Beneficial Ownership Rule for Businesses

Effective May 11, 2018, new rules under the Bank Secrecy Act will aid the government in the fight against crimes to evade financial measures designed to combat terrorism and other national security threats. Federal regulation now requires certain financial institutions to obtain, verify and record information about the beneficial owners of legal entity customers. Legal entities can be abused to disguise involvement in terrorist financing, money laundering, tax evasion, corruption, fraud and other financial crimes. Requiring the disclosure of key individuals who own or control a legal entity (i.e., the beneficial owners) helps law enforcement investigate and prosecute these crimes.

Before a new account can be opened, all banks are now required to obtain information verifying the business as well as the individuals associated with the business. You will now be required to provide the name, address, date of birth and Social Security number (or passport number or other similar information, in the case of non-U.S. persons) for the following individuals (i.e., the beneficial owners):

  • Each individual, if any, who owns, directly or indirectly, 25 percent or more of the equity interests of the legal entity customer (e.g., each natural person that owns 25 percent or more of the shares of a corporation); and

  • One individual with significant responsibility for managing the legal entity customer (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President or Treasurer).

The financial institution may also ask to see a copy of a driver's license or other identifying document for each beneficial owner listed on this form. If you are opening an account on behalf of a Legal Entity, you will be required to provide the appropriate documentation and to certify that this information is true and accurate to the best of your knowledge on the Certification of Beneficial Owner(s) Form.

What types of businesses are potentially exempt from these new requirements?


Business clients who fall into one of the categories below are generally exempt from these requirements. However, the Certifying Person may still be required to sign the beneficial owner form to attest to the exemption.

  • Sole Proprietorships.
  • Unincorporated Associations. 
  • Regulated Domestic Financial Institutions, including their holding companies. A financial institution regulated by a federal functional regulator or a bank regulated by a state bank regulator.
  • U.S. & U.S. state government entities. A department or agency of the United States, or any State or of any political subdivision of a State.
  • U.S. publicly traded companies and subsidiaries (51% owned or greater) thereof - publicly traded companies (listed at 31 CFR 1020.315(b) (2) through (4)). U.S. publicly traded companies and subsidiaries that are majority owned by these publicly traded companies.
  • Securities and Exchange Commission (SEC) registered issuers of securities. An issuer of a class of securities registered under section 12 of the Securities Exchange Act of 1934 or that is required to file reports under section 15(d) of that Act.
  • Exchanges and clearing agencies - as defined in section 3 of the Securities Exchange Act of 1934, that is registered under section 6 or 17A of that Act e.g. NY SE, NASDAQ.
  • Securities and Exchange Commission (SEC) registered investment companies - as defined in Section 3 of the Investment Company Act of 1940, which is registered with the SEC under that Act.
  • Securities and Exchange Commission (SEC) registered investment advisers - as defined in section 202(a)(11) of the Investment Advisers Act of 1940, that is registered with the SEC under that Act.
  • CFTC-registered entities. A registered entity, commodity pool operator, commodity trading advisor, retail foreign exchange dealer, swap dealer, or major swap participant, each as defined in section 1a of the Commodity Exchange Act that is registered with the CFTC.
  • Registered Public accounting firms registered under section 102 of the Sarbanes–Oxley Act.
  • Trusts (non-statutory business trust). The exclusion would generally cover non-statutory, i.e., created by contract, trusts. e.g. Irrevocable trusts, generation skipping trusts, life insurance trusts; etc.
  • Estates.
  • U.S. State registered insurance companies.
  • Entity registered with the SEC - entity registered with the SEC under the Securities and Exchange Act of 1934.
  • Financial Market Utility - A financial market utility designated by the Financial Stability Oversight Council under Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
  • Non-U.S. government agency engaged in U.S. government activities only (non-commercial), e.g. Federal Reserve Board.
  • Pooled investment vehicle operated or advised by a regulated domestic financial institution.
  • Pooled investment vehicle NOT operated or advised by a regulated domestic financial institution.
  • Charities. Internal Revenue Code–qualified charities and nonprofit entities in good tax-exempt standing.

 

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