What is Beneficial Ownership?

Beneficial ownership refers to the individuals who ultimately own or control a legal entity, such as a company or trust. These individuals are known as beneficial owners. Identifying beneficial owners is crucial for transparency and compliance in the financial sector, helping to combat money laundering, tax evasion, and other illicit activities.

Why is Beneficial Ownership Important?

1. Transparency: Knowing the beneficial owners of entities helps ensure transparency in financial transactions.
2. Compliance: Financial institutions are required to comply with regulations that mandate the identification of beneficial owners.
3. Risk Management: Identifying beneficial owners helps banks manage risks associated with financial crimes.

Key Regulations

1. Corporate Transparency Act (CTA): Effective January 1, 2024, this U.S. Federal law requires certain entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN)¹ 
2. Customer Due Diligence (CDD) Rule: This rule amends the Federal Bank Secrecy Act (BSA) regulations, and requires all financial institutions to collect and verify beneficial ownership information when opening accounts for legal entities.

Who is a Beneficial Owner?

A beneficial owner is a natural person who:

• Owns 25% or more of the equity interests of a legal entity.
• Exercises significant control over the entity.
• Benefits from the assets of the entity, such as through a trust or property.

Information Required

When identifying beneficial owners, banks typically need the following information:

• Full legal name
• Date of birth
• Residential address
• Social Security Number (SSN) or other government-issued identification number

Steps for Bank Customers

1. Prepare Documentation: Gather all necessary documents that verify the identity of beneficial owners.
2. Complete Forms: Fill out any forms provided by the bank to disclose beneficial ownership information.
3. Submit Information: Provide the completed forms and supporting documents to the bank.
4. Update Information: Notify the bank of any changes in beneficial ownership promptly.

Common Scenarios

• Businesses: Owners of companies must disclose their ownership stakes.
• Trusts: Trustees must provide information about the beneficiaries.
• Property: Individuals who benefit from property ownership must be identified.

Benefits for Customers

• Enhanced Security: Ensures that your financial transactions are secure and compliant with regulations.
• Reduced Risk: Helps prevent your accounts from being used for illicit activities.
• Transparency: Promotes a transparent financial environment, benefiting all stakeholders.

Conclusion

Understanding and complying with beneficial ownership requirements is essential for both bank customers and financial institutions. It ensures transparency, reduces risks, and helps maintain the integrity of the financial system.

For more information about Federal Beneficial Ownershp requirements, please go to:  Beneficial Ownership Information Reporting | FinCEN.gov

If you have any questions or need further assistance, feel free to reach out to Excel Bank at (323) 602-2000 or email us at information@excel.bank

¹ Notice to Customers: Beneficial Ownership Information Reference Guide