The Financial Crimes Enforcement Network (FinCEN) has published proposed rules that will require corporate bank accounts to identify and verify the identities of beneficial owners of legal entities, at account opening. The 88-page document, to which industry comments are invited, proposes:
(1) Corporations, broker-dealers, and other legal entities will be executing a Standard Certification Form, listing their 25% shareholders, and sole individual exercising managerial control. Shareholders must be individuals; if another corporation, then its shareholders. No look-backs, only future accounts will be required to identify ownership and control persons.
(2) Publicly-traded companies, regulated companies, intermediaries and tax-exempt charities & non-profits are exempt. Trusts are also exempt, but FinCEN suggests a risk-based approach be applied to them.
(3) Beneficial Ownership is defined as an equity ownership interest of at least 25%. Control is defined as actual managerial control, executive in nature, coupled with stock ownership.
(4) The bank must know the nature and purpose of the customer relationship;normal and expected activity, and lawful purpose of the company.
(5) Ongoing monitoring after account opening, and updating ownership information should there be red flags indicating suspicious activity, changes in business operation and management, changes in signatories or their addresses, or indicia of shell company operation.
Will this solve the dilemma of identification of Beneficial Owners ? We cannot say, but the public comments should prove interesting. Who will complain the loudest about potential loss of business ?