If our borrower is an LLC, and one of the members who owns more than 25% is a different LLC, then would I conduct BOIP on the LLC member?

Current thinking is: The person opening an account for ABC, LLC indicates XYZ LLC is a 25% owner. Then you need to ask who owns XYZ. If there is more than one owner of XYZ, you're done. However if XYZ is a single member LLC then you need to identify the single member as he or she indirectly owns 25% of ABC.

I've read and heard some pretty ridiculous advice on this subject. Hopefully the second Q&A will address it and provide some examples.

I am confused. In your example if there is more than one owner of XYC, you do not have to do anything else. I have always understood you have to drill down till you get a heart beat, in this case you have to get the owners of XYC so you can CIP them.

If XYZ owns 25% and you have more than one owner, then none of the XYZ owners could possibly qualify as owning 25% or more of the original entity.

I know the possibility is slim, but do also consider if an owner in on the LLC's on that account has a personal stake in the account in addition to their ownership of the LLC, or if they also have partial ownership in other LLC's that own the account.

Obviously, it will be a risk based decision on how far you drill down, but consider the LLC's are often created for different reasons, and one of those reasons is to obscure ownership. Several minority stakes could potentially aggregate to a stake greater than 25%.

So, the natural person opening an account for ABC, Inc says its ownership is:

123 Inc - 24%; 456 Inc - 24%; 789 Inc 24%; and 111 Inc 24%. The remaining 4% belongs to another natural person, Bubba Doofus

In order to determine if some combination of shareholders from those companies (or Bubba Doofus) might indirectly own 25 % of ABC we would need the complete list of names of the shareholders for all four plus their respective percentages of ownership. There's one fairly well known trainer who says that. It's very successful in getting the audience excited. (Part of the show for some.)

Clearly, banks are not required to get the percentage of ownership for ABC. However, if it is owned by another legal entity they should get a complete breakdown of of that entity's ownership as an excess of caution? Road apples. The preamble specifically says banks are not required to verify ownership.

This regulation is a cynical attempt to perpetrate a fraud against anyone who truly believes the U.S. should require the disclosure of beneficial owners for creatures of statute and partnerships. Obviously, FATF didn't buy it so it's hard for me to understand why anyone takes it seriously. Yet, it's a foregone conclusion that some examiners will offer their own interpretations further expanding the charade and wasting even more resources.

Just don't expand it as a volunteer...

No matter what improvements you make, it will still be worthless. (Note: It's only the honest people who are going to tell you the truth and nobody cares what honest people own.) Just do what's required, ask the natural person opening the account for the names of any individuals who, directly or indirectly own 25% or more of the legal entity customer and write down what they say as if it was the gospel.

Spend the rest of your bank's finite resources on something that makes a difference.

A huge AMEN to that Ken!

For all of our sakes, we should not go overboard with this rule or it will result in Death by Beneficial Ownership............

I recently removed the percentage of ownership from my form. Our core system has fields to collect the percentage; however, our employees will be instructed to NOT use the fields.

I'm sticking to what the regulation requires and that's it.