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The Green Sheet Online Edition

May 28, 2018 • Issue 18:05:02

Readers Speak: What is a 'Beneficial Owner'?

Where can I find information on new regulations that require us to gather more personal data on "Beneficial Owners" applying for merchant services. Who is requiring this? I don't even know what "Beneficial Owner" means. And what do I do if someone objects to providing more of their own identifying information? In this day and age, where security is a major concern, people might want to provide less, not more data to companies they do business with.

Linda Rosinski, Merchant Level Salesperson


The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) discusses "Beneficial Ownership" in its final rules on customer due diligence requirements for financial institutions. FinCEN summarized this action as follows: "FinCEN is issuing final rules under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements for: Banks; brokers or dealers in securities; mutual funds; and futures commission merchants and introducing brokers in commodities. The rules contain explicit customer due diligence requirements and include a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions."

A beneficial owner is an individual who owns 25 percent or more of the business applying for services. The information required is name and title; date of birth; address (residential or business street address); Social Security number for U.S. customers; and, for foreign customers, passport number or other similar ID number, along with country of issuance. This information must also be collected from at least one individual with controlling authority, such as a CEO or COO, if said individual doesn't also own 25 percent or more of the enterprise. The final rules became effective July 11, 2016; however, the applicability date for covered financial institutions was May 11, 2018. For full details, visit www.gpo.gov/fdsys/pkg/FR-2016-05-11/pdf/2016-10567.pdf.

Thanks for your excellent question.


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