I am confused and hoping to get clarification on the following. We have a corporation that was purchased by a division or subsidary of a publically traded company. They do not want to provide any CIP documentation. I am confused as to whether we can rely on the publically traded company status in this case. They are relying on the definition of customer which the FFIEC Manual defines as: Excluded from the definition of customer are federally regulated banks, banks regulated by a state bank regulator, governmental entities, and publicly traded companies (as described in 31 CFR 103.22(d)(2)(ii) through (iv)). I have looked on the Secretary of State and SEC websites with no luck, but am not sure if I heading in the right direction. How can I find out what the relationship between the parent company & the division or subsidary is? Does it make a difference on the CIP requirement whether the relationship is subsidary or division, etc?

We have already had to amend our BSA Policy to accomodate this. The only change to our account has been adding one of the purchasing companys employees as a signer. The account officer does not want to bother the customer with any requests for clarification or documentation, so I am on my own. Thanks for your help.

Is the sub of the publicly listed entity a wholly owned? Is the company purchased 100% owned by the sub?

All publicly traded company's disclosure a lot of information, including their subs owned in their annual report. If you go to the SEC's Edgar database, you can find the most current annual report.

ACBbank thank you for the info, it was helpful. I was able to determine that the company is a subsidary of the publically traded company. Now the question is...is a subsidary exempt from CIP on the basis of the publically traded company?

So I thought the answer would be "Yes," however, I have found nothing to support my original opinion. Even though it makes sense that a domestic sub of a publicly traded company would be exempt from CIP, I'm going to say their not at this point.

Maybe one of the Guru's has a link or some guidance that I missed.

Phase I CTR Exemptions (31 CFR 103.22(d)(2)(i)–(v))

FinCEN’s rule identifies five categories of Phase I exempt persons:
•A bank, to the extent of its domestic operations.
•A federal, state, or local government agency or department.
•Any entity exercising governmental authority within the United States.
•Any entity (other than a bank) whose common stock or analogous equity interests are listed on the New York Stock Exchange or the American Stock Exchange or have been designated as a NASDAQ National Market Security listed on the NASDAQ Stock Market (with some exceptions).
•Any subsidiary (other than a bank) of any "listed entity" that is organized under U.S. law and at least 51 percent of whose common stock or analogous equity interest is owned by the listed entity.

Therefore - I would go as far to say they would also be exempt from CIP.

Excluded from the definition of customer are federally regulated banks, banks regulated by a state bank regulator, governmental entities, and publicly traded companies (as described in 31 CFR 103.22(d)(2)(ii) through (iv)).



(iv) Any entity, other than a bank,
whose common stock or analogous equity
interests are listed on the New
York Stock Exchange or the American
Stock Exchange or whose common
stock or analogous equity interests
have been designated as a NASDAQ National
Market Security listed on the
NASDAQ Stock Market (except stock
or interests listed under the separate
‘‘NASDAQ Capital Markets Companies’’
heading), provided that, for purposes
of this paragraph (d)(2)(iv), a person
that is a financial institution,
other than a bank, is an exempt person
only to the extent of its domestic operations;
(v) Any subsidiary, other than a
bank, of any entity described in paragraph
(d)(2)(iv) of this section (a ‘‘listed
entity’’) that is organized under the
laws of the United States or of any
State and at least 51 percent of whose
common stock or analogous equity interest
is owned by the listed entity,
provided that, for purposes of this
paragraph (d)(2)(v), a person that is a
financial institution, other than a
bank, is an exempt person only to the
extent of its domestic operations;

WW - If you don't mind my asking, what is your source document? It's not that I don't think your assessment is correct, but it seems that this verbiage relates to currency transaction exemptions, not an exemption from the definition of a Customer.

I'd be very grateful if you would share your source document.

Thank you.

Time to get out your magnifying glass and examine your roman numerals. Note that the exclusion from CIP requirements extends to listed companies BUT NOT to their subs (in the old rules, it extended to roman numerals (ii) through (iv), omitting (v), which is where the subs are described). Try starting by dumping your old versions of the old FinCEN regulation and refer to the current definitions in 31 CFR 1020.100. http://www.bankersonline.com/regs/31-1000/31-1020-000.html#100

There you will find the exclusion language in the definition of customer for the purposes of 1020.220 (the CIP regulation). "A person described in §1020.315(b)(2) through (b)(4)" is excluded. That takes you to the CTR exempt person provisions. You'll see that .315(b)(2) through (4) do not include the subsidiaries described in .315(b)(5).

Come to think of it, finding that out in the old version (31 CFR 103) would have been a lot faster.

The exemption reg is tied to CIP. So I referenced both from the Exam manual - hence the older regulation numbers I guess.

But I disagree how to read the reg. I understand it doesn't list (v) or (5) from whichever version you read ... but why could you Phase 1 exempt a subsidiary ... but not exclude them from CIP? It doesn't make sense? (I guess that's the government for you).

Anywho - As I read the original question ... It sounds like the original poster was getting pushback from getting CIP for a signer? A signer on an account isn't subject to CIP since they are not a "customer" under the definition. Your customer is the subsidiary of the public company.

It depends how your policy is written, but my policy doesn't require CIP on signers. My procedures require it, but I can override procedure if I so choose (for examples such as this I probably would override).

I agree that bank CIP policies need to tread carefully between ensuring they know whom they are dealing with and hamstringing their operations to the extent they can't open an account for a publicly-traded corporation.

But the difference between the list of persons that are exempt or potentially eligible from CTR filing requirements and the list of persons who aren't "customers" under the CIP regulation is very real. When the latter was written, it was discussed at length. Subs simply are not included. And FinCEN was deliberate in that determination back in 2003.

Agreed.

As noted, subsidiaries of publicly traded companies listed on a major exchange are "customers" for the purposes of CIP. Regardless, the regulation is wholly inapplicable to a signatory on any entity's account unless your bank's CIP says otherwise.

As also noted, if you are focusing on whether you need identification from a signatory the only thing you need to read is your bank's CIP. What your account officer does or does not want to be bothered with is irrelevant; the decision was made on a much higher plane.

Ken - Maybe I'm reading your post incorrectly, but are you saying that subs of publicly traded companies listed on the appropriate exchanges are not "customer" for the purposes of CIP?

No, you read it correctly; what I said was wrong. I have since reworded it. Thanks.

Re-surfacing this thread as it seems to conflict with the answer to question 24 on FIN-2018-G001 located at https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf. Hoping someone can weigh in and clarify!

Question 24: Definition of legal entity customer: Publicly traded companies and entities listed on foreign exchanges.

Are companies publicly traded in the United States and entities listed on foreign exchanges excluded from the definition of legal entity customer and, therefore, excluded by the Rule?

A. Companies traded publicly in the United States are excluded from the definition of legal entity customer. Specifically, the Rule excludes from the definition of legal entity customer certain entities that are considered “exempt persons” under 31 CFR 1020.315(b). This includes any company (other than a bank) whose common stock or analogous equity interests are listed on the New York Stock Exchange,
the American Stock Exchange (currently known as NYSE American), or NASDAQ stock exchange (see 31 CFR 1020.315 (b)(4)). The Rule also excludes a U.S. entity when at least 51 percent of its common stock or analogous equity interest is held by a listed entity (see 31 CFR 1020.315 (b)(5)). These U.S. companies are excluded from the Rule because they are subject to public disclosure and reporting requirements that provide information similar to what would otherwise be collected under the Rule. Companies listed on foreign exchanges are not excluded from the definition of legal entity customer. Such companies may not be subject to the same or similar public disclosure and reporting requirements as companies publicly traded in the United States and, therefore, collecting beneficial ownership information for them is required.

There is no contradiction, but you have to consider the definitions in each part of the regulation.

Chapter X Section 1010.220(c)(2)

(2) Customer does not include:
(ii) A person described in §1020.315(b)(2) through (b)(4);

Chapter X Section 1010.230(e)(2)(ii)

(2) Legal entity customer does not include:
(ii) A person described in § 1020.315(b)(2) through (5) of this chapter;

In other words, we have to perform CIP for the sub, but we do not have to obtain a beneficial ownership certification. The preamble to the final rule vaguely makes reference to the fact that these definitions are not identical.

"Section 1010.230(e)(2). The NPRM proposed ten exclusions from the legal entity customer definition. The first two categories are also for the most part excluded from the requirements of the CIP rules."

Thanks, Brian!