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#2168166 - 03/14/18 06:08 PM Re: Document for use in drilling down BO percentages? ABT
John Burnett Offline
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John Burnett
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My view: Assume that your entity is an LLC. It is owned 25% by Joe Jones, 25% by Harry Smith, 25% by Harriet Packard, and 25% by the Birdie Trust, Sam Snerd and Lion Woods, trustees. You would have four beneficial owners:
1. Joe Jones
2. Harry Smith
3. Harriet Packard
4. Sam Snerd and Lion Woods, TTEES.

The control prong will depend on who manages the LLC.
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#2168174 - 03/14/18 06:36 PM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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My impression is that Sam and Lion are two individuals that would require that we collect information on both. Which means that my form does not have a Section 1 for Lion Woods. I would have to add another page.
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#2168205 - 03/14/18 07:28 PM Re: Document for use in drilling down BO percentages? ABT
John Burnett Offline
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The problem is that FinCEN, in its lack of precision in drafting the rule, failed to recognize that a trust can have more than one trustee, each with full "ownership" interest in the trust. The rule says "trustee" (singular). I wonder if this is one of those burning questions that FinCEN is trying to cover in its long-awaited updated FAQ.
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#2168235 - 03/14/18 07:59 PM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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I hope so!

I'm conducting training now and this is one of the issues that employees are having a hard time with. We are using 25% as our threshold and I would like to be able to say there will never be more than 4 beneficial owners on the form, but that is not true using the scenario that we just discussed. It just make it hard for them to understand, particularly since they have a short runway for getting this down before we go live.
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#2168290 - 03/14/18 11:02 PM Re: Document for use in drilling down BO percentages? ABT
Dirving Offline
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Originally Posted By TryingtoComply:
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?


To clarify, I was not stating that it makes sense for trustees to be identified under the Control Prong. I was stating that, since a trustee only has control of, and not "ownership" in the Trust, you would not apply the "25%" ownership rule to the individual trustees. ALL trustees would just be Beneficial Owners (under the 25% rule because the "Trust" has 25% or more ownership in the legal entity customer). You still need the Control Person who has management control in the Legal Entity opening the account.

I hope that helps.

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#2168843 - 03/17/18 06:02 PM Re: Document for use in drilling down BO percentages? ABT
David Dickinson Offline
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The above post from Dirving is from the consultant on my Team that wrote the scenarios I posted earlier. I hope that helps you understand the context of her reply.
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#2168845 - 03/18/18 09:13 AM Re: Document for use in drilling down BO percentages? TryingtoComply
Elwood P. Dowd Offline
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Quote:
I would like to be able to say there will never be more than 4 beneficial owners on the form,


You can't.

First, the individual listed under the control or management prong is also referred to as a beneficial owner. (That's regardless of whether he or she has any ownership interest.) The fact that it would in some cases be a misnomer was pointed out to FinCEN in the comment process. They ignored it.,

Second, if a trust or trusts are beneficial owners there is no "cap" on the number of names you might list. No one commented on that because it simply was not mentioned in the NPRM. (I'm quite certain its obvious lack of logic would have drawn fire if it had been.)

Just a suggestion, don't train the masses on the remotely, but theoretically possible...all it does is convince your audience they don't understand what they actually need to know 99% of the time.
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#2169289 - 03/20/18 09:50 PM Re: Document for use in drilling down BO percentages? ABT
David Dickinson Offline
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Quote:
Just a suggestion, don't train the masses on the remotely, but theoretically possible...all it does is convince your audience they don't understand what they actually need to know 99% of the time.

Great comment Ken. When I teach and someone gets into the minutia, I say "We can teach 98% of this in ____ minutes. We can spend 4 hours on the 2%. However, I doubt that's what most want to do. Let's talk about the 2% later over a beer." smile Stick to what people need to know most of the time and teach them to contact you for the other 2%.
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#2171155 - 03/30/18 05:55 PM Re: Document for use in drilling down BO percentages? ABT
John Burnett Offline
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The beer, David, will make that 2% of the minutia seem a lot easier to understand.

For what it's worth, I loved the scenarios you posted until you got to the trust as a beneficial owner. FinCEN should have made this a lot easier by saying that the trust is to be identified as the beneficial owner, period. But it wants to be able to see who the trust is controlled by because the thrust of the rule is "Who is the man behind the curtain?" Who pulls the strings behind the legal entity customer?

Another piece of that 2% of minutia that hopefully won't come up often is how to aggregate individuals' ownership interest as you drill down into the levels of entity ownership. This can be an issued with multilayered ownership via LLCs, for example. Without getting overly bogged down in detail, suffice it to say that one individual can own a piece of multiple LLCs (or corporations or other entities).

For example, take Jim's Sporting Goods LLC, which is owned by five LLCs, each with a 20% interest in Jim's Sporting Goods LLC. Let's call them LLC 1, LLC 2, LLC 3, LLC 4 and (you guessed it!) LLC 5. Jim Smith and his wife own part of each of those LLCs, and each of the numbered LLCs has three other owners. Here's the breakdown:

LLC 1
15% - Jim Smith
15% - Jim's wife
10% - Sara Jones
10% - Harry Jones
50% - Guido Roma

LLC 2
15% - Jim Smith
15% - Jim's wife
10% - Mary Jones
20% - Tony Jones
40% - Guido Roma

LLC 3
15% - Jim Smith
15% - Jim's wife
30% - Mary Jones
35% - Tony Jones
5% - Guido Roma

LLC 4
25% - Jim Smith
25% - Jim's wife
15% - Mary Jones
10% - Tony Jones
25% - Guido Roma

LLC 5
25% - Jim Smith
25% - Jim's wife
20% - Harry Jones
10% - Mary Smith
20% - Guido Roma

You do the math to determine the indirect ownership percentage of each individual. When Jim Smith, for example, has an ownership in more than one of the numbered LLCs, you do the math for each of his ownership interests and combine them to determine his indirect ownership of Jim's Sporting Goods LLC.

If I've done the math correctly, Jim Smith has 19% indirect ownership; Jim's wife also has 19%. Sara Jones owns 2%; Harry Jones has 6%; Mary Jones, 13%; Tony Jones 11%; Mary Smith 2% and Guido Roma 28%.

So you start with an entity called Jim's Sporting Goods LLC and by digging, discover that the only individual with 25% or more direct or indirect ownership is Guido Roma, two ownership tiers removed, with ownership scattered among five different entities.

It gets worse if you have a couple of entity owners in tier 1 and a couple more in tier 2.
Last edited by John Burnett; 03/30/18 05:57 PM. Reason: I accused the Bureau of creating this monster instead of FinCEN.
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#2171220 - 03/30/18 09:14 PM Re: Document for use in drilling down BO percentages? ABT
TryingtoComply Offline
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We are a business bank and I can envision this happening.

Hand the customer the form. Tell them to complete it. Rely on it. If you have different information on file, deal with it.
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#2171227 - 03/31/18 11:38 AM Re: Document for use in drilling down BO percentages? TryingtoComply
Elwood P. Dowd Offline
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Ditto.

All of this effort expended on developing the equivalent of a spread sheet and literally verifying ownership based on unsupportable statements is a self inflicted wound.

Ask the question. Write down the answer. Go on to what's next.
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#2171630 - 04/03/18 07:55 PM Re: Document for use in drilling down BO percentages? ABT
Dirving Offline
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We finally have FinCEN clarification on identifying the Trustee(s) as Beneficial Owners when a Trust has 25% or more ownership interest in a Legal Entity customer opening a new account!

Per the JUST RELEASED Guidance FIN-2018-G001: "Where there are multiple trustees, or co-trustees, financial institutions are expected to collect and verify the identity of, at a minimum, one co-trustee of a multi-trustee trust who owns 25% or more of the equity interests of a legal entity customer . . . " "A covered financial institution may choose to identify additional co-trustees as part of its customer due diligence, based on its risk assessment and the customer risk profile and in accordance with the institution's account opening procedures."

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#2171759 - 04/04/18 02:47 PM Re: Document for use in drilling down BO percentages? Dirving
Always In Training Offline
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Per the JUST RELEASED Guidance FIN-2018-G001: "Where there are multiple trustees, or co-trustees, financial institutions are expected to collect and verify the identity of, at a minimum, one co-trustee of a multi-trustee trust who owns 25% or more of the equity interests of a legal entity customer . . . " "A covered financial institution may choose to identify additional co-trustees as part of its customer due diligence, based on its risk assessment and the customer risk profile and in accordance with the institution's account opening procedures."


-- This makes less sense than it did before.

I'm going back to, ask the question - use their answer unless you know otherwise.

I also don't think most people that work for a company that is owned for another company - that come in to open an account for a business know anything about its ownership as evidenced by when of the publically traded discount stores came in with papers from corporate that they didn't need to provide us anything they were exempt from BSA. Ummm.... no, I still need your docs. How am I to know you are wholly owned by a publically traded entity if you won't point me in that direction or give me any of your information. There's BSA and then there is policy. I know the difference, but there's got to be some give and take. All the newly hired manager would do was cross his arms and sit in my lobby and tell me to call the lady on the letter. He had no idea.

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