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#2166872 - 03/06/18 04:59 PM Document for use in drilling down BO percentages?
ABT Offline
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Posts: 32
Does anyone have a document they are using and can share for drilling down beneficial ownership when a legal entity is owned by one or more other legal entities of 25% or more? I need a "tool" for our front line staff and lenders to use when they are helping customers determine the BO percentage layers down to natural persons of their legal entity.

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#2166877 - 03/06/18 05:23 PM Re: Document for use in drilling down BO percentages? ABT
Daisy Doodle Offline
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Me too. I was going to sit down and create one, but haven't done it yet. Needs to be very simple!

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#2166881 - 03/06/18 05:36 PM Re: Document for use in drilling down BO percentages? ABT
ABT Offline
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I agree with the simplicity of the document so it is easy for front line staff and customers to use.

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#2166889 - 03/06/18 06:05 PM Re: Document for use in drilling down BO percentages? ABT
David Dickinson Offline
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We have a free "Certificate of Beneficial Owner" form that might help you. It's in the "BSA Tools (Free Downloads)" box at our store. Here's a direct link. I think that may help you out.
https://www.bankerscompliance.com/resources/

Free Downloads is at bottom left of linked page.
Last edited by Truffle Royale; 03/07/18 02:53 PM.
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#2166897 - 03/06/18 06:55 PM Re: Document for use in drilling down BO percentages? ABT
Lilly C Offline
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Sunny Florida
I think they are looking for a flowchart not the form.

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#2166900 - 03/06/18 07:11 PM Re: Document for use in drilling down BO percentages? ABT
Daisy Doodle Offline
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Southern U.S.
Right. Something that does the math for them, is what I had in mind to try to create.

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#2166906 - 03/06/18 07:37 PM Re: Document for use in drilling down BO percentages? ABT
ABT Offline
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Joined: Nov 2010
Posts: 32
Yes, I'm looking for a document to make the BO percentage easy to calculate for the frontline staff helping the person opening the legal entity's account. Perhaps in an Excel spreadsheet format?

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#2166912 - 03/06/18 08:11 PM Re: Document for use in drilling down BO percentages? ABT
Always In Training Offline
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Where the Green Grass Grows
Sitting through a webinar on this, The example given was Company A owned by Person B and Company C, Okay Person A was a BO, checking for Company C, it was owned by Person D and Company E. Company E was owned by Companies F & G and it was a topic of debate that no one would have to drill any further because there wouldn't be a natural person that owned 25% or more of Company A. It seems crazy that you don't have to keep digging.

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#2166913 - 03/06/18 08:13 PM Re: Document for use in drilling down BO percentages? ABT
Always In Training Offline
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Where the Green Grass Grows
Guess I'm getting at, I think it has to be a flowchart and not a calculator. You almost have to draw them out as a tree and every company is going to be different.

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#2166914 - 03/06/18 08:16 PM Re: Document for use in drilling down BO percentages? ABT
Daisy Doodle Offline
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Joined: Feb 2014
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Southern U.S.
I was hoping that once it was flowcharted a calculator could be built in (maybe needed at each level). Haven't tried yet. Need to be a one pager, if possible.

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#2166921 - 03/06/18 08:55 PM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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Yeah, we would all love that kind of tool. We talked about it too, but it would be an expanding flowchart and since there could be many different scenarios, I thing that would be difficult to do in Excel. But that's not to say it couldn't be done.

Consider creating several examples from the most simple and working up to more complex.

Here's a plug: Bankers Compliance Consulting did a webinar called BSA/AML Annual Overview Compliance Webinar that did just that. You can use the examples they provided to create the flowcharts in PowerPoint. I taught myself how in less than 30 minutes and created a bunch of scenarios.

For a couple hundred bucks you will receive some great material to help you develop your own training.

You're welcome David. smile
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#2166997 - 03/07/18 02:54 PM Re: Document for use in drilling down BO percentages? ABT
David Dickinson Offline
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Thank you! smile
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#2167023 - 03/07/18 03:49 PM Re: Document for use in drilling down BO percentages? ABT
David Dickinson Offline
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David Dickinson
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Central City, NE
After reading the complimentary post above from TryingToComply, I thought it might be helpful to give some more Beneficial Owner info. The following came from our April 2017 Newsletter ("Banking on BCC") https://store.bankerscompliance.com I hope this is helpful.

Beneficial Owner Scenarios
By now you should all be aware of the new Beneficial Owner rules that are mandatory on May 11, 2018. On the surface, it sounds pretty simple. You just ask the person opening an account for a legal entity, who the “individual” beneficial owner(s) are that have 25% or more ownership in that entity. How hard can that be, right? After all, FinCEN expects “that a legal entity that has a complex structure would have personnel who necessarily have a general understanding of the ownership interests of the natural persons behind it for operational, management, accounting, and other purposes.” The bank doesn’t have to confirm the status of the beneficial owner(s), you just “rely on the beneficial ownership information supplied by the customer, provided you have no knowledge of facts that would reasonably call into question the reliability of the information.” Let’s just say, it’s not as easy as it may seem. We’ve put together some pretty typical scenarios that will prove this point.

Not only should employees who open accounts have an understanding of who an “individual” beneficial owner is and how deep into the web you have to go to identify them, you may also need to train your customers. Does that person sitting in front of you opening the account really know who the entity’s beneficial owners are, as defined by the new rule? This isn’t something they will want to just guess at or assume, because their word is on the line. They must sign and certify that the information they are providing you, about the entity’s beneficial owners, is true and accurate to the best of their knowledge. If they are not truthful, or knowingly provide you with inaccurate information, that signed certification gives law enforcement the right to go after them for “fraudulent application”. Falsifying documents is a very serious offense and is generally classified as a felony.

Does your action plan for implementing the new beneficial owner rules include training appropriate personnel on the definition of and various examples of, “beneficial owners”? The following scenarios provide examples of the potential layers involved in identifying those 25% beneficial owners. In every scenario, the “control prong” will always apply. We will start with the most basic scenario and build from there.

1. General Examples:
In each of the following scenarios Jack’s Donuts, Inc. is requesting some type of a new account (new loan, new deposit account, etc.):

a. General Scenario 1:
Jack’s Donuts, Inc. is owned 100% by Jack. Jack is the President and primary person with management control over the company.

Beneficial Owner(s): Jack (100% ownership)

Control Person: Jack


b. General Scenario 2:
Jack’s Donuts, Inc. is owned 100% by Jack. Jack has hired Candy, as Chief Operating Officer, to manage the company.

Beneficial Owner(s): Jack (100% ownership)

Control Person: Candy


c. General Scenario 3:
Jack’s Donuts, Inc. is owned 50% by Jack and 50% by Jill. Candy is the Chief Operating Officer and has management control over the company.

Beneficial Owner(s): Jack (50% ownership) and Jill (50% ownership)

Control Person: Candy


d. General Scenario 4:
Jack’s Donuts, Inc. is owned 50% by Jack; 25% by Jill; and 25% by Candy. Candy is the Chief Operating Officer and has management control over the company.

Beneficial Owner(s): Jack (50% ownership), Jill (25% ownership) and Candy (25% ownership)

Control Person: Candy


e. General Scenario 5:
Jack’s Donuts, Inc. is owned 20% by Jack; 20% by Jill; 20% by Sally; 20% by Bill; and 20% by Candy. Candy is the Chief Operating Officer and has management control over the company.

Beneficial Owner(s): Not Applicable (No individual owns at least 25% of Jack’s Donuts)

Control Person: Candy


f. General Scenario 6:
Jack’s Donuts, Inc. is owned 50% by Jack and 50% by Jill’s Coffee Company, L.L.C. Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume Jill’s Coffee Company, L.L.C is not an exempt legal entity. Jill’s Coffee Company, L.L.C. is owned 100% by Jill.

Beneficial Owner(s): Jack (50% ownership) and Jill (50% ownership through Jill’s Coffee Company, L.L.C.)
Control Person: Candy


g. General Scenario 7:
Jack’s Donuts, Inc. is owned 50% by Jack and 50% by Jill’s Coffee Company, L.L.C. Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume Jill’s Coffee Company, L.L.C. is not an exempt legal entity. Jill’s Coffee Company, L.L.C. is owned 50% by Jill and 50% by Jane.

Beneficial Owner(s): Jack (50% ownership), Jill (25% ownership through Jill’s Coffee Company, L.L.C.) and Jane (25% ownership through Jill’s Coffee Company, L.L.C.).

Control Person: Candy


h. General Scenario 8:
Jack’s Donuts, Inc. is owned 50% by Jack and 50% by Jill’s Coffee Company, L.L.C. Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume Jill’s Coffee Company, L.L.C. is not an exempt legal entity. Jill’s Coffee Company, L.L.C. is owned 50% by Jill, 25% by Jane and 25% by Bill.

Beneficial Owner(s): Jack (50% ownership) and Jill (25% ownership through Jill’s Coffee Company, L.L.C.)
Jane and Bill are not considered beneficial owners since they each only have 12.5% ownership in Jack’s Donuts, Inc. (through Jill’s Coffee Company, L.L.C.)

Control Person: Candy


i. General Scenario 9:
Jack’s Donuts, Inc. is owned 50% by Jack and 50% by Jill’s Coffee Company, L.L.C. Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume Jill’s Coffee Company, L.L.C. is not an exempt legal entity. Jill’s Coffee Company, L.L.C. is owned 25% by Jill, 25% by Jane, 25% by Bill and 25% by Sally.

Beneficial Owner(s): Jack (50% ownership)
Jill, Jane, Bill and Sally are not considered beneficial owners since they each only have 12.5% ownership in Jack’s Donuts, Inc. (through Jill’s Coffee Company LLC)

Control Person: Candy


j. General Scenario 10:
Jack’s Donuts, Inc. is owned 50% by Jack and 50% by Jill’s Coffee Company. Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume Jill’s Coffee Company is a publicly traded company (exempt legal entity). Beneficial Owner(s): Jack (50% ownership)
Jill’s Coffee Company is an exempt legal entity and therefore free from any further 25% beneficial ownership identification.

Control Person: Candy


2. Charity/Non-ProfitExample:
In this example Jane, Secretary for ABC Church, is requesting some type of new account (new loan, new deposit, etc.). Jane has managerial control for the church.

BeneficialOwner(s): Not Applicable (Non-profits are exempt from the 25% beneficial ownership requirements)

Control Person: Jane


3. TrustasaBeneficialOwnerExamples:
In each of the following scenarios, Jack’s Donuts, Inc. is requesting some type of a new account (new loan, new deposit account, etc.):

a. TrustScenario1:
Jack’s Donuts, Inc. is owned 100% by Jack’s Trust. Jack is the only Trustee (100% ownership). Jack is also the President of Jack’s Donuts, Inc. and has management control over the company.

Beneficial Owner(s): Jack (as the 100% trustee through Jack’s Trust) Control Person: Jack


b. TrustScenario2:
Jack’s Donuts, Inc. is owned 100% by Jack and Jill’s Trust. Jack and Jill are the Trustees (each have 50% ownership). Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Beneficial Owner(s): Jack and Jill (each is a 50% trustee through Jack and Jill’s Trust)

Control Person: Candy



c. Trust Scenario 3:
Jack’s Donuts, Inc. is owned 100% by J & J Trust. Jack, Jill, John, Jane and Sally are the Trustees (each have a 20% ownership). Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Beneficial Owner(s): Not Applicable (No individual owns at least 25% of Jack’s Donuts)

Control Person: Candy


d. Trust Scenario 4:
Jack’s Donuts, Inc. is owned 100% by J & J Trust. ABC Bank is the Trustee (100% ownership). Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume ABC Bank is an exempt legal entity as a federal or state regulated financial institution.

Beneficial Owner(s): Not Applicable (No individual owns at least 25% of Jack’s Donuts)

ABC Bank is an exempt legal entity and therefore free from any further 25% beneficial ownership identification.

Control Person: Candy


As you can see, it can get pretty complicated! While the bank is not required to research and confirm the status of the beneficial owners, it’s a good idea for appropriate employees and the customer to understand the basics of who is and is not an “individual” beneficial owner.
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David Dickinson
http://www.bankerscompliance.com

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#2167028 - 03/07/18 04:24 PM Re: Document for use in drilling down BO percentages? David Dickinson
ABT Offline
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Joined: Nov 2010
Posts: 32
Thank you David! These scenario examples are excellent and will be useful for training staff.

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#2167034 - 03/07/18 05:01 PM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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The West
David you are so generous! You probably just made a bunch of people's day with that post. smile
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#2167036 - 03/07/18 05:09 PM Re: Document for use in drilling down BO percentages? ABT
Sunshine Lady Offline
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Sunshine Lady
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Posts: 623
Thank you, it helps to simply using the different scenarios.
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#2167083 - 03/07/18 07:51 PM Re: Document for use in drilling down BO percentages? ABT
ahou Offline
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ahou
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Posts: 3,094
Wow, thanks David. Just what I needed.
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#2167119 - 03/07/18 09:56 PM Re: Document for use in drilling down BO percentages? ABT
Buddy the Elf Offline
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first lily pad on the right
So helpful! Thank you very, very much!!!!
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#2167402 - 03/09/18 03:13 PM Re: Document for use in drilling down BO percentages? David Dickinson
Cape Codder Offline
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Posts: 413
Originally Posted By David Dickinson


3. TrustasaBeneficialOwnerExamples:
In each of the following scenarios, Jack’s Donuts, Inc. is requesting some type of a new account (new loan, new deposit account, etc.):

a. TrustScenario1:
Jack’s Donuts, Inc. is owned 100% by Jack’s Trust. Jack is the only Trustee (100% ownership). Jack is also the President of Jack’s Donuts, Inc. and has management control over the company.

Beneficial Owner(s): Jack (as the 100% trustee through Jack’s Trust) Control Person: Jack


b. TrustScenario2:
Jack’s Donuts, Inc. is owned 100% by Jack and Jill’s Trust. Jack and Jill are the Trustees (each have 50% ownership). Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Beneficial Owner(s): Jack and Jill (each is a 50% trustee through Jack and Jill’s Trust)

Control Person: Candy


c. Trust Scenario 3:
Jack’s Donuts, Inc. is owned 100% by J & J Trust. Jack, Jill, John, Jane and Sally are the Trustees (each have a 20% ownership). Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Beneficial Owner(s): Not Applicable (No individual owns at least 25% of Jack’s Donuts)

Control Person: Candy


d. Trust Scenario 4:
Jack’s Donuts, Inc. is owned 100% by J & J Trust. ABC Bank is the Trustee (100% ownership). Candy is the Chief Operating Officer of Jack’s Donuts, Inc. and has management control over the company.

Assume ABC Bank is an exempt legal entity as a federal or state regulated financial institution.

Beneficial Owner(s): Not Applicable (No individual owns at least 25% of Jack’s Donuts)

ABC Bank is an exempt legal entity and therefore free from any further 25% beneficial ownership identification.

Control Person: Candy.


Hello, David. Thank you so much for this document. I'm a bit confused about the Trust scenarios you provided in Section 3, however. If I understand the final rule correctly, if the beneficial owner of a legal entity customer is a Trust, the trustee(s) of that trust will be recorded on the certification. Why would the trustees % of ownership in the Trust have any bearing on that requirement?
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#2167407 - 03/09/18 03:45 PM Re: Document for use in drilling down BO percentages? ABT
rlcarey Offline
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Galveston, TX
I think the use of the term ownership when it comes to a trust is a little misleading. Trustees do not actually own the trust, they only control it.

The final rule says:

If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25 percent or more of the equity interests of a legal entity customer, the beneficial owner for purposes of paragraph (d)(1) of this section shall mean the trustee.

And I think this that should have reflected "trustee(s)" - whether or not there is one, two or ten of them. The trust still owns 25 percent or more - all trustees control the trust.
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#2167459 - 03/09/18 06:43 PM Re: Document for use in drilling down BO percentages? rlcarey
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Posts: 413
Thanks. That was my take, as well.
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#2167728 - 03/12/18 11:27 PM Re: Document for use in drilling down BO percentages? rlcarey
fmissle Offline
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Posts: 989
Pac NW
Originally Posted By rlcarey
I think the use of the term ownership when it comes to a trust is a little misleading. Trustees do not actually own the trust, they only control it.

The final rule says:

If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25 percent or more of the equity interests of a legal entity customer, the beneficial owner for purposes of paragraph (d)(1) of this section shall mean the trustee.

And I think this that should have reflected "trustee(s)" - whether or not there is one, two or ten of them. The trust still owns 25 percent or more - all trustees control the trust.

Hopefully this will be clarified when the (anyday now!) new FAQ comes out, but a follow up.

Jack's Donuts is owned
25% by Bill
25% by Jane
25% by Sally
25% by the Jill Family Trust. The trust has 4 Trustees (assume none of these trustees are other owners).
Candy is the COO

In this case, would you theoretically put 6 BO? That doesn't seem right since they say multiple times that the most you could have for the ownership is 4.
Or do you consider that each of the trustees "owns" 11.25% of Jack's donuts and so none of them are listed?

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#2167730 - 03/13/18 12:00 AM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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Joined: Apr 2013
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fmissle,

I have already conducted my first round of training and this exact question came up. That is: If there are multiple trustees do they all have to be listed on the certification? My response was "yes" as that is my understanding.

The final rule says:

If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25 percent or more of the equity interests of a legal entity customer, the beneficial owner for purposes of paragraph (d)(1) of this section shall mean the trustee.

I'm wondering if they made a mistake and intended that the trustee be identified as the controlling person (which is also a beneficial owner) and if they will be correcting this? In this case, the person opening the account could pick ONE and enter them as the controlling person.
Last edited by TryingtoComply; 03/13/18 12:03 AM. Reason: Typo
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#2168134 - 03/14/18 05:21 PM Re: Document for use in drilling down BO percentages? ABT
David Dickinson Offline
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Joined: Nov 2000
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Central City, NE
Thank you all for questioning our information about trusts. I passed this on to one of the experts on my Team. She replied:

It makes sense to me that a Trustee only has control and not “ownership” in the Trust, so you wouldn’t take the 25% ownership into consideration, you would just look to ALL of the trustees for Beneficial Owners. (You still need the Control Person who has management control in the Legal Entity opening the account). I reached out to FinCEN to confirm this is what they intended and they confirmed that “all Trustees are considered beneficial owners of a legal entity that is owned 25% or more by a Trust."

Thus, this changes our scenarios on Trusts as beneficial owners - especially Trust Scenario 3. Previously, we had said the 25% beneficial ownership was Not Applicable because there were 5 Trustees and none of them had 25% ownership in the Trust. Since we now agree this is irrelevant, ALL the Trustees of a Trust will be beneficial owners under the 25% rule.


I'm sorry for the confusion and thankful for the BOL community questioning this!
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#2168154 - 03/14/18 05:51 PM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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Joined: Apr 2013
Posts: 1,921
The West
I'm confused. Beneficial owner has two prongs; ownership and control. Under which section of the form would the trustees be identified if using the model form? Section I for beneficial owners or Section II for control person?

The reason I'm confused is that you started out talking about how it makes sense for trustees to be identified under the control prong. But it sounds like FinCEN wants them identified under the ownership prong?

Our form only has four sections to collect beneficial owners (similar to the model form). Using the scenario with five trustees that was provided in your training, we would need to add an additional form in a situation like this.
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