Who is considered a beneficial owner?
- The Beneficial Ownership Rule includes two prongs, an ownership prong and a control prong:
- The ownership prong consists of any individual that directly or indirectly owns 25% or more equity in the legal entity opening an account. Under the Beneficial Ownership Rule, every individual that falls under this definition must be identified.
- A beneficial owner under the control prong is any individual that has significant responsibility to control, manage, or direct the legal entity, e.g., an executive or senior manager. At least one individual that falls under this definition must be identified.
- Note: Owners will often fit the definition under both prongs. If that’s the case, there’s no need to identify a separate individual to meet the requirements of the control prong.
Are financial institutions required to collect beneficial ownership information for accounts opened prior to the may 11th, 2018 effective date?
Financial institutions are not required to conduct a retroactive review to obtain beneficial ownership information from accounts opened prior to the effective date, however, if an existing client opens a new account after the effective date, the financial institution is required to collect beneficial ownership information at that time.
Why is FinCen imposing these requirements?
FinCen states their goal is to create greater transparency in our financial system. The final rule states, “Covered financial institutions are not presently required to know the identity of individuals who own or control their legal entity customers (also known as beneficial owners). This enables criminals, kleptocrats, and others looking to hide ill-gotten proceeds to access the financial system anonymously. The beneficial ownership requirement will address this weakness and provide information that will assist law enforcement in financial investigations, help prevent evasion of targeted financial sanctions, improve the ability of financial institutions to assess risk, facilitate tax compliance, and advance U.S. compliance with international standards and commitments”.
Are there any types of entities that are not required to provide beneficial ownership information under the rule?
- Yes, the following types of entities are some of those excluded from the Beneficial Ownership Rule:
- Financial Institutions regulated by a federal or state regulator
- Departments or agencies of the U.S. of any State, or any political subdivision of a State
- Any entity that exercises governmental authority on behalf of the United States or any such State or political subdivision
- Public companies or any entity where a majority of the equity (51%+) is owed by a public company
- Unincorporated associations
- Investment companies and advisors registered with the SEC
- Any other entity registered with the SEC under the Securities and Exchange Act of 1934.
*must still provide personal information from at least one individual with significant responsibility to manage or direct the entity.
Does FinCen provide guidance or standards for protecting beneficial owners personal information?
- The Beneficial Ownership Rule does not create any new standards or guidelines for financial institutions to protect personal information, however, the rule does make it clear existing Federal and State privacy laws, such as the Right to Financial Privacy Act, govern the protection of beneficial ownership information. It is the responsibility of the institution collecting the information to protect it.
- ChargeItPro takes this responsibility very seriously. Keeping every one of our client’s information is a top priority. ChargeItPro will not share personal information outside of the context of regulation and compliance.