Our scenario is

ABC LLC
Members: XYZ LLC (66.67%)
Members: The Jane Doe Revocable Trust (10%)
- Jane Doe, Trustee
The John Doe Revocable Trust (30%)
-Sam Houston, Trustee
-Tom Dow, Trustee
-Sue Doe, Trustee
-John Banker, Trustee
The Mickey Mouse Revocable Trust (30%)
-Sam Houston, Trustee
-Tom Dow, Trustee
-Sue Doe, Trustee
-John Banker, Trustee
Donald Duck (30%)

Red Top, LLC (33.33%)
Members: Minnie Mouse (10%)
Charlie Brown 2005 Trust (45%)
-Linus Brown, Trustee
-Lucy Brown, Trustee
-Pigpen Brown, Trustee
Judy Brown 2005 Trust (45%)
-Linus Brown, Trustee
-Lucy Brown, Trustee
-Pigpen Brown, Trustee

Who is the Beneficial Owners. We believe that Sam Houston, Tom Dow, John Banker, Linus Brown, Lucy Brown and Pigpen Brown are the beneficial owners.

Our commercial admins are saying no one is because trusts are exempt, but the trust isn't who we're giving the money to, it's ABC LLC and they are saying if it is the trusts then The John Doe Revocable Trust and the Mickey Mouse Trust are two different trusts and therefore they don't have enough percentage to be a player, it doesn't matter that the trustees are the same. And the same thing with the second LLC that the Charlie Brown trust and Judy Brown trust are two different trusts also and it doesn't matter about the trustees.

HELP!

The FAQ's released in April may help. I think Q&A #19 addresses this issue.

Fincen FAQ

We started there but it doesn't really help.

We interpreted it one way and the Commercial admin and customer (who is a lawyer) is interpreting it another way!!

Ugh!

You're taking legal advice from the other guys attorney?

Here's an idea! Prepare the BO form both ways and tell your lawyer customer you will submit both to FinCen for an opinion. That way you can open the account now, and you'll still be in compliance either way.

Actually I sort of did what Daisy Doodle said. I sent it to FinCEN yesterday and I am still waiting for an answer. But I did not send the lawyers response to them. No we're not taking advice from the attorney. I was curious to see what everyone thought while waiting on FinCEN.

The problem is agreeing on the trust. Since XYZ LLC (66.67%) is only 66.67% ownership of the entity, the two trusts below own even less. But the trustees are the same on both trusts so do they get aggregated together and now become over 25% or are they considered two different trusts therefore neither own enough percentage.

Which goes back to the question, why are trustees even a part of this, they manage and control the account, but do they benefit from the trust? Probably not, the beneficiary would, so why isn't the beneficiary the beneficial owner and not the trustees, but FinCENs FAQs never mention the beneficiary. Also then we would need a copy of the trust to see who the beneficiary was.

A quandary!

Well, I think I'd go with no one but I can totally see an argument the other way as well.

It's almost like FinCEN didn't address a lot of possible scenarios with this rule!

I don't think any of them worked in a loan department, otherwise they'd know the unlimited and convoluted ways that our customers (and loan officers) structure deals.

Please let us know what FinCen had to say!

I finally got an answer from FinCEN today!

If the trustees are the same, the percentages are to be aggregated together. They referred me to Question 3 but replaced with trusts names.

"you can reference Question 3 of the FAQs(https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf ) which shows how a person may be a beneficial owner due to multiple instances of indirect ownership of the same legal entity customer. For example, let’s say ABC Inc. is the legal entity customer and is owned 60% by Mike Michaels, 20% John Doe trust, and 20% by Mickey Mouse Trust. We know Mike is a beneficial owner, but if Mary Smith is the trustee of both trusts, the expectation is that the institution treat her as a beneficial owner as well since they have that knowledge."

That's just plain curious. The trustees of those two trusts are not necessarily owners of the trusts, yet FinCEN is saying that you'd combine them because the trustees are identical. There is no legal foundation for that, as far as I know. And there is nothing in the rule that would lead to that conclusion, either.

And yes, I know that trustees of revocable trusts are often the grantors and therefor the owners. But these dudes might not be the grantors; they could be successor trustees and the trust might not still be revocable.

I think in general their treatment of trusts seems as if they initially decided trusts are too convoluted and they didn't want to include them in the rule period, but as a result they're stuck making things up to just not address it. I do feel like their response is at least consistent with the nonsensical guidance they've given so far: "If you run into a trust, stop, pick a trustee and move on without thinking too hard about it."

If in the example one of the trusts had two trustees, one of whom was a common trustee of the other, it seems like you'd then have an option of either aggregating the common trustee, or listing two separate people.

Better yet, what if ABC LLC was owned 20% by XYZ LLC, which is owned entirely by Jack, and 20% by Jack Revocable Trust, which XYZ LLC is the sole trustee of. In that case at the 25% threshold you wouldn't identify either of them. At the 20% threshold you'd identify Jack for 20% and XYZ LLC for 20%.

Clearly that's all just arbitrary, and moreover as everyone's already pointed out, trustees are not owners so the whole rule stops making sense when we see trusts anyway.

Apply the same thought process to jointly held ownership interests, including those held by spouses as community property or tenancy by the entireties. The regulation requires identification of 25%+ equity interests, but the 2nd Q&A indicates banks can set lower thresholds. In any case where ambiguity exists, just write down the other names, do CIP Lite, and go on.

Spend the time you save on regulations that actually protect our financial system, our country.