May 16, 2019

Due diligence processes where we need them most.

As you may have heard, the Bank Secrecy Act has been amended in order to clarify and strengthen customer due diligence requirements for financial institutions. This includes explicit instructions regarding identifying beneficial owners of legal entity customers. If you’re curious as to what this regulation is all about and how it may affect you, we’ve got answers.  

Do these rules apply to all financial institutions?

Yes, all financial institutions have implemented this rule as of May 2018. For purposes of this rule, covered financial institutions are federally regulated banks and federally insured credit unions, mutual funds, brokers or dealers in securities, futures commission merchants and introducing brokers in commodities.  

Why were the Customer Due Diligence rules issued?

These rules were issued to further aid the government in the fight against crimes to evade financial measures designed to combat terrorism and other national security threats.  

Who does the beneficial ownership portion of the rule apply to?

The rule applies to a bank’s covered legal entity customers. Covered legal entity customers include corporations, limited liability companies, general and limited partnerships and other entities (including statutory trusts) created by filing a public document with the Secretary of State or similar office.  

Who is considered a beneficial owner and what information will be collected?

Banks are required to ask for identifying information such as name, address, date of birth, social security number and copies of identification documents for:
  • Each individual that has beneficial ownership (25% or more) in the legal entity; and
  • One individual that has significant managerial responsibility for the legal entity

When must beneficial owners be identified?

Beneficial owners must be identified each time a new account is opened for a covered legal entity customer on or after May 2018. A new account is defined as: all formal banking relationships, including a deposit, loan, safe deposit, cash management or trust account. Legal entity customers will also be asked for beneficial ownership information any time there are changes regarding the beneficial owners, ownership structure or nature of their business.  

What if I’m opening an account on behalf of a legal entity?

You will be required to provide the appropriate documentation regarding the beneficial owners and certify that this information is true and accurate to the best of your knowledge. This is required to be completed prior to the account being opened.  

What else do I need to know?

The most important thing to remember is that this regulation is for your protection and to continue assisting the government in fighting financial crime. At Bank Iowa, we proudly support all efforts to maintain the security of our customers and our country.  

Still have questions? Contact any Bank Iowa location as we’d be happy to discuss this requirement to ensure a smooth account opening process for legal entity customers.