The Bank Secrecy Act (BSA) is the major regulatory consideration for financial services customer onboarding and account opening in the United States. In May 2018, amendments to the “Customer Due Diligence Rule” in the BSA that were passed in prior years became effective. These amendments apply to U.S. banks, mutual fund brokers or dealers in securities, futures commission merchants, and brokers in commodities and expand obligations to verify beneficial owners of legal entities.
While this was a big change for financial institutions, the commitment by the US Government to rout out bad actors was further underscored with the passing of the AML Act in 2020, specifically, the “Corporate Transparency Act” section, which requires corporations, limited liability companies, and similar entities to file reports with and keep current information about their beneficial ownership with the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
The US had been slow in fully embracing FATF Recommendation 24, “Transparency and beneficial ownership of legal persons” and it is encouraging to finally see the US join the ranks of countries whose regulations already require financial institutions to obtain, verify, and record information about the beneficial owners of legal entity customers. Legal entities have long been abused to disguise involvement in terrorist financing, money laundering, tax evasion, corruption, fraud, and other financial crimes. Requiring disclosure of key individuals who own or control a legal entity — the beneficial owners — helps identify reportable suspicious activity which in turn enables law enforcement to investigate and prosecute these crimes more readily.
Typical procedures in obtaining Beneficial Ownership information are manual, requiring a certification form to be completed and signed by the person opening a new account on behalf of the legal entity. In the United States, these covered legal entities typically include corporations, limited liability companies, or other entities that are created by a filing of a public document with a Secretary of State or similar office.
When an account is opened for a covered legal entity, identifying information — name, address, date of birth, social security number — as well as identifying documents must be collected for:
- Each individual, if any, who directly or indirectly owns 25 percent or more of the equity interests of the legal entity customer. In other words, each natural person owning 25 percent or more of the shares of a corporation.
- An individual with significant responsibility for controlling the legal entity customer, which may be a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer.
Global Data Consortium (GDC) can help you electronically verify this information with our innovative Know Your Business solution.
 Also included are general partnerships and any similar business entity formed in the United States or a foreign country. These legal entities do not include sole proprietorships or unincorporated associations.