New Account Opening Requirements for Legal Entities
In 2018 federal regulatory requirements compelled all financial institutions to acquire, validate, and document information on legal entity customers’ beneficial owners and controllers.
Intended to assist the government in its fight against financial crime, these new regulations necessitate the disclosure of beneficial owners, who are defined as individuals who own or control a legal entity. All financial institutions are required to collect basic identification information (name, address, date of birth, social security number), as well as a copy of a corroborating form of identification, such as a driver’s license, when a deposit or loan account is opened for a covered legal entity. These measures must be met by RiverHills Bank for each individual within a legal entity who meets either or both of the following criteria:
- Has beneficial ownership (25% or more) of the legal entity
- Has significant managerial control of the legal entity
Acting in accordance with the new information gathering requirements, RiverHills Bank strictly adheres to these more rigorous, government-mandated regulatory measures. Therefore, we encourage our legal entity customers to be prepared to provide the required information and a current form of ID every time a new account is opened, or credit is applied for, on behalf of a legal entity.
Frequently Asked Questions
Are all legal entities included in this regulation?
Corporations, limited liability companies, entities created by the filing of a public document with a Secretary of State’s office or equivalent government office, a general partnership, and any comparable business entity formed in the U.S. or a foreign country are all types of legal entities subject to the regulation. Sole proprietorships, unincorporated associations, trusts (some exceptions apply), publicly traded companies, and most financial institutions are not legal entities subject to the regulation.
Does the Certification of Beneficial Owner(s) form have to be completed by a beneficial owner?
No. An individual, who is opening an account on behalf of a legal entity, may also complete the Certification of Beneficial Owner(s) form; however, that individual must have significant managerial control of the legal entity or regularly perform similar functions.
How in-depth is the information required for the Certification of Beneficial Owner(s) form?
The following data must be provided for each beneficial owner: Name, address, date of birth, and Social Security Number (or passport number or similar identification number in the case of non-U.S. citizens). Beneficial owners are:
- Each individual, if any, who owns, directly or indirectly, 25% or more of the shares of the corporation; and
- An individual, such as a CEO, CFO, COO, Managing Member, General Partner, President, VP or Treasurer or equivalent administrative professional, who has significant responsibility for controlling, managing, or directing the legal entity customer.
Does the Certification of Beneficial Owner(s) form have to be completed in advance of opening a new deposit or loan account?
Yes, both new and existing legal entity customers must complete the form prior to opening a new account.
Is RiverHills Bank responsible for authenticating the percentage of ownership for a legal entity customer?
Unless the bank has actual knowledge of any incorrect information, it may rely on the Certification of Beneficial Owner(s).
If beneficial ownership changes, is the legal entity required to disclose this information to the bank?
The information is normally required at the time the new account is opened. In certain circumstances, the bank may insist upon updated information on existing accounts.