In May 2016, the U.S. government passed a new regulation regarding the beneficial ownership of legal entity customers. Going forward, it will be mandatory for all financial institutions to comply with this regulation by identifying the ultimate beneficial owner(s) and a controlling person of a legal entity customer opening or maintaining an account (e.g. deposit, loan or safe deposit box).
Any time an account is opened or maintained for a legal entity, Honor Bank will request information that identifies the ultimate beneficial owner(s) and controlling person of the legal entity. The required identifying information includes name, address, date of birth, identification number, and other information that will help identify those individuals. This information will need to be collected whether or not the person identified is an Honor Bank customer.
While we understand the information requested is personal and sensitive, we need to obtain this information in order to comply with the law. As always, we will treat all information collected with the utmost care. All information will be stored securely and handled with the same standard of privacy that we have always maintained.
What you need to know about Beneficial Ownership
- The new regulation impacts all legal entities opening or maintaining accounts at any financial institution.
- Legal entities will need to identify and attest to all ultimate beneficial owner(s) that meet specific requirements as well as a controlling person (e.g., Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President or Treasurer).
- Honor Bank will collect information regarding the ultimate beneficial owner(s) and control person of legal entities whether or not they have a personal relationship with the Bank.
Information you will need to provide
- Address (Personal or Business)
- Date of Birth
- Social Security Number or Tax Identification Number
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 the time of change.
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 individuals satisfy the definition of a person with “significant responsibility to manage, direct or control a legal entity customer?”
A: The control person identified must be a high-level official in the legal entity who is responsible for how the organization is run and who will have access to a range of information concerning the day-to-day operations of the company. Examples of the types of positions that could qualify include an executive officer or senior manager (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President or Treasurer). This list of positions is illustrative, not exclusive.
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. The business or personal address can be used for the beneficial owners.
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: What if the beneficial owner(s) is not available to appear in person at the bank.
A: The bank can provide a Beneficial Ownership worksheet to collect the beneficial owners identifying information. We are also able to accept a photocopy or other reproduction of valid ID.