On May 11, 2018, the beneficial ownership rule became fully effective.  While the rule was finalized on July 16, 2016, compliance was not mandatory until May 11, 2018.  The delay in implementation was to permit covered financial institutions to ready their BSA/AML compliance programs.

In accordance with the rule, a covered financial institution must verify, at the time a new account (loans, deposits, etc.) is opened, the beneficial owners opening the account on behalf of a legal entity customer.  If there are multiple layers of legal entities, the covered financial institution is required to look through each layer to identify the beneficial owners.

A “beneficial owner” is defined as any natural person who (i) owns 25 percent or more of a legal entity and (ii) controls the legal entity.  The covered financial institution must identify at least one beneficial owner who owns 25 percent or more of the legal entity, but is limited to naming a total of four natural persons.  There is no such limitation for beneficial owners that may control the legal entity customer.

Click here to read the public announcement issued by the Financial Crimes Enforcement Network (FinCEN) on the beneficial ownership rule.

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