Quick Guide to Beneficial Ownership Requirements

Overview

A U.S. Government Agency by the name of the Financial Crimes Enforcement Network, or FinCEN, passed a regulation that became mandatory on May 11, 2018. This rule was enacted to help our government fight financial crimes such as money laundering and terrorist financing. All financial institutions are now required to comply with this regulation by collecting information on individuals who are the ultimate beneficial owner(s) of all covered legal entity customers before any account may be opened or renewed by the financial institution. Identifying information must be collected for all beneficial owners and the control person whether or not they have a personal relationship with the financial institution.

Who is considered a Beneficial Owner?

  • An individual (or “natural person”) who directly or indirectly owns 25% or more of the legal entity customer and/or
  • An individual (or “natural person”) who has significant responsibility to control, mange or direct the legal entity customer. This person is also known as a “Control Person.”

I am an entity trying to open a loan or deposit account. What do I need to do?

  • Review the Certification Form for a description of what is required and what must be provided to the bank.
  • Determine whether any individuals own 25% or more of the entity, including individuals who may have indirect ownership through a family member or other entities that own your entity. All Beneficial Owners must be noted on the Certification Form, which is signed by the person who opens the account.
  • Identify a Control Person for the entity. This may be the same or a different person than the Beneficial Owner(s).
  • Complete a Certification Form with the information required. The person opening the account must certify that the information on the form is true and correct.

I am an entity who owns a stake in another entity who is opening an account. What do I need to do?

  • Provide information on any individuals who have an ownership stake in your entity to the person opening the account. They need this information in order to determine if there are any indirect beneficial owners of their entity.
  • Provide information on any individuals who have an ownership stake in another entity who owns your entity to the person opening the account. They need this information in order to determine if there are any indirect beneficial owners of their entity.
  • If no individuals have enough ownership in your entity or other entities related to the transaction to directly or indirectly own 25% or more of the entity opening the loan or deposit account, provide that information so that the person opening the account may complete the required Certification Form.
  • You may need to reach out to Beneficial Owner individuals to collect their Name, Address, Birthday, Social Security Number or Tax ID Number, and an acceptable Identification Document.

What are Beneficial Owners and the Control Person Required to Do?

  • Disclose your direct or indirect ownership percentage in the entity which owns the account.
  • Provide the required identifying information to the bank: Name, Address, Birthdate, Social Security Number or Tax ID Number, and an acceptable form of photo ID, such as a Driver’s License, State-Issued ID Card, or Passport. This applies whether or not you have a personal relationship with the bank.

This seems very invasive and/or onerous. Is it optional?

It is not optional. FinCEN requires every financial institution to collect this information for legal entities unless FinCEN has exempted the entity. The bank may not open or renew your account if you do not provide the Certification Form and the required identification information.

Are any entities exempt?

Yes, there are some exemptions available for the following types of entities: federally or state regulated financial institutions, certain government entities within the U.S., an entity listed on certain major stock exchanges or majority owned by a listed entity, certain entities registered with the Securities and Exchange Commission, state-regulated insurance companies, and some pooled investment vehicles. Sole Proprietorships and Trusts which are not registered with the Secretary of State are also exempt. Please ask us if you think you may be exempt from the rule.

Additional Information and Questions

As always, your usual contacts at Benchmark Bank will be happy to answer any questions. We will work to assist you in complying with this law as your business is greatly valued.

Please review a copy of the Certification Form for a description of the requirements from FinCEN.

You can read the full rule at www.federalregister.gov/documents/2016/05/11/2016-10567/customer-due-diligence-requirements-for-financial-institutions.