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#2200547 - 12/12/18 11:03 PM Qualified Opportunity Funds--BSA
McGruff Offline
Gold Star
Joined: Feb 2004
Posts: 262
We're considering opening a relationship with a guy who has formed a Qualified Opportunity Fund. Right now I'm researching this new animal trying to figure out what we are getting into. It appears that this will be structured like any other escrow account. Does anyone have any info that gives guidance on this type of entity regarding risk, esp BSA/AML risk?

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#2200560 - 12/13/18 12:08 PM Re: Qualified Opportunity Funds--BSA McGruff
rlcarey Offline
10K Club
Joined: Jul 2001
Posts: 80,357
Galveston, TX
Well, I think the jury is still out on a lot of how this is going to work. As far as maintaining the cash portion of the fund at the bank, the fund has to hold 90% of it's assets in real estate located in an opportunity zone, so the benefit of having this account at the bank from a deposit gathering aspect is going to be rather limited depending on the size of the fund that the potential customer is expecting. Other than that, transactions through the fund would be limited to the initial investments, the purchase and sale of real property and operating expenses for said properties. There may be some CRA benefit in offering such an account, but I didn't get that deep into the weeds. I guess I would be first looking at the sophistication of the customer, what is their background (real estate and financial background), size of the projected fund, who are going to be the investors, etc., and then start the risk assessment from there. The fund either has to be a partnership or a corporation. As far as the structure of the account, I think it would be just like any other operating account for a partnership or corporation. The bank maintains no responsibility for the funds or how the actual account is managed in order for the investors to qualify for the tax breaks associated with the animal. Your biggest risk is the potential customer turns out to be a Bernie Madoff type character peddling snake oil, as such, your upfront due diligence would be the key.
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