In May 2016, the U.S. Treasury Department’s Financial Crimes Enforcement Network issued final rules regarding beneficial owner identification obligations for legal entity customers (the “Rule”).

Under the Rule, covered financial institutions must establish procedures to: (1) Identify each natural person that directly or indirectly owns 25% or more of the equity interests of a legal entity customer (the “ownership prong”); (2) Identify one natural person with “significant responsibility to control, manage, or direct” a legal entity customer (the “control prong”), which may be a person reported under the ownership prong; and, (3) Verify the identities of those persons according to risk-based procedures, which procedures must include the elements currently required under the Customer Identification Rule at a minimum.

Identification of those beneficial owners must be conducted at the time a new account is opened. Compliance with the Rule’s requirements is mandatory by May 11, 2018.

View full memo, FinCEN Issues Final Beneficial Owner Identification Rules