Beneficial Ownership we know is required when an entity is registered with a state secretary, etc. When we have entities who are, for example unincorporated associations, we know that there is no ownership so there is no beneficial ownership. However, in a case like this, are we still required to obtain the certificate form with the control prong section filled out?

Or is the control prong only section filled out when we have a true, legal entity, but ownership is less than 25% for all owners? We weren't clear whether unincorporated organizations such as local sports teams, ladies hat society, etc. who obtain an EIN for their organization, but otherwise are not officially organized or recognized with a state secretary would need the form at all/person opening the account portion of the form/control prong.

Source: 31 CFR Part 1010. Section 1010.230(e) (Legal entity customer), paragraph (3):

"(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."

From that, you would correctly surmise that you're still only concerned with legal entity customers, and the "control prong only" provision only applies to the two types of entities listed there.

Don't subject anyone to this regulation that you don't have to.

Unincorporated organizations lack legal capacity and therefore do not meet the definition of a "customer." You existing CIP should already address obtaining CIP information on signers of these organizations since they are your customers for CIP purposes.

Beneficial ownership would not apply to these.

See the definition of "customer" from the exam manual.

The CIP rule applies to a "customer." A customer is a "person" (an individual, a corporation, partnership, a trust, an estate, or any other entity recognized as a legal person) who opens a new account, an individual who opens a new account for another individual who lacks legal capacity, and an individual who opens a new account for an entity that is not a legal person (e.g., a civic club).

Okay, no control or ownership prongs for Unincorporated Associations.

Next question - what about floor plan customers? For example, the customer has a $250,000 line of credit of which there is one master note. When a new vehicle is added to the floor plan, we give the customer another account number for that floor plan vehicle (sort of like a sub-account number for a main account number). The only document the customer signs is a trust receipt. No new documents are done for the floor plans.

I will go out on a limb here and suggest you have one extension of credit -- the "subnotes" don't constitute new loans; they are used to tie specific paydowns on the line to specific vehicles and advances.

Do you have to get a new certification form every time the customer opens a new deposit/loan account? For example ABC Corp closes on a loan today and two weeks later they close on another loan. Nothing on the ownership information has changed, do they have to get another signed certification form or can you just rely on the original form that was signed two weeks ago?

Yes. You are required to obtain a new certification of beneficial ownership at each new account event. The point is to certify that there has not been a change in ownership since the last certification was obtained.

Thank you John!

Of course, we are over-thinking "each new account event". Does this include signer changes on an existing account when the beneficial owner/control individual is the same? I believe that if a new signature card is created or note is signed, a new certification form should be obtained. Thoughts?

You're not opening a new account and you've indicated the Beneficial Ownership info hasn't changed. There is no triggering event that would require a new Certification.

I agree with my fellow Cape Codder, Mel. A new authorized signature by itself doesn't trigger a need for an updated BO certification. If you become aware of a change in ownership or if a new account is opened, you get a new BO Certification. As someone much wiser than I said (and I paraphrase), with a rule that is as patently useless as this one, you shouldn't go looking for ways to make things more complicated than they are.