Beneficial Ownership and Expanding the Secondary Names Database

This recipe expands the number of owner types stored in the Secondary Names database table (SECNAMES), which is used to link member and non-member records together to denote joint owner and beneficiary relationships on member accounts.  The idea is to allow CUs to designate owners that may not necessarily have all of the same rights and privileges as a true joint owner, complete with their own label and set of rules.

The primary impetus behind the change is the regulatory changes around tracking “beneficial ownership” on organizational accounts, but the changes will also be useful for tracking other ownership types, such as power of attorney (POA) and payable on death (POD) relationships.

NEW!  Recommendations from AuditLink on how to use CU*BASE Tools to Track Beneficial Owners

Some Background

Beneficial Ownership is the next pillar of the Bank Secrecy Act.  The change addresses legal entity accounts only, not natural persons, and requires that credit unions perform additional due diligence on any individual owning 25% or more of the company or who acts as a controlling agent on behalf of the company.  It was designed to curb the use of shell companies to hide the identities of individuals who would normally be blocked from doing business in the U.S.

What does it mean to our partners?  CUs will be able to configure another joint owner type (beneficial owner) for their corporate and other legal-entity Membership Designations.  In addition, there will be a comment field that can be used to designate the individual as belonging under either the ownership or the control prong.  These additional individuals will then be added to the non-member database and automatically be scanned against the OFAC lists when they are created and on a weekly basis thereafter.

If we have one recommendation to our partner strategists and designers it would be to reevaluate your Membership Designations.  Designation Codes are configurable by CU.  Now is the time to review them and understand that this code gives employees who are serving members the visual cues to understand how they should serve that member.  Don’t forget to review your configurable procedures content as well!

Credit unions who have been using Account Comments or other fields to designate a relationship to an account should be re-evaluated as well.  If the new additional ownership type can be used to more easily display and record the relationship, a new relationship type should be configured instead.

Learn more in the AnswerBook:  How the Secondary Names (SECNAMES) file works to store joint owner names

Project Highlights

  • Expand the SECNAMES table to allow for a new type M code (in addition to the existing J and B) for special types of joint owners, such as Beneficial Owners, Authorized Users, Power of Attorney (POA), Payable On Death (POD), Representative Payee, etc.
  • Expand Membership Designations codes to allow the CU to define, by membership type, which owner types are allowed, what the generic label should be, and any other rules needed to control how CU*BASE treats owners marked with that type. For now this means showing these relationships differently on various CU*BASE screens.  It is still up each CU’s policies as to how the members should be serviced.
  • Add a field for comments that the CU can use when linking a secondary name, to explain that specific relationship. Would be visible only on the Secondary Names Inquiry, and perhaps a few other places to be determined.
  • Secondary names marked as type M will not be included in the Teller “Currently Serving” window.

IMPORTANT: Our intent is to allow for a single M-type label per Membership Designation code. The CU decides what the label will be for that particular Membership Designation, and then can link as many of those relationships to the account as needed.  When linking a name, a comment can be added to explain that specific person’s relationship, but as a group all of the names under that M type code (for that Membership Designation Code) would be lumped under a single generic label and treated the same way by CU*BASE screens, reports, and functions.

Open the working research spec/project outline

Special Thanks

Our thanks to representatives from the following CUs who helped us refine the design for this project:  Alpena Alcona Area CU, Fox Communities CU, Frankenmuth CU, Honor CU, Notre Dame FCU, and TBA Credit Union.

Status as of 12/18/2018:  Project #46834 was implemented in the 18.10 release.

Your chefs for this recipe:  Jim Vilker and Dawn Moore

 

Updated
December 18, 2018

One Response to “Beneficial Ownership and Expanding the Secondary Names Database”

  1. Dawn Moore

    A client asked the question, “Will there be a flood of the ‘M’ code for this project or will those appear or change on MASTER as the credit union associates the code to the Membership Designation Codes? Will we have to manually update the new field in SECNAMES file for the Beneficial Owner Code or will it come over into the SECNAMES from what we assign to it from the Membership Designation configuration?”

    We have no plans to change anything in a credit union’s database when we release the new functionality. Since Due Diligence codes are CU-defined, and since the new secondary owner type is for use with things other than just beneficial owners, there will be no linkages between those features. CUs will need to link the new ownership types (or change existing links) and then can separately assign due diligence flags as appropriate. However, just like you can now change an existing relationship from a ‘J’ joint owner to a ‘B’ beneficiary with just a couple of clicks, you will be able to do the same if you have an existing record set up as a joint owner but you would rather it be flagged as an ‘M’ type on that particular account.

    Reply

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