What Is the Definition of a Legal Entity Customer

For the purposes of the beneficial ownership rule,2See 31 CFR 1010.230(e)(1), a client of a corporation is defined as a corporation, limited liability company, or other entity formed by the filing of an authentic instrument with a Secretary of State or other similar office, a partnership, and a similar legal entity, established under the laws of a foreign jurisdiction and opening an account. A number of types of business units are excluded from the legal entity`s definition of the customer under the beneficial ownership rule. In addition, and subject to certain restrictions, banks are not required to identify and verify the identity of the beneficial owner(s) of a customer of a legal entity when the customer opens certain types of accounts. For more information on exclusions and exceptions to the beneficial ownership rule, see Appendix 1. These exclusions and exceptions do not modify or replace other existing requirements related to BSA/AML and OFAC sanctions. (1) The client of a legal person is a company, limited liability company or other legal person established by the presentation of an authentic instrument to a Secretary of State or similar office, a general partnership and a similar legal entity established under the law of a foreign jurisdiction and opening an account. The number of persons who meet the definition of “beneficial owner” and who must therefore be identified and verified in accordance with this Section may vary. Pursuant to paragraph (d)(1) of this Section, it may be necessary to identify up to four persons, depending on the circumstances of the case. In accordance with point (d)(2) of this Section, only one person may be identified. It is possible that, in certain circumstances, the same person(s) may be identified in accordance with points (d)(1) and (2) of this Section. A covered financial institution may also identify other persons as part of its customer due diligence if it deems it appropriate on the basis of risk. In addition to the beneficial ownership information mentioned above, the new Regulations also amend the anti-money laundering program requirements for IFCs to explicitly require them to implement and maintain appropriate risk-based procedures to conduct ongoing customer due diligence for these ISPs. With regard to the obligation to obtain beneficial ownership information, financial institutions must identify and verify the identity of each person who owns 25% or more of a legal entity and an entity that controls the legal entity.

[1] Where a share trust directly or indirectly holds 25% or more of a client`s interest in a corporation, the beneficial owner means the trustee. FinCEN considers loan extensions, CD renewals and similar events as new banking relationships and therefore as “new accounts” within the meaning of the beneficial ownership rule. However, FinCEN recognizes that the industry does not generally treat these types of events as new relationships. As a result, FinCEN has issued guidelines that exempt institutions from collecting beneficial ownership information when renewing most CDs, renewing locker rentals, and renewing certain loans, commercial lines of credit, and credit card accounts if renewal does not require review and subscription approval (see FIN-2018-R004 for more details). For other types of credit renewals, FinCEN requires institutions to collect beneficial ownership information at each renewal after May 11, 2018 or to reconfirm previously submitted beneficial ownership information. In particular, however, if a client of a legal person certifies his beneficial ownership information to an institution in connection with a loan and the client also agrees to inform the institution of any change in his information, the institution may rely on this Agreement as a continuous certificate for the subsequent renewal of that loan, unless otherwise known (see FAQ #12, FIN-2018-G001, for more details). Institutions should consider adding this type of client agreement to their credit and renewal documents. Banks must put in place procedures to retain and update customer information, including beneficial ownership information for customers of legal entities, based on risk. In addition, banks are not required to conduct retroactive reviews to obtain beneficial ownership information from legal entities that were existing customers as of May 11, 2018.

However, based on its ongoing supervision, the bank may need to obtain (and update) beneficial ownership information for existing legal entities. For more guidance on retaining and updating customer information, including beneficial ownership information, see the “Ongoing Customer Relationship Monitoring” section of the “Customer Due Diligence Overview” section of the FFIEC BSA/AML Audit Manual.12 FFIEC, Overview and Procedures of the Core Review, Overview of Client Due Diligence, May 2018. .

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