I'm in the Commercial Real Estate Department dealing mostly with construction lending. Many of our deals are set-up under an LLC for that particular project. This one LLC could have many "owners" including individuals, corps, other LLCs. etc. How are other banks gathering KYC/EDD/AML information on all these "owners" and how far down the chain do you go?

Our Compliance Officer says we should use a 10% ownership rule, only gathering info on "owners" of 10% or more of the originating entity, but in the next breath says we should drill down to all the "owners".

Does the size of the deal make a difference?

Do we need AML info on "owners" who are investors in 1% of the originating entity?

Any help on this would be greatly appreciated. Thanks.

Your institution should have decided, based on a risk analysis, what it would consider as "owner" for purposes of CIP. Some banks have set a 10% ownership threshold. Others have set higher, and others have set it lower.

The KYC/EDD/AML information should be on the customer as a whole, the source of funds, the nature of the transaction, and any other considerations for money laundering risk. For real estate deals, you need to be satisfied that you are dealing with legitimate funding from the customer. IOW, you do not want to have a construction loan where the borrower's equity came from laundered money.