Is a credit union allowed to set a lower ownership threshold than 25% for beneficial ownership?

A credit union is indeed allowed to set a lower ownership threshold than 25% for beneficial ownership, especially in the context of high-risk entities. The underlying rationale for this flexibility is to enhance the ability of financial institutions to identify and mitigate risks associated with potential money laundering or other illicit activities. In high-risk cases, having a lower threshold can enable credit unions to gather more information on individuals or entities holding a significant stake in a business, which safeguards the institution and upholds compliance with the Bank Secrecy Act (BSA).

This approach aligns with the overall regulatory framework, which encourages institutions to take proactive measures in risk assessment, allowing them to make determinations based on their unique risk profiles and customer base. It’s important for institutions to maintain a robust understanding of their clients, particularly in sectors that are more vulnerable to financial crimes.

The other options provided do not reflect the current regulatory guidance effectively. The prohibition of a lower threshold under all circumstances does not align with the flexibility provided to financial institutions in managing risk, while making exceptions solely for non-profit organizations or foreign entities is overly restrictive and does not encapsulate the broader intent of the regulations.