When reviewing new account documentation, how many BSA Officers read the documentation to ensure the signers on the accounts have the authority to sign for the corporation? I know this sounds ridiculous to even write but I run into documents presented at account opening that give no information on who the officers are for the corporations.

Current example: Company provided the By-Laws, certificate of filing and SS4 application. None of the documents name a director/shareholder/officer and the Secretary of State filing does not have the officer listed either.

How do you verify who has the authority to open accounts and transact business for this newly formed entity?

Presumably, the directors of the new corporation will hold an initial meeting during which they will adopt resolutions of various sorts, one of which will designate the individuals authorized to open and maintain bank accounts. You'll get a certification of the adoption of that resolution as your confirmation of that authority.

This has always been a concern of mine as well, especially considering if banks will be required to collect beneficial ownership; collecting beneficial ownership is challenging when entity documents, issued by the state, do not list individuals (i.e. shareholder/director/owner/controler).

how are we to collect beneficial ownership

You ask them. You document. They lie - you still did your job. But that was one of the biggest things that people commented on in the proposal.

Signers on corporate accounts have nothing to do with ownership of the corporation or LLC. You get documentation from the entity indicating the directorate have authorized specific individuals to do business on behalf of the entity and those are the people you allow to sign on the accounts. The authorized parties many times have no ownership in the business, I.E., business managers, bookkeepers, etc.

This has not changed in the 35+ years I have been in banking. It has nothing to do with BSA/AML - it is a matter of the depositor's agreement and contract between the parties.

Agreed, authority to act on behalf of an entity is not a BSA/AML issue. You verify authority because you are a good banker and understand your job, not because someone tells you to do it.

On the lending side, banks read the entity's organizational documents to verify who exactly has the authority to borrow money and pledge collateral. If the documents establishing the entity say one thing and a resolution says something else, the organizational documents would control.

My experience is that who has the authority to do other things; e.g. opening deposit accounts, sending wire transfers, etc. is very rarely addressed in the formation documents. Relying on properly adopted resolutions is inherently reasonable.

On the other hand, if I wasn't going to read the organizational documents I would not ask for them. The law will assume you read them and, if there's a "gotcha," it will be said that you knew or should have known the right answer.

Collecting beneficial ownership information is a completely different issue. It is made of the same fabric as that found in "The Emperor's New Clothes;" you are nothing more than a scribe writing down what people tell you. If it's right or it's wrong it has little impact on the bank except that incorrect information may foul your AML efforts.

In additional to performing CIP our branch new accounts folks are required to collect (and read/understand) documents that substantiate authority (via bylaws, unanimous consent, meeting minutes, etc). We also have a QC group that verifies after account opening and identifies if we have incomplete documentation.

"new accounts folks are required to collect (and read/understand) documents that substantiate authority (via bylaws, unanimous consent, meeting minutes, etc)."

You need to be very careful with the precedents that you set in this area. If you are requiring more than a simple corporate resolution and you miss something in the by-laws that would negate the corporation from doing what they are presenting to you, you could end up in a protracted legal battle if there is a big loss down the road.

John and Randy, it would be really nice to receive a resolution or even minutes that are current when an account is opened. Most of the time we do not receive them and if we do, they are incomplete with no signatures.

We prepare our inhouse resolution and require someone to sign that we have been able to identify through the certificate of filing or docs we are able to find on the Texas Comptroller website. It is usually faster than asking the customer to provide them.

That agrees with my experience, which is a bit dusty at this point. Banks have two reasonable choices, I think, when asked to open an account for an entity. (1) Require appropriate and complete resolutions of the governing body of the entity as a precondition for opening the account; or (2) Providing one of those "canned" resolution forms to be completed and signed and returned.

The problem I have with the "canned" forms is a nagging feeling that the governing body never sees or votes on those "resolutions." But the practical side of me realizes it may be the best you can expect.

In any event, I wouldn't open the account without one or the other form of documentation, completed.

Well founded in my estimation...

Many bankers believe the "resolution" is the piece of paper that the corporate officers signed at their desk. Actually, what they are supposed to receive is a piece of paper that is a memorial of a resolution that happened elsewhere at a different date and time. (Reading it would so indicate.)

Many of the same bankers believe that a power of attorney is an individual.