Business Accounts & Beneficial Ownership Rule
The U.S. Treasury Department finalized a regulation requiring financial institutions to obtain, verify and record information about the beneficial owners of legal entity customers.
One of the main reasons for this regulation is that legal entities can be used to disguise involvement in various criminal activities including terrorist financing, money laundering, tax evasion, corruption, fraud, and other financial crimes. The new rule requires financial institutions to identify and verify the identity of the beneficial owners of all legal entity customers. The information provided assists law enforcement in combating these crimes. The information requested must be updated and verified every time a legal entity opens a new account with a financial institution, like Sandy Spring Bank, even if the business is already a client of Sandy Spring Bank.
For most legal entities, except for sole proprietorships, publicly traded companies and certain other legal entities, the person opening the account will be asked to provide the name, address, date of birth and Social Security Number or Individual Tax Identification Number or the primary identification type, number and issuing location (e.g. Passport or other photo ID) for the following people:
Any and all persons that own 25% or more of the legal entity - Beneficial Owner(s)
One person with significant responsibility for managing the legal entity (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer) - Controller
At a minimum, on most accounts opened for a legal entity, at least one person, the Controller, must be identified AND up to four persons must be identified as Beneficial Owners. Here is the Beneficial Owner and Controlling Person form that would need to be completed when you open a new business account.
The Beneficial Owners identified must be natural persons, which means that the client may need to look through several layers of legal entities to determine whether an actual person is a 25% owner of the legal entity. There may be no one person who owns 25% or more of the legal entity, therefore, there may not be a Beneficial Owner listed. Also, because the bank’s requirement includes only those who own at least 25% of the legal entity, no more than four persons will be listed as Beneficial Owners.
The rule from the U.S. Treasury Department provides for a straightforward definition of who the Controller is - “[T]he legal entity customer must provide identifying information for one person with significant managerial control.” Several job titles usually fit within this definition, including: CEO, CFO, COO, Managing Member, General Partner, President, Vice President, Treasurer or any other person who “regularly performs similar functions”.
Only one person needs to be listed as a Controller.
Note: Non-government organizations, charities and other non-profits are excluded from the identifying of Beneficial Owners but a Controller must be provided.
While ultimately it is the Beneficial Owners and the Controller providing the information, it is the person authorized by the legal entity opening the account that will be certifying the accuracy of the information on the Beneficial Owner Certification Form.
What if the legal entity is owned by other legal entities?
There are many instances where a legal entity is owned by other legal entities. In those cases you will be asked to provide the ownership information of those legal entities until it is determined which person, if any, own 25% or more of the legal entity that is opening an account or service with Sandy Spring Bank.
Every time a new or existing business client opens an account, loan or other service the beneficial ownership information will need to be obtained. The Bank may ask for the information to be periodically updated outside of the account opening process as part of the Bank’s customer due diligence requirements.
Your Sandy Spring Banker will assist with any questions you may have as it relates to your specific business entity.
Thank you for choosing Sandy Spring Bank and for helping to keep the financial system safe from crime and in compliance with US regulatory requirements.