FinCEN's Beneficial Ownership Requirement

Effective May 11, 2018, final rules adopted by the Financial Crimes Enforcement Network, or FinCEN, under the Bank Secrecy Act require "covered financial institutions" (e.g., federal regulated banks, federal insured credit unions, mutual funds, broker dealers, futures commission merchants) to identify and verify the identity of beneficial owners of legal entity customers (other than those that are excluded) at the time a new account is opened (other than accounts that are exempted) (the "rule"). The rule requires risk-based procedures for conducting ongoing customer due diligence, and requires an understanding of the nature and purpose of customer relationships for the purpose of developing a customer risk profile.

LEGAL ENTITY CUSTOMER

A legal entity customer means a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction, that opens an account (including partnerships, business trusts, etc.). The definition does not include natural persons opening accounts on their own behalf.

Exclusions. Certain legal entity customers are not covered by the rule, including:

Regulated banks. A department or agency of the federal or state government. Entities established under the laws of the U.S., any state or political subdivision of a state. Entities whose stock is listed on the NYSE, the NYSE American or Nasdaq. A U.S. entity when at least 51% of its common stock or analogous equity interest is held by a listed entity Issuers of securities registered under Section 12 of the 34 Act or that are required to file reports under Section 15(d). Investment companies. SEC registered investment advisers. Clearing agencies. Any other entity registered with the SEC under the 34 Act. Bank holding companies or a savings and loan holding companies. Insurance companies regulated by a state. Pooled investment vehicles operated or advised by a financial institution excluded from the definition of a legal entity customer. A financial market utility designated by the Financial Stability Oversight Council under Title VIII of the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010. A foreign financial institution established in a jurisdiction where the regulator of such institution maintains beneficial ownership information regarding such institution. A non-U.S. governmental...