Beneficial Ownership and Politically Exposed Persons (PEPs) Flashcards

Which of the following entities is typically EXEMPT from FinCEN beneficial ownership reporting under the Corporate Transparency Act?

Answer: A publicly traded company subject to SEC reporting requirements

Publicly traded companies subject to SEC reporting requirements are among the 23 categories of entities exempt from CTA reporting because their ownership is already publicly disclosed.

When a financial institution identifies a discrepancy in beneficial ownership information provided by a customer, what is the appropriate response?

Answer: Conduct additional due diligence to resolve the discrepancy; escalate and file a SAR if suspicion remains

FinCEN guidance requires institutions to conduct additional due diligence when discrepancies arise, and to file a SAR if the discrepancy cannot be satisfactorily resolved and suspicion of illicit activity remains.

A bank is onboarding a family trust as a new client. Who should be identified as the beneficial owner?

Answer: The settlor, trustee(s), protector (if any), beneficiaries, and any other natural person exercising ultimate effective control

For trusts, beneficial ownership extends to all parties exercising control or ownership over trust assets, including settlors, trustees, protectors, and beneficiaries, to ensure true ownership is transparent.

What is 'PEP screening' and at what point in the customer lifecycle should it occur?

Answer: An ongoing process at onboarding and periodically throughout the relationship to detect new PEP status or connections

PEP screening must be conducted at onboarding and on an ongoing basis because customers can acquire PEP status after account opening (e.g., a customer is elected to public office), requiring continuous monitoring.

Which approach does FATF recommend for applying beneficial ownership and PEP controls?

Answer: A risk-based approach, applying enhanced measures proportional to the level of assessed risk

FATF's core principle is the risk-based approach: institutions should apply enhanced measures to higher-risk customers and relationships (including PEPs and complex ownership structures) proportionate to assessed risk.

Which international standard specifically addresses beneficial ownership transparency for legal persons and legal arrangements?

Answer: FATF Recommendation 24 (legal persons) and Recommendation 25 (legal arrangements)

FATF Recommendations 24 and 25 specifically require countries to ensure adequate, accurate, and timely information on beneficial ownership is available for legal persons and legal arrangements such as trusts.