Thread Options
#2175481 - 04/26/18 09:48 PM Property Managment Companies & HOAs
TryingtoComply Offline
Diamond Poster
Joined: Apr 2013
Posts: 1,799
The West
Just learned today that we do business with a property management company (PMC) that manages properties for many HOAs. Also learned that we establish accounts in the name of the HOA (rather than the PMC) with individuals associated with the HOA as authorized signers. We also have accounts established in the name of the PMC with the authorized signers being individuals associated with the PMC only.

I'm not sure what determines how they are set up.

I understand there is an exception for property managers that allows them to let individuals associated with the HOA be authorized signers.

Has anyone done any research on this? Trying to determine who is the customer for purposes of beneficial ownership. I'm thinking it boils down to which entity is on title.
_________________________
TryingToComply
CRCM

Return to Top
BSA/AML/CIP/OFAC Forum
#2180451 - 06/01/18 05:01 PM Re: Property Managment Companies & HOAs TryingtoComply
1banker Offline
New Poster
Joined: Jan 2009
Posts: 16
I am also researching this. Historically we have set these up with building owner named as the account holder and CIP on building owners, as well as on PMC signers (as a business decision). Recently learned a megabank sets these up for the same PMC in the name of "PMC as Custodian for ..." with CIP and BO only on the PMC. Aside from doing CIP on owners we have only ever had contact with the PMC.

Seems like this from the BSA Exam Manual would apply:
https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_083.htm
"Unlike trust arrangements, agency accounts are established by contract and governed by contract law. Assets are held under the terms of the contract, and legal title or ownership does not transfer to the bank as agent. Agency accounts include custody, escrow, investment management, and safekeeping relationships....
For purposes of the CIP, the bank is not required to search the trust, escrow, or similar accounts to verify the identities of beneficiaries, but instead is only required to verify the identity of the named accountholder (the trust). In the case of a trust account, the customer is the trust whether or not the bank is the trustee for the trust. However, the CIP rule also provides that, based on the bank’s risk assessment of a new account opened by a customer that is not an individual, the bank may need "to obtain information about" individuals with authority or control over such an account, including signatories, in order to verify the customer’s identity."

Do others have experience with these accounts? What do you do for Account Name, CIP, and BO?

Return to Top
#2180610 - 06/04/18 05:31 PM Re: Property Managment Companies & HOAs TryingtoComply
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,296
Cape Cod
The first question to be answered is what is the agreement between the HOA and the PMC. Some HOAs want the PMC to open and manage an account; others might want to retain control of the account themselves, with or without having someone at the PMC as an authorized signer. If the HOA wants control of the account, you open it in the name of the HOA, and apply CIP to the HOA.

On the other hand, if the HOA agreement with the PMC states that the PMC will have the authority to open the account as an agent of the HOA, the HOA is your customer.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2209248 - 03/22/19 02:57 AM Re: Property Managment Companies & HOAs John Burnett
BSA Aficionada Offline
Member
Joined: Sep 2015
Posts: 86
I have three unique scenarios involving HOAs and PMCs I am hoping someone can weigh in on.

Scenario 1: HOA is an incorporated association. There is a property management agreement by and between the HOA and the PMC. Pursuant to the agreement, PMC shall establish and maintain, in PMC's chosen bank, an operating account in the name of the Association for the deposit of monies collected from the members and a reserve account and any other accounts in the name of the Association at a financial institution(s) chosen by the Board. Account titling reflects HOA as sole owner with four board members and the PMC (legal entity) as authorized signers. My interpretation of the Bank's obligations relative to beneficial ownership....while the PMC may be managing the HOA, the HOA is a direct client of the Bank (with HOA board members signing on the account). As such, beneficial ownership is triggered for the HOA for the control prong only, as the HOA is an incorporated non-profit. Under the control prong, we are looking to identify the person who controls the legal entity, not who controls the funds in the account.

Scenario 2: HOA is an incorporated association. There is a property management agreement by and between the HOA and the PMC. Pursuant to the agreement, relative to the deposit of association funds, PMC shall deposit all monies collected on behalf of the Association in a bank or other financial institution in an operating account of the PMC's choosing. Relative to the reserve account, no fewer than two board member signatures shall be required to authorize disbursement of funds from the reserve account. Account titling reflects HOA as sole owner with four board members and three individuals associated with the PMC as authorized signers. My interpretation of the Bank's obligations relative to beneficial ownership....same as Scenario 1.

Scenario 3: HOA is a corporation. There is a property management agreement by and between the HOA and the PMC. Pursuant to the agreement, PMC shall establish and maintain, in a manner to indicate the custodial nature thereof, a separate bank account to entitled "ABC Corp/Property Management Company as Agent" as agent of the Owner for the deposit of moneys of the Owner. Account titling reflects HOA as sole owner with the PMC (legal entity) and seven individuals as authorized signers. It is not clear at this time if the seven individuals are associated with the HOA and/or the PMC My interpretation of the Bank's obligations relative to beneficial ownership....I'm not sure!

Colleague is convinced that because the PMC either partially or fully controls the funds in all three scenarios that obtaining a Beneficial Ownership Certification Form for the PMC is adequate. I disagree.

Please also opine as to the best way to execute against beneficial ownership requirements given the voluminous triggers for these types of relationships.

Return to Top
#2209278 - 03/22/19 02:45 PM Re: Property Managment Companies & HOAs TryingtoComply
praBSA Offline
Gold Star
Joined: Aug 2018
Posts: 258
In a principal/agent relationship, the agent is your customer. All 3 scenarios indicate there is an agreement which makes the PMC the agent. If the HOA has signors on the account, that would violate the agreement because they shouldn't have control. The PMC is your customer and the one whom BO should be collected in all 3 scenarios.

With that said, the HOA shouldn't have signors, but you scenarios indicate they could. The agreement, to me, would govern this scenario. If you have the HOA with signors/control on the account, why is there an agreement at all? If the HOA insists on having control, I would tell them to open the account themselves.

If all else fails, collect both. Having both sets of ownership doesn't hurt you, but follow your procedures first.

Return to Top
#2209292 - 03/22/19 04:30 PM Re: Property Managment Companies & HOAs praBSA
BSA Aficionada Offline
Member
Joined: Sep 2015
Posts: 86
I agree that Association funds to be held in a bank account that is owned or solely controlled by a management company triggers beneficial ownership on the management company. However, in instances whereby the bank account is in the name of the Association with the board members having full and complete control and access and the management company added as a signer so that it may perform the required financial-related duties, I feel that beneficial ownership is triggered on the Association. In such a set-up, the board can remove the management company from the bank account at any time.

praBSA - please let me know if this changes your position. I would also greatly appreciate if several folks can weigh in!

Return to Top
#2209320 - 03/22/19 07:43 PM Re: Property Managment Companies & HOAs TryingtoComply
praBSA Offline
Gold Star
Joined: Aug 2018
Posts: 258
Yes, I agree. My point is, that arrangement makes no sense from a business perspective and I don't know if I would even allow it. Two different companies running a bank account seems like a mess. To me, they either have an agency agreement or they don't. But yes, I agree with you that an account under the HOA name, HOA EIN, and both HOA and PMC signors would trigger BO on the HOA. I just wouldn't recommend it any account being setup that way.

Return to Top
#2209456 - 03/25/19 09:43 PM Re: Property Managment Companies & HOAs TryingtoComply
KerryVBC Offline
100 Club
KerryVBC
Joined: Oct 2007
Posts: 151
Colorado
We deal with hundreds of HOAs and management companies. We require a management agreement that is signed by both the PMC and the HOA. Typically, the PMC are the signers on the account and they sign the signature card. Our banking resolution lists the "powers granted" and both the PMC and representatives from the HOA sign the resolution. We do beneficial ownership on both the management company and the HOA. The accounts are titled under the HOA name & EIN. We do CIP on both the entity and the PMC.
_________________________
Opinions expressed are my own.

Return to Top
#2209484 - 03/26/19 01:55 PM Re: Property Managment Companies & HOAs praBSA
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,296
Cape Cod
Originally Posted By praBSA
Yes, I agree. My point is, that arrangement makes no sense from a business perspective and I don't know if I would even allow it. Two different companies running a bank account seems like a mess. To me, they either have an agency agreement or they don't. But yes, I agree with you that an account under the HOA name, HOA EIN, and both HOA and PMC signors would trigger BO on the HOA. I just wouldn't recommend it any account being setup that way.


I agree that when an agency agreement exists, the account ought to be owned and controlled by the agent, and the agent is the bank's customer. Even if the agency agreement provides that a representative of the HOA will be an authorized signer on the account, ownership of the account is still in the agent.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2253220 - 04/29/21 05:18 PM Re: Property Managment Companies & HOAs John Burnett
RebekahL CRCM Offline
Platinum Poster
RebekahL CRCM
Joined: Feb 2003
Posts: 772
Big Sky Country
Originally Posted by John Burnett
The first question to be answered is what is the agreement between the HOA and the PMC. Some HOAs want the PMC to open and manage an account; others might want to retain control of the account themselves, with or without having someone at the PMC as an authorized signer. If the HOA wants control of the account, you open it in the name of the HOA, and apply CIP to the HOA.

On the other hand, if the HOA agreement with the PMC states that the PMC will have the authority to open the account as an agent of the HOA, the HOA is your customer.

John, this was awhile ago, but can I please clarify? Shouldn't that last sentence read "On the other hand, if the HOA agreement with the PMC states that the PMC will have the authority to open the account as an agent of the HOA, the PMC is your customer."
_________________________
Me, Type A? Maybe - I'm not done analyzing it yet.

Return to Top

Moderator:  Andy_Z