What is the recommended action if verification of a beneficial owner's identity cannot be completed?

Filing a suspicious activity report is the recommended action when verification of a beneficial owner's identity cannot be completed. This step is critical because it serves as an alert to law enforcement and regulatory authorities about potential illegal activity. The inability to verify the identity may indicate that the account may be associated with illicit activities, which could involve money laundering or other financial crimes.

In such cases, institutions must adhere to regulatory burdens to monitor and report suspicious activities that could suggest non-compliance with Anti-Money Laundering (AML) regulations. By filing a suspicious activity report, the institution fulfills its obligation to identify and mitigate risks associated with unknown or suspicious beneficial ownership, promoting the integrity of the financial system.

Options like closing the account after a grace period might not adequately address the risks, as those actions do not include notifying authorities of potential illegal activities. Notifying the beneficial owner directly may compromise the investigation or alert the potential wrongdoer. Requesting further documentation can delay action and may not resolve the identity verification issue, especially if the documentation provided does not satisfy the requirements needed to complete the verification process.