The Rules for New Account Opening and Beneficial Ownership
Effective May 11, 2018
- What Is beneficial ownership?
- Who is affected?
- What are the new rules?
Helping to fight money laundering and other financial crimes
The Financial Crimes Enforcement Network
(FinCEN) of the U.S. Treasury has revised the Bank Secrecy Act rules.
Financial institutions are now expected to expand their customer due
diligence programs to include the collection and verification of
beneficial ownership information for business and legal entity customers
at new account openings.
What Is beneficial ownership?
An individual’s beneficial ownership in a legal entity is determined by applying two separate criteria: ownership percentage and management control.
Ownership percentage – If an individual owns a 25 percent or more equity interest (e.g. a shareholder) in the legal entity then they must be identified. This minimum standard for ownership
percentage could affect zero to 4 persons.
Management control – The one individual that holds a significant responsibility to control, manage or direct the business or legal entity (e.g. CEO, President, Treasurer, General Partner, Managing Member, etc.) in other words
a high-level official.
The beneficial ownership rule requires that a legal entity customer must provide identifying documentation for at least one, and up to 5, Beneficial Owners to open a new account or loan.
What type of information is needed?
An authorized signer of the entity will be required to sign a certification listing the individuals that are the Beneficial Owners. The Certification also requires each Beneficial Owner’s address, date of birth, Social Security number or other
government identification number, Primary and Secondary Identification, and other identifying information. In the case of a foreign person, a passport number or other similar information is required.
Original documents are not required.
Copies of identity documents are acceptable in the case of the beneficial owners. In some instances, copies of other identifying documents may also be required for each beneficial owner.
What is a legal entity customer?
The legal entity definition includes a corporation, a limited liability company, other entity created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of
a foreign jurisdiction that opens an account. Importantly, also included are limited partnerships, business trusts that are created by filing with a state office, and any other entity created in this manner.
What is an account?
An account means a formal financial relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account
also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.
How long are records retained?
The financial institution must retain the information for five years after the date the account is closed or, in the case of credit cards, five years after the account Is closed or becomes dormant.