Beneficial Ownership Procedures

Part I Legal Entities

  1. Identify if the customer is a Legal Entity
  2. Obtain Beneficial Ownership Certification

Type of Legal Entity / ID Beneficial Owners and Controlling Person?
Sole Proprietor / No
General Partnership / Yes
Limited Liability Partnership / Yes
Limited Partnership / Yes
Limited Liability Limited Partnership / Yes
Corporation for Profit / Yes
Corporation Not for Profit / Yes but only controlling person
Limited Liability Company Single Member / Yes
Limited Liability Company-Multiple Member / Yes
Nonprofit clubs, organizations, tragedy accounts,
benefit accounts / No
Escrow Accounts / No
Trust Accounts / No unless owner of a legal entity
Public Funds / No
IOLTA / Maybe if intermediary is a legal entity
1031 Exchange Accounts / Maybe if intermediary is a legal entity
Campaign Accounts / No
Estate Accounts / No
Agents / Maybe if agent is a legal entity
Foreign business / Yes
  1. If the customer is exempt and a legal entity document the exemption.
  2. Obtain only control prong—pooled investment vehicles
  • If the account is a pooled investment vehicle operated by a financial institution, only complete the control prong of the form.
  • Obtain CIP only on the controlling person and our normal procedures for resolution and signature card.
  1. Charities
  2. Obtain documentation that the charity is a corporation and listed at the secretary of state’s website.
  3. Check all charities or nonprofit organization even if the “Inc” or “Incorporated” is not in the title. Many civic groups and churches are incorporated through the state. Document your search.
  4. Obtain CIP only on the controlling person.
  5. Follow our normal procedures on resolution and signature cards.
  6. If the group is a nonprofit corporation. If it is not incorporated then the organization is excluded.
  7. US Stock Exchanges
  8. If the business is traded on the US stock exchange or is a 51% subsidiary of a business traded on the US stock exchanges, you must document the exemption and mark the company as “exempt”.
  9. Customer will be exempt from both CIP and CDD except for the subsidiaries—the subsidiaries are not exempt from CIP.
  10. Foreign exchanges

Companies listed on foreign exchanges are not excluded from the definition of legal entity customer. Such companies may not be subject to the same or similar public disclosure and reporting requirements as companies publicly traded in the United States and, therefore, collecting beneficial ownership information for them is required.

•Obtain Certification of BO Form for foreign entities

•Obtain our normal CIP for foreign legal entities.

  1. Government Entities that are for profit—not exempted
  • Examples of legal entity customers that would be considered non-U.S. governmental entities engaged in only governmental and not commercial activities include entities that are owned and operated by a non-U.S. government agency or political subdivision, such as embassies or consulates, as well as entities that are instrumentalities of a foreign government, such as government-owned enterprises engaging in activities that are exclusively governmental in nature, that is, activities involving the direct exercise of legislative, executive, or judicial authority and which do not involve taking profits from the endeavor.
  • Those State-owned enterprises engaged in profit-seeking activities, including, among others, sovereign wealth funds, airlines, or oil companies, would not qualify for the legal entity customer exclusion. Generally, many State-owned enterprises may not have an individual that owns at least a 25 percent equity interest because a governmental department, agency, or political subdivision holds such interest.
  1. Activity Exemption—Loans

Legal Entity opens an account for a legal entity customer that is: [a]t the point-of-sale to provide credit products, including commercial private label credit cards, solely for the purchase of retail goods and/or services at these retailers, up to a limit of $50,000.” The point of sale exemption is provided for retail credit accounts opened to facilitate purchases made at the retailer because of the very low risk posed by opening such accounts at the brick and mortar store.

  1. Activity Exemptions—Equipment

The exemption is intended to cover business equipment such as farm equipment, construction machinery, aircraft, computers, printers, photocopiers, and automobiles that a business purchases or leases. The Rule does not limit the exemption to small businesses.

Three conditions:

• the account’s purpose is to finance the purchase or leasing of equipment,

• payments are remitted directly by the financial institution to the vendor or lessor, and

• there is no possibility of a cash refund on the account activity.

  1. Activity Exemption—Postage Accounts

This exemption is for postage accounts.

Part B

Account

Account means a formal banking 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.

The following are accounts (note to BSA –you will have to fill all this in—a lot more accounts to list)

Product, Service or Dealing / In / Out
Consumer Loans / Yes
Commercial Loans / Yes
Mortgage Loans / Yes
Credit Cards / Yes
Cash Management Services / Yes
Online Banking / Yes
Safe deposit Boxes / Yes
DDA / Yes
Savings / Yes
Time Deposits / Yes
MMA / Yes
Check cashing / No
Wires / No

At the time the new account is opened:

–A beneficial owners and controlling person listed on the form will be identified by getting a photocopy of the primary identification.

–Beneficial Owners and controlling person will provide his or her

•Name

•Home Physical Address

•TIN (SSN or ITIN) If foreign, foreign TIN or Passport Number

•Date of Birth

–List any nondocumentary procedures you might use.

–You cannot open a new account or make a loan without this information and CIP

–You will complete a resolution and signature card on the legal entity.

–This does not change who has access to information or signing authority on the account. Only those who are listed on the resolution and transferred to the signature card have the ability to get balances and make transactions on behalf of the business.

–Owners and controlling person are not always those who sign on behalf the legal entity for deposits.

–The BO Certification Form is just a record keeping requirement for the BSA Department.

–New Customer: Get Certification of Beneficial Ownership FormCompleted at time new account opened and accompanying CIP

–Renewal: Obtain Certification of Beneficial Ownership at time of first renewal. For those opened after May 11, 2018, obtain Certification of Beneficial Ownership and statement that the customer will notify us in the event of a change on renewing products.

–Existing Customer Unchanged Form: Certification of Beneficial Ownership is unchanged. Obtain verbal or written confirmation. (See samples)

–Existing Customer Changed Form: Update Certification of Beneficial Ownership and Controlling Person get new CIP when required.

–Make sure that all existing ID has not expired at the time a new account is opened.

•I, ______certify that if this is a renewing product that I will notify you of any change at the time of renewal.

Part III The form and CIP on Beneficial Owners and Controlling Person

  1. Determine if the business is a legal entity.
  2. If the business is excluded or exempted document the reason why. Show proof that the business does not meet the definition of legal entity.
  3. Collect CIP on beneficial owners and controlling person.
  4. Who has to complete this form?
  • This form must be completed by any person opening a new account on behalf of a legal entity with any of the following U.S. financial institutions: (i) a bank or credit union; (ii) a broker or dealer in securities; (iii) a mutual fund; (iv) a futures commission merchant; and (v) an introducing broker in commodities.
  • For the purposes of this form, a legal entity includes a corporation, limited liability company, or other entity that is created by a filing of a public document with a Secretary of State or similar office, a general partnership, and any similar business entity formed in the United States or a foreign country. Legal entity does not include sole proprietorships, unincorporated associations, or natural persons opening accounts on their own behalf.
  • What information do I have to provide?
  • When you open a new account on behalf of a legal entity, the financial institution will ask for information about the legal entity’s beneficial owner(s), including their name, address, date of birth and social security number (or passport number or other similar information, in the case of Non-U.S. persons). 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.
  • Beneficial owners are: (1)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 (2)An 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 number of individuals that satisfy this definition of “beneficial owner” may vary. Under section (1), depending on the factual circumstances, up to four individuals (but as few as zero) may need to be identified. Regardless of the number of individuals identified under section (1), you must provide the identifying information of one individual under section (2). It is possible that in some circumstances the same individual might be identified under both sections (e.g., the President of Acme, Inc. who also holds a 30% equity interest). Thus, a completed form will contain the identifying information of at least one individual (under section (2)), and up to five individuals (i.e., one individual under section (2) and four 25 percent equity holders under section (1))
  • A legal entity may have multiple “beneficial owners,” this form requires you to list only those that own 25% or more (up to five) under each of the two prongs of the definition above. If appropriate, the same individuals may be listed under both prongs.
  • Additional information:

-No entities are listed on this form in the BO or CP sections.

-Put home addresses of the people listed on this form.

-Usually the person opening the account will be the person listed on the resolution.

-Employees do not sign the form only the person opening the business

-If the customer is over 24% we will round up to 25%

Part IV Drilling Down

•Under the Rule’s beneficial ownership identification requirement, a covered institution must collect, from its legal entity customers, information about any individual(s) that are the beneficial owner(s) (unless the entity is excluded or the account is exempted). Therefore, covered financial institutions must obtain from their legal entity customers the identities of individuals who satisfy the definition, either directly or indirectly through multiple corporate structures, as illustrated in the following example.

•For purposes of the Rule, Allan is a beneficial owner of Customer because he owns indirectly 30 percent of its equity interests through his direct ownership of Company A. Betty is also a beneficial owner of Customer because she owns indirectly 20 percent of its equity interests through her direct ownership of Company A plus 16⅔ percent through Company B for a total of indirect ownership interest of 36⅔ percent. Neither Carl nor Diane is a beneficial owner because each owns indirectly only 16⅔ percent of Customer’s equity interests through their direct ownership of Company B.

•

•If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, 25 percent or more of the equity interests of a legal entity customer, the beneficial owner for purposes of the ownership/equity prong is the trustee, regardless of whether the trustee is a natural person or a legal entity.

•The ownership/equity and control prongs, although related, are independent requirements. Thus, satisfaction of, or exclusion from, regulatory obligations under one prong does not mean a covered financial institution’s obligations under the other prong are also satisfied or excluded.

•Step by Step

•If there is a multi-tiered legal entity, drill down to obtain the human beings who own and if any 25% owners then complete both parts of the Certification of beneficial ownership. If no 25% owners only complete the controlling person section.

•If there are no 25% human being owners then we only complete the control part and have the person certifying the ownership open the account and provide CIP.

•You will have to obtain CIP paperwork on all the entities till you hit the individuals who own the business.

•Obtain CIP on owners and controlling persons on the Certification Form

•Obtain the normal paperwork, resolution and signature card for this account.

Part V Reliance On Another Financial Institution

•A covered financial institution may rely on the performance by another financial institution (including an affiliate) of the requirements of this section with respect to any legal entity customer of the covered financial institution that is opening, or has opened, an account or has established a similar business relationship with the other financial institution to provide or engage in services, dealings, or other financial transactions, provided that:

–Such reliance is reasonable under the circumstances;

–The other financial institution is subject to a rule implementing 31 U.S.C. 5318(h) and is regulated by a Federal functional regulator; and

–The other financial institution enters into a contract requiring it to certify annually to the covered financial institution that it has implemented its anti-money laundering program, and that it will perform (or its agent will perform) the specified requirements of the covered financial institution’s procedures to comply with the requirements of this section.

Part VI Trigger Events

•Update beneficial ownership form when:

–Death

–Addition of new owner to business resolution

–Business is sold

–Business changes structure

–Addition of new account (check to see if still up to date)

–Change in controlling person

–Name change of an owner or controlling person

•Do not update if there isminor issues:

–Change in address of the business

–Close of products or services