The U.S. government now requires financial institutions to collect and verify specific information from any legal entity (primarily businesses) establishing a new banking relationship.  This includes existing customers updating an existing account, opening a new account, renewing a certificate of deposit or initiating or renewing a loan.

These new rules help fight financial crime. Because legal entities can be used to disguise money laundering, terrorist financing, tax evasion, corruption, fraud, and other financial crimes, requiring the disclosure of key individuals who, a) benefit from ownership; and/or b) control a business, helps law enforcement investigate and prosecute these crimes.

All banks are required to collect this information. We appreciate your cooperation.

A beneficial owner is any individual who owns – either directly or indirectly – 25 percent (25%) or more equity interest in a legal entity.

Also referred to as the individual with control, this is the person with significant responsibility for managing the legal entity. Generally, this individual has the authority to act on behalf of the legal entity and make decisions related to financial relationships. For example, a chief executive officer, chief financial officer, chief operating officer, managing member, general partner, president, vice president, or treasurer. This person’s identity must by verified through a government issued ID or passport.

Yes.  The legal entity’s documents define who is authorized to open and/or sign on deposit accounts or borrow money on its behalf.

We are required to obtain the legal name, physical address, date of birth, and social security number (SSN) for each person listed on the certification. A copy of their government-issued ID, driver’s license or passport is required for verification.  Non-U.S. citizens must provide a passport number.

The bank is required to collect information on beneficial owners at the time an account is opened. The account should not be funded or loan proceeds advanced until the signed beneficial certification has been received.

The bank is also required to update this information for a legal entity when a “significant event” occurs, such as a change in ownership or an individual that has significant management responsibility, i.e., an executive officer or senior manager including Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President or Treasurer requiring a change of authorized signers. Please advise us of any change in ownership or control so we may update our records.

The individual with authority to request an account be opened or a loan be granted is the person to complete the certification. This could also be the person named as the individual with significant management responsibility, or someone who has been designated by that individual to establish bank relationships on behalf of the legal entity. The person who completes the form will sign it certifying the information is accurate to the best of his or her knowledge.

Indirect ownership means the legal entity may be owned by one or more legal entities. We are required to obtain information on the individuals behind these layered entities who have 25 percent or more ownership in the legal entity.  The bank is required to “drill down” to a natural person.

Yes. You would simply mark the box indicating there are no individuals with beneficial ownership and complete the control section for the individual with significant management responsibility.

There are limited exceptions to the collection of beneficial ownership information. It is not required of government agencies, publicly traded companies, sole proprietorships, or unincorporated associations (i.e., youth sports leagues, Scout troops, after- prom parent groups, bowling teams, etc.)

The bank must determine whether the organization applying to open the account is a state chartered legal entity. Non-profit corporations or similar entities, including non-government organizations (NGO’s), charities and religious organizations (whether or not tax-exempt) are exempt from the beneficial ownership portion of the requirement, requiring only the information on the individual with significant responsibility to control, manage, or direct the entity be obtained, along with verification of their identity, i.e. a driver’s license or government issued ID.  In most cases, the individual is also an authorized signer on the account.

The bank must know the name of the underlying legal entity of any business that uses another name in public. For example, if a restaurant goes by the name “Taco-Taco,” but the legal owner is “Serious Brands, Inc.”, the bank must obtain beneficial ownership information on Serious Brands, Inc. as the legal entity.

Generally, personal trusts are exempt from these rules since they are created without a public filing.  However, any trust created by the filing of a public document with the appropriate state office, such as statutory trusts or business trusts which are similar to corporations, are subject to these requirements.

Under most state laws, an IOLTA is considered a non-statutory trust account. The bank must obtain certification of the individual with significant management responsibility and verify their identity, i.e. obtain government issued ID or driver’s license.

We are required to maintain this information as part of the records associated with the legal entity. It is treated with the highest level of confidentiality and security as all other customer information.