Pub. 12 2017-2018 Issue 6

WWW.NEBANKERS.ORG 24 A LOT OF QUESTIONSHAVE ARISENON THE VARIOUS2018RULES, but this by far is the No. 1 question the Compliance Alliance hotline receives. In addition, one of hottest issues the Compliance Alliance hotline receives ques- tions about is the Beneficial Ownership Rule. Let’s break down this rule step by step. Step 1: ToWhomDoes This Rule Apply? The rule applies to “legal entities,” as defined by the rule. So even if you’re used to thinking about family trusts and estates as a “legal entity” because they are separate from the individuals involved and they are created by state law, that’s not the defining trait of a “legal entity.” The defining trait is an organization cre- ated by registering with the Secretary of State as a business that is separate from the individual(s) running it. For example, a sole proprietorship would not meet that definition but a sole member limited liability company (LLC) would. Likewise, a family trust would not meet the definition of a “legal entity,” but a business trust set up by registering with the Secretary of State would. If you have a legal entity, you continue to step 2; if not, you follow your regular Customer Identification Program (CIP) steps. Step 2: What Do I Have to Do? The beneficial ownership rule requires that banks identify who the beneficial owners of a legal entity are and then verify the identity of those owners much like CIP. First, you need to BENEFICIAL OWNERSHIP: STEP BY STEP Silvia Garcia Maggio, CRCM, Associate General Counsel, Compliance Alliance “Can someone please explain this in plain English?!”