Beneficial Ownership- FAQs
Federal regulations now require that federally-insured financial institutions obtain, verify, and record information about ‘Beneficial Owners’ of Legal Entities. This new requirement has been implemented by FinCEN (Financial Crimes Enforcement Network) to provide additional due diligence and help fight financial crime. As your company, partnership, or organization opens new loans, deposit, or safe deposit accounts, or makes certain changes to these types of accounts, the bank will ask you for specific identifying information, in accordance with the law.
Q. Does this regulation apply to existing business accounts?
A: If certain types of changes are made to existing accounts (e.g. change in authorized signers, change of ownership structure, deceased owner, or another triggering event), identifying information and organizational documents related to Beneficial Ownership will be required at that time. If no changes affect the ownership or control of an existing account, then the Beneficial Ownership information does not apply.
Q. What types of companies are considered to be Legal Entities?
A: For purposes of Beneficial Ownership, a Legal Entity is defined as a corporation, limited liability company, general partnership, limited partnership, or other type of entity, including business trusts, that are created by the filing of a public document with a Secretary of State or similar office, as well as similar entities formed under the laws of a foreign jurisdiction.
A Legal Entity customer does not include sole proprietorships, unincorporated associations, or natural persons opening accounts on their own behalf.
This listing is illustrative, not exclusive.
Q: What about Associations and Non-Profits; are they also Legal Entities?
A. Incorporated non-profits, like 501(c)3 organizations, as well as any organization that is created by the filing of a public document with a Secretary of State or similar office, are considered to be Legal Entities, and will be asked to provide Beneficial Ownership information. If no one is considered to be an owner, then only the ‘control’ information is required (e.g. the name of one individual with significant responsibility to control, manage, or direct the organization. Examples include an executive officer or senior manager, CEO, CFO, COO, president, vice president, treasurer, etc.)
Unincorporated associations do not fall under the legal entity definition, and are not required to provide Beneficial Ownership information.
Q: Who is the Beneficial Owner and Responsible Individual?
A: The FinCEN rule defines a Beneficial Owner as each of the following:
- Each individual who directly or indirectly owns 25% or more of the equity interests of a Legal Entity customer.
- A single individual with significant responsibility to control, manage, or direct a Legal Entity customer, including an executive officer or senior manager (e.g., a CEO, CFO, COO, managing member, partner, president, vice president, treasurer, etc.) or any other individual who regularly performs similar functions.
Beneficial Owner(s) must be a natural person, and cannot be another LLC or company, a nominee, or a straw man.
Q: What types of identifying information is required?
A: The Name, Date of Birth, Address, and Social Security Number (or other government identification number, such as a passport number) is required for each individual who owns 25% or more of the equity interest of the Legal Entity. This same information is required for an individual with significant responsibility to control/manage the Legal Entity. The bank will also request your company’s organizational documents.
Q: Who is responsible for providing this identifying information?
A: The individual seeking to open a new deposit, loan or safe deposit account (or make changes to an existing account) on behalf of the Legal Entity customer will be asked for Beneficial Ownership information. This individual could, but would not necessarily, be a Beneficial Owner. It would then be necessary to provide the appropriate identifying information for each individual listed in order to open the new account or process the change request.
Q. What if no one owns 25% or more of the Legal Entity?
A. If there are no owners with 25% or more ownership, then identifying information will only be required on one person who controls or manages the organization.
Q: How frequently will identifying information be requested?
A. Each time a new account is opened, or a certain type of change is made to an existing account, Beneficial Ownership information will be required.
Q. How can I obtain more information on this topic?
A. The brochure, About Certification for Beneficial Owners, provides background information and more details on this new regulation. The Beneficial Ownership Certification Form is the template the bank will use in collecting identifying information. The following Legal Entity document from FinCEN provides information on the types of legal entities impacted by this ruling. If you have additional questions, your relationship banker would also be happy to assist.