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#2157126 - 12/13/17 05:39 PM Beneficial Ownership and Estate Accounts
gonetobeach Offline
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There is probably a very simple answer to this question:

For the beneficial ownership rules, how would one handle opening an estate account? Technically it is an entity (and I find no clear exclusion in the rules).

Opinion #1: "we ask for documentation from the IRS and the court, which is a state office, so we would have to obtain the beneficial ownership and control person information."

Question: Would an institution be required to know who the owners of the estate account funds are?

Opinion #2: "a separate entity, yes, and we would get the control person information, the executor of the estate."

In this case using the exclusion: (3) The following legal entity customers are subject only to the control prong of the beneficial ownership requirement: (i) A pooled investment vehicle that is operated or advised by a financial institution not excluded under paragraph (e)(2) of this section; and (ii) Any legal entity that is established as a nonprofit corporation or similar entity and has filed its organizational documents with the appropriate State authority as necessary.

Any insight would be appreciated!

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#2157127 - 12/13/17 05:42 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
rlcarey Offline
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#2157131 - 12/13/17 05:56 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
gonetobeach Offline
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So an estate account would be treated similarly as a trust account?

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#2157133 - 12/13/17 06:02 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
rlcarey Offline
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Do they have to file a public document with your Secretary or State in order to be established??

Question 20: Definition of legal entity customer
Q: Who is a legal entity customer?
A: The Rule defines a legal entity customer as a corporation, limited liability company, other entity created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an account. The definition also includes limited partnerships, business trusts that are created by a filing with a state office, and any other entity created in this manner.
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#2157146 - 12/13/17 06:53 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
Elwood P. Dowd Offline
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Randy is using the Socratic method, but it doesn't work if you don't answer questions. wink

An estate, which exists without filing with the Secretary of State or an equivalent office, is not a legal entity customer. You are not required to identify beneficial owners.
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#2157158 - 12/13/17 07:39 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
gonetobeach Offline
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Sorry - I was looking for answers.

There was the opinion that by filing with the court, you were filing with the State, thus an entity covered by the rule. Not the case - I'll clarify that with our BSA Officer.

With further digging (and no help from Google) did find my answer.

Footnote 58 in the Final Rule!

58. Also not covered by the final rule are accounts in the name of a deceased individual opened by a court-appointed representative of the deceased's estate.

Question solved, Thank you both.

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#2157198 - 12/13/17 09:57 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
Elwood P. Dowd Offline
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It's fortunate, but misleading, that you found a footnote that addressed your specific question. That will be a rare event, one that may not repeat itself in the rest of your career. rlcarey took his readers directly to the section that, with some thoughtful analysis, would have indicated that the regulation does not apply to:
* estates,
* sole proprietorships, and
* trusts that are not registered with the state.
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#2157468 - 12/15/17 07:34 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
John Burnett Offline
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My two cents -- It is a shame when a regulator elects to tuck information like that into a footnote to a Federal Register document. It won't show up in the regulation itself, and most probably won't appear in any official guidance from FinCEN. Yes, it can be determined by analyzing the wording of the regulation itself (as Randy did in this discussion), but if FinCEN thought that the information about a decedent's estate was important enough to mention, it could have been included in the regulation itself.
Last edited by John Burnett; 12/15/17 07:35 PM.
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#2157997 - 12/20/17 10:39 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
gonetobeach Offline
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Agreed.

In my comment above about looking for answers, I meant that I was off looking up the answer to Randy's question about filing a public document with the state and sorry that it took so long in getting back to the conversation.

BSA was indicating that FinCEN would probably want to know who the beneficiaries are in some of these estates, and as I noted, was making the case that a court could be considered an extension of the state. And with the rule being specific about sole proprietors and which types of trust accounts were exempt, estate accounts were suspect. They were leaning toward recommending inclusion of this type of account (entity) in procedures.

Thankfully, that little footnote was found which addressed our specific question. Yay! But I agree will probably not ever happen again.

I want y'all to know that I truly appreciate all the help, guidance, insight, support and in so many cases a comforting safety net. I always seek the gurus when researching because in so many cases, the answer is here. And if it's not, we get help researching - even if its a prod in the right direction..

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#2158112 - 12/21/17 07:42 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
Elwood P. Dowd Offline
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Quote:
BSA was indicating that FinCEN would probably want to know who the beneficiaries are in some of these estates,


Clearly, it's not just that banks don't understand the purpose of the regulation, they also do not understand the basic characteristics of legal entities. (A clear example is the number of people who ask questions about a "business" without saying whether it's a corporation, partnership, LLC, sole proprietorship, etc.)

Legal entity customers are often used to hide the identity of evil doers. What FATF wants is to require business entities that are required to register with the state to disclose their owners at formation. That way, the information is available to law enforcement without legal compulsion. After several attempts, FinCEN failed to get such a requirement through Congress. So, they put in this stopgap measure that actually does nothing to put the information in the hands of law enforcement. They now have Plan B that would actually work, but it's unlikely to gain much traction with the current administration.

A decedent's estate is not a target for additional disclosures. First, it is court supervised, a judge can review and question any transaction. Second, the will is a public document so the names of the heirs are there for anyone to see; i.e. an estate cannot serve as a cloaking device.

Estates never register. They are created by court order.

Discussed in another current thread, trusts can certainly be used to hide the identity of evil doers. However, a non business trust is a private arrangement based on a written contract. Banks are free to require copies of trust documents identifying the grantors and beneficiaries at account inception or later if they became concerned about the activity.

Only statutory trusts are required to register. Looking for a contractual trust on an SOS web site is like looking for a Schwinn on the Bureau of Motor Vehicles web site.
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#2178967 - 05/21/18 05:57 PM Re: Beneficial Ownership and Estate Accounts rlcarey
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Similar to the topic raised in the other thread, if an estate is a 50% owner of a legal entity customer, then you would need to collect and verify the identity of the estate executor or whatever, right? That would be my analogy for collecting and verifying the identity of the Trustee for a Trust.

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#2179033 - 05/21/18 09:16 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
TryingtoComply Offline
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Quote:
Banks are free to require copies of trust documents identifying the grantors and beneficiaries at account inception or later if they became concerned about the activity.


Not true in CA. This is prohibited by our probate code. A financial institution is specifically prohibited from requesting information on the dispositive portions of the trust relating to the distribution of the trust estate. Section 18100.5(b).
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#2179051 - 05/22/18 01:04 AM Re: Beneficial Ownership and Estate Accounts TryingtoComply
Elwood P. Dowd Offline
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Reading a CA or NY statute for the first time is like opening a box of chocolates from Forest Gump,you never know what you are going to get. However, in this case, the legislature remained n touch with its home planet. The prohibition (sub paragraph h) is against asking for proof of the information contained in the certification "in bad faith."

Asking for an explanation of activity inconsistent with that expected from the certificate should be the essence of good faith.
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#2179059 - 05/22/18 12:42 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
TryingtoComply Offline
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The Certificate of Trust does not reveal beneficiaries, only the current and successor trustees. If we see unusual activity on an account, we would ask the trustee for an explanation. It would have to be extenuating circumstances for us to request a copy of a trust document. I would not do this without consulting with our general counsel.
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#2179068 - 05/22/18 01:25 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
John Burnett Offline
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Back to the original question -- the estate of a decedent is not a legal entity that is formed by a filing with the Secretary of State or similar state official. It is formed as a matter of common law and statute when the decedent's life ended. The estate exists as a matter of law whether or not a probate proceeding is opened. So it cannot possibly be a legal entity customer under the Beneficial Ownership Rule.
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#2179150 - 05/22/18 06:15 PM Re: Beneficial Ownership and Estate Accounts John Burnett
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Originally Posted By John Burnett
Back to the original question -- the estate of a decedent is not a legal entity that is formed by a filing with the Secretary of State or similar state official. It is formed as a matter of common law and statute when the decedent's life ended. The estate exists as a matter of law whether or not a probate proceeding is opened. So it cannot possibly be a legal entity customer under the Beneficial Ownership Rule.


Thank you, John. How about when a legal entity customer is owned by an estate? Do you treat the Estate Executor as the BO?

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#2179154 - 05/22/18 06:20 PM Re: Beneficial Ownership and Estate Accounts Compliance NABW
Elwood P. Dowd Offline
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Treating a personal representative as the beneficial owner of a legal entity customer is every bit as logical as treating a trustee as the beneficial owner.
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#2179191 - 05/22/18 07:59 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
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Thank you. I might sense a hint of sarcasm there, lol, but for a Trust, that is exactly what the Final Rule says to do, so I figured it would be an analogous extension with the Estate Executor.

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#2179395 - 05/23/18 05:57 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
John Burnett Offline
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Ken? Sarcasm? Say it isn't so!
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#2179406 - 05/23/18 06:12 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
BrianC Offline
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Surely you jest!

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#2179540 - 05/24/18 01:05 PM Re: Beneficial Ownership and Estate Accounts BrianC
Elwood P. Dowd Offline
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Life's better when your friends understand you. wink

To round out the trilogy: If the legal entity customer is owned 25%+ by an IRA, then the IRA custodian or trustee is the beneficial owner. It's not logical. It's just consistent.
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#2189951 - 08/21/18 05:53 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
Money244 Offline
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What about court cases such as Smith v. Jones but the account is opened by an entity that specializes in administration of these lawsuits. Am I to understand that we must collect the controlling party of the firm that is administrating the account?

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#2189967 - 08/21/18 06:17 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
rlcarey Offline
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Yes. And BO information on the firm also, as applicable.
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#2189975 - 08/21/18 06:56 PM Re: Beneficial Ownership and Estate Accounts rlcarey
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Thank you!

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#2190025 - 08/21/18 11:11 PM Re: Beneficial Ownership and Estate Accounts gonetobeach
Money244 Offline
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My apologies but have one more question relating to Chapter 7, 11 or 13 accounts where the trustee is court-appointed, is the trustee required to sign the BO form as the controlling party? or are these accounts exempt since the trustee is court-appointed?

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