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#2143487 - 08/24/17 05:42 PM Beneficial Ownership and Aggregation
bhazzard Offline
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I want to make sure I am interpreting his correctly, so any thoughts or differing opinions are welcome!

When it comes to the aggregation responsibility for the beneficial ownership rule, if we have John Smith who is
30% owner in company A;
40% owner in company B;
50% owner in company C;
and 75% owner in company D;

and there was $30,000 deposited in cash total into his various business accounts, a CTR would need to be filed because he "benefits" from the cash?

Additionally, if that is the case, do you identify each business in the SAR, or only the ones that exceeded $10,000? My initial reaction would be just the conductors and the beneficial owner.

Thanks!

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#2143498 - 08/24/17 06:14 PM Re: Beneficial Ownership and Aggregation bhazzard
RockChucker, CAMS Offline
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Why the SAR?
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#2143504 - 08/24/17 06:27 PM Re: Beneficial Ownership and Aggregation RockChucker, CAMS
bhazzard Offline
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I meant CTR, not SAR lol. I apologize!

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#2143517 - 08/24/17 07:08 PM Re: Beneficial Ownership and Aggregation bhazzard
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Are the businesses sole proprietors, LLCs, partnerships corporations, etc.?
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#2143597 - 08/25/17 01:15 PM Re: Beneficial Ownership and Aggregation BrianC
Elwood P. Dowd Offline
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When you provide the information Brian requested there are a number of people who can answer your question directly, but here's the preface to that response: The new beneficial ownership rule has absolutely no effect on the way banks complete CTRs, none. It might raise your awareness of common ownership, but it will not affect the way you complete the CTR.

There is preexisting guidance dealing with whether the activity of two different, but commonly owned, legal entity customers is subject to aggregation.
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#2143623 - 08/25/17 02:51 PM Re: Beneficial Ownership and Aggregation Elwood P. Dowd
Wildcat Rampage Offline
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Originally Posted By Ken_Pegasus
When you provide the information Brian requested there are a number of people who can answer your question directly, but here's the preface to that response: The new beneficial ownership rule has absolutely no effect on the way banks complete CTRs, none. It might raise your awareness of common ownership, but it will not affect the way you complete the CTR.

There is preexisting guidance dealing with whether the activity of two different, but commonly owned, legal entity customers is subject to aggregation.
[quote][/quote]

Not the OP, but....

Thank you Ken.

I listened to an "off brand" webinar recently during which the leader implied (I would say stated, but it was so fast, I can't rely on memory, so I'll be diplomatic and say implied) that beneficial ownership would change CTR reporting. It was implied that the following would become true 5-11-18 (if we were aware because of beneficial ownership):

Coach Cal is a 30% owner of Big Blue Nation, LLC, there are no other owners of more than 25%. Coach Cal is in the driver's seat of the control prong as well.

Coach Cal is also a 35% owner of Wildcat Coal Lodge, LLC, there are no other owners of more than 25%. Again Coach Cal is in the driver's seat of the control prong as well.

Big Blue Nation has a cash deposit of $6,000 on 8-24-2017 made by John Doe.

Wildcat Coal Lodge, LLC has a cash deposit of $7,000 on 8-24-2017 made by Joe B. Hall.

According to the webinar, we would be required to file a CTR because Coach Cal is the beneficial owner, that made no logical sense to me.

I'm interpreting your response here to say that there is nothing to say that we're required to file a CTR on Coach Cal. Did I interpret your response correctly?

Thank you.
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#2143632 - 08/25/17 03:14 PM Re: Beneficial Ownership and Aggregation Wildcat Rampage
Elwood P. Dowd Offline
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Quote:
we would be required to file a CTR because Coach Cal is the beneficial owner,



I don't fully understand the example, but the answer to the statement is : Road apples.
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#2143698 - 08/25/17 06:44 PM Re: Beneficial Ownership and Aggregation bhazzard
John Burnett Offline
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I sincerely hope that "off brand" webinar presenter quickly get the facts right or retires from the business. Ken's response is genteel. Mine would be a lot less refined.
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#2143831 - 08/28/17 05:11 PM Re: Beneficial Ownership and Aggregation bhazzard
bhazzard Offline
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OK, I apologize, I have been out of the office for a few days.

I would be curious to know for all business structure types.

I have heard it both ways.

I have heard some say yes we would need to aggregate, otherwise what's the point of identifying them? When a joint account has a deposit of over $10,000 we are required to identify the other owner since they are "benefiting," from the funds. Wouldn't this be the same idea?

I have also heard the stance of follow the guidance and unless we know they are comingling funds we would not have to file.

Although I know what the new rule states, it is a little "open," when they address the aggregation piece.

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#2143833 - 08/28/17 05:32 PM Re: Beneficial Ownership and Aggregation bhazzard
John Burnett Offline
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Try to separate in your mind the rule on CTRs and the rule on Beneficial Ownership. They are two separate requirements. Ownership is irrelevant for CTRs reporting the cash transactions of entities (corporations, LLCs, partnerships) unless you can see that multiple such entities owned by a single owner are not being operated independently of each other.
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#2143834 - 08/28/17 05:34 PM Re: Beneficial Ownership and Aggregation bhazzard
John Burnett Offline
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For a sole proprietorship, the CTR is filed on the owner of the business (he or she IS the business; it has no separate legal identity).
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#2143848 - 08/28/17 06:14 PM Re: Beneficial Ownership and Aggregation bhazzard
bhazzard Offline
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Thanks John, I think your interpretation and explanation makes sense smile

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#2143875 - 08/28/17 07:24 PM Re: Beneficial Ownership and Aggregation bhazzard
Elwood P. Dowd Offline
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I own half of an LLC. I do not own half of its bank account. A deposit to a legal entity customer benefits the legal entity, not its owners.
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#2158757 - 12/29/17 05:28 PM Re: Beneficial Ownership and Aggregation bhazzard
TryingtoComply Offline
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From the Rule:

While the requirement to identify the
beneficial owners of legal entity
customers does not modify this existing
CTR aggregation requirement, the
beneficial ownership identification may
provide financial institutions with
information they did not previously
have, in order to determine when
transactions are ‘‘by or on behalf of’’ the
same person. Thus, if a financial
institution determines that a legal entity
customer or customers are not being
operated independently from each other
or from their primary owner—e.g., the
institution determines that legal entities
under common ownership have
common employees and are repeatedly
used to pay each other’s expenses or the
personal expenses of their primary
owner—then the financial institution
may determine that aggregating the
transactions of a legal entity or entities
and their primary owner would be
appropriate.52 Under such
circumstances, if a financial institution
were aware that a beneficial owner
made a $5,000 cash deposit into his
personal account, and later the same
business day, he made a $6,000 cash
deposit into the account of a legal entity
not being operated as an independent
entity, the institution would be required
to aggregate those transactions and file
a CTR.
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#2158762 - 12/29/17 06:05 PM Re: Beneficial Ownership and Aggregation TryingtoComply
Elwood P. Dowd Offline
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That's from the preamble, not the regulation. It reiterates guidance that FinCEN issued in 2001 and, aside from acknowledging that the new regulation has no effect on aggregation, is without effect.

Regardless, this part is pretty cute:

Quote:
Under such circumstances, if a financial institution were aware that a beneficial owner made a $5,000 cash deposit into his personal account, and later the same business day, he made a $6,000 cash deposit into the account of a legal entity not being operated as an independent entity, the institution would be required to aggregate those transactions and file a CTR.


"Under such circumstances" notwithstanding, a casual reading indicates those two transactions were subject to aggregation because they were carried out by the same person. Whether he was a beneficial owner or whether the entity was being operated separately could not be more irrelevant. [FinCEN screwed up its own example.]
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#2158767 - 12/29/17 06:51 PM Re: Beneficial Ownership and Aggregation bhazzard
Beachbum, CRCM Offline
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Exactly what I thought when I read the example Ken, Beneficial ownership would not come into play in that example. I thought for a minute I was misunderstanding something.
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#2158813 - 12/29/17 09:49 PM Re: Beneficial Ownership and Aggregation bhazzard
TryingtoComply Offline
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Correct, the information in the preamble to the Final Rule. Sorry for the confusion. My intention was to emphasize the existing guidance.

Yes, the example they use is not very helpful!

I'm hearing from some of my peers that they will be routinely aggregating cash transactions of beneficial owners with cash transactions occurring on any entity they are associated with. I'm assuming the transactions will be aggregated by their AML software.
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#2158816 - 12/29/17 10:16 PM Re: Beneficial Ownership and Aggregation bhazzard
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They are out of their minds.
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#2158819 - 12/29/17 10:31 PM Re: Beneficial Ownership and Aggregation bhazzard
Daisy Doodle Offline
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It's not clear to me at this point how we would prevent it from happening. But our 'kickoff project' to implement all of the 'stuff' between our core and our BSA software (with system updates on both sides) doesn't get underway until January. If we don't allow our beneficial ownership records to flow through to our BSA Software we would have to manually add the BO's to our SARS. If we don't set up customer records on our core for our BO's, no OFAC checking. If we do set them up with customer records on our core, I don't know how we prevent our core from aggregating since it uses TIN to aggregate everything in sight. But if a BO makes an unrelated cash deposit and gets swept in with a business, well, we already have to manually review all that anyway, just like we do when a signer gets pulled in--we have to determine conductor on each side. Just more research maybe?

Guess we'll know more soon. Our core has put out minimal info so far on their upgrade.

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#2158827 - 12/30/17 12:35 AM Re: Beneficial Ownership and Aggregation TryingtoComply
Elwood P. Dowd Offline
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Quote:
we would have to manually add the BO's to our SARS


FinCEN has not said that banks should automatically include beneficial owners as SAR subjects when a legal entity is a SAR subject.

Obviously, ABC Inc., your SAR subject, did not decide to structure its deposits, a human did. However, the bank really doesn't know if it was an owner, an account signatory, or an individual whose name is not in the bank's records who made the fateful decision. Defaulting to the owner(s) may have some logic to it, but it would be wise to wait until FinCEN says that's what they want.

Quote:
They are out of their minds.


Yup. Moreover, any literate reviewer will criticize them for completing CTRs incorrectly..
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#2159046 - 01/03/18 07:09 PM Re: Beneficial Ownership and Aggregation bhazzard
Princess Romeo Offline

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Abolish the CTR and replace with monthly cash reporting done directly from the core system where the reported information includes account number, account owner, street address, Tax ID#, aggregate cash in for the month, aggregate cash-out for the month. Let the Feds and local law enforcement slice and dice the data any way they like. We then eliminate SARs for structuring and focus our BSA/AML efforts on truly suspicious activity. In other words, let's modernize BSA reporting to the 21st century.
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#2159047 - 01/03/18 07:17 PM Re: Beneficial Ownership and Aggregation bhazzard
rlcarey Online
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You are both singing to the choir and in the rain smile What a life it would be.
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#2159055 - 01/03/18 07:35 PM Re: Beneficial Ownership and Aggregation Princess Romeo
RockChucker, CAMS Offline
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Originally Posted By Princess Romeo
Abolish the CTR and replace with monthly cash reporting done directly from the core system where the reported information includes account number, account owner, street address, Tax ID#, aggregate cash in for the month, aggregate cash-out for the month. Let the Feds and local law enforcement slice and dice the data any way they like. We then eliminate SARs for structuring and focus our BSA/AML efforts on truly suspicious activity. In other words, let's modernize BSA reporting to the 21st century.


AMEN Sister!!!
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