive risk assessment.
3. Expanded Definition of Financial Institutions
The definition of what constitutes a “financial institution” is rapidly broadening. New sectors such as investment advisers, real estate, and even industries dealing with high-value assets like art and antiquities are increasingly falling under FinCEN’s scrutiny. This expansion brings with it a heightened need for these industries to develop or enhance their Bank Secrecy Act (BSA) and AML programs. Financial institutions of all types need to ensure that their compliance frameworks are agile enough to accommodate these updates and prepare for future expansions of regulatory oversight.
4. Increased Reporting and Record-Keeping Requirements
The need for precision in reporting and record-keeping has never been more critical. Financial institutions are tasked with ensuring that they have accurate, up-to-date records of their customers, including detailed information on beneficial ownership and operating locations – and tracking and capturing any changes to that data over time. Regularly auditing customer data is key to maintaining data integrity and ensuring that organizations stay compliant with evolving regulatory standards.
5. Tailoring Change Management to Your Organization
Mack and Geister emphasized that not all institutions will experience the same level of impact from FinCEN’s recent AML updates. Organizations should conduct comprehensive risk assessments to determine where they stand in terms of compliance and which areas of their programs may require significant changes. While some companies may need only minimal adjustments, others may face sweeping reforms, necessitating board-level discussions and the overhaul of policies and procedures.
6. The Importance of a Holistic AML Ecosystem
To effectively manage these changes, companies should develop a robust AML approach that integrates customer due diligence (CDD), sanctions screening, transaction monitoring, and risk assessments. Middesk’s business identity solutions streamline these processes by providing real-time access to accurate, comprehensive business data, helping organizations stay compliant and confidently mitigate risk while supporting business growth. By aligning these pillars with regulatory expectations, institutions can ensure they are well-positioned to meet FinCEN's evolving requirements and reduce exposure to financial crimes.
Conclusion
FinCEN's AML updates, particularly around beneficial ownership and increased record-keeping requirements, will have significant implications for financial institutions. The key to navigating this evolving landscape is adaptability, leveraging tools and technology like Middesk, and implementing a tailored, risk-based approach. As more sectors come under scrutiny and compliance expectations rise, businesses from a wide range of industries must stay proactive in managing these regulatory shifts to safeguard their operations and reputations.
Download our quick guide to get the information you need to stay compliant and gain a better understanding of the differences between Beneficial Ownership Information (BOI) and Ultimate Beneficial Ownership (UBO).
