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FinCen's New Customer Due Diligence Rule

June 20, 2018 - As we noted last month, the US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published new Customer Due Diligence Requirements for Financial Institutions (the “CDD Rule”) which became effective on May 11, 2018. In connection with the new CDD Rule, FinCEN had also published a Form of Certification Regarding Beneficial Owners of Legal Entity Customers, but the form was not suited to the syndicated loan market.  At the request of members of the LSTA’s Primary Market Committee, the LSTA worked with SIFMA to develop one BOC Form that could be used by their members and loan market participants (BOC Form).  Since the Rule’s effective date, the LSTA has been monitoring the response to the use of the LSTA BOC Form and last week hosted an LSTA Primary Market Committee (PMC) meeting to seek member input on the form’s use and any revisions that were being made to it.  The existing form currently states that the borrower is authorized on behalf of each identified beneficial owner to provide the form’s certification and the potentially confidential and sensitive information attached to the form to the covered financial institutions in the syndicate.  It seems that parties are considering expanding that authorization language in certain circumstances including when the agent may want to disseminate the form and attachments directly to other covered financial institutions in the syndicate, although agent practice in this regard is not consistent and no clear practice has yet emerged.  The LSTA has engaged external counsel to guide our committee work relating to the privacy issues raised by the sharing of this potentially confidential and sensitive information especially in the light of the GDPR which took effect on May 25th. External counsel will join the next Primary Market Committee meeting in July, and members will be given the opportunity to discuss relevant privacy issues relating to the use and dissemination of the LSTA BOC form and supporting information at that time.

The LSTA’s Market Advisory on the BOC Form published on May 11th is available here.

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