Situation: New Commercial Customer to the bank wants to open a account for ABC Brands LLC. ABC Brands is owned by 7 different LLCs.

Ownership breakdown:

First LLC – 31% - owned by two individual – 90%/10%
Second LLC – 31% - owned by one individual – 100%
Third LLC – 15% - owned by one individual – 100%
Fourth LLC – 15% - owned by one individual – 100%
Fifth LLC – 3% - owned by one individual – 100%
Sixth LLC – 3.5% - owned by one individual – 100%
Seventh LLC – 1.5% - owned by one individual – 100%



Two questions:

1. Besides ABC Brands LLC, would we get Articles, Resolutions, EIN Form, Etc from all of the 7 LLCS that own ABC Brands?

a. If not, would we at minimum get a resolution for each LLC authorizing them to act on behalf of ABC Brands to open an account?




2. Beneficial ownership: My understanding is the Beneficial Ownership form would list: The 90% owner of First LLC and the 100% owner of Second LLC. Correct?

So unless you have specific policy requirements that require formation documentation on each LLC up the ownership chain, you should, at a minimum be obtaining the formation documents for ABC Brands. You also need to identify the beneficial owner(s), if there are any, and at least one (1) control person.

Most banks require the person opening the account to execute the beneficial ownership form that FinCEN published as part of the Final CDD Rule. I would not encourage you or any bank personnel to try and figure out the beneficial owners of any customers. Have them execute the beneficial ownership form and unless you have a reason to believe that the information provided is false, you have done your part.

While I absolutely support ACBbank's advice, consider that, in your ownership breakdown, there are other possible beneficial owners, depending on whether there's any overlap of individuals. One obvious example is the ownership of the 3rd and 4th LLCs. If they are directly owned by the same individual, that individual would have a 30% interest in ABC Brands LLC, your legal entity customer.

John, if I may ask one followon question. ACB alluded that banks should not try to figure out the ownership percentages, rather to take their word for it. I think that's consistent.with the rulemaking. Yet in all our training, and guidance from on-high, including the CFPB and their FAQ Ownership calculation matrix, the consistent theme cited is, "if a business is owned by another business, then we are to "drill down" to determine ownership." Then there's this big exercise that ensues about how to calculate the various permutations of ownership percentages. It certainly leads one to think they are supposed to get that owner data and figure it out themselves. I think this is a big failing in the teaching side of this rule. I just learned this yesterday, and am now conducting remedial training to ensure that we simply ask the person filling out the form to certify that what they put down is correct. That they can figure out the percentages themselves. It certainly puts a potential hole in the rule, when you can't verify the numbers that the rule dictates.

You do the drill down and identify the other entities that have a ownership interest. Then you ask the customer for the ownership percentages of these entities. Once you drill down to the individuals, you use what the customer has told you to figure out who you need BO information from. The customer does not do that, they just identify who owns how much of what. I see no conflicts.

Thanks RLCarey,

We did exactly as you stated, because of course, we experienced this the other day with a potential new customer. We asked them for the names & % owned of the 20 owners of the BO Entity, and they balked and said "never mind, we're not telling you who owns that company".

They are really going to throw a fit when they are eventually have to report that to FinCEN then. Good luck in them ever opening another bank account also.