CDD Beneficiary Rule

Does anyone require guarantees on business loans with thresholds of ownership less than 25%? I am having a hard time determining the best way to handle requiring ownership information for 25% on a business account and then requiring the business customer to break down the ownership further when they apply for a loan. i.e. a sba loan requires 20% guarantees. I'm just wondering how others are handling this? Thank you

Two seperate issues in my book. One is a federal requirement, the other is sound lending.

Said differently: If you get a "complete" breakdown of ownership for underwriting purposes, then Appendix A is just filling out a form with part of that information and adding the name of a person with managerial control.

Thanks. Yes, if we open the loan first we're good, but if we open an account first and then a loan, we're requiring more information of the same info. Is this what others are doing? separating requirements?

I don't understand your dilemma. If an individual opens a deposit account you are likely to ask for her occupation and place of employment. If she applies for a loan you are likely to ask her for proof of income as well. If a corporation opens a deposit account, you will require the beneficial ownership information. If the corporation applies for a loan your bank's policy is to require all the ownership information, not just that required by the regulation.

Different relationships drive different information requirements.

My dilemma is that I feel some of our customers will be upset when they are required to supply different percentages of BOs and CIP for a business account vs. business loan.

This is not about customer service.

Yes, it may be a little confusing to customers. Some banks have elected to send letters to their customers and post signs where new accounts are opened to explain the new rule.

As Randy said, this is not a "customer service" issue. It's now a regulatory requirement and your employees will need to be well-trained to communicate this effectively. Create a script for them so they feel prepared.

We have decided to lower our threshold for Ultimate Beneficial Ownership to 20% across the board because the lenders were already getting that information in the Commercial Lending Applications. In order to lessen the confusion, we made this decision a year ago, have trained to that for the past year, and went 'live' with collecting UBO (after having *requested* it for the past 12 months as a ramp-up/training effort) for 20% or more on January 1, 2018.

How are things going so far? Have you received much pushback from the customers about providing the information? Has it added a significant amount of time to your account opening process?

BSAN3rd,

Definitely interested in hearing how it went for you as well.

During the "comment" process, some made the argument that it should be 10% so it would be just like FATCA...

"Consistency is the hallmark of the unimaginative." Oscar Wilde

You can make it any lower percentage you like for any reason you like. All that does is potentially increase the amount of unverifiable information you obtain. For anyone who actually believes this information is valuable, the simplest thing to do is to require the names of the four largest owners. At a minimum, you would get one name. At a maximum, you would get four. (Some examiners will scratch their heads, wondering if you can do this.)

You would at least make dishonest people tell you a lie of substance rather than just allowing them to say: "Our biggest shareholder owns 8%" thus letting them off the hook for telling you anything at all.

To clarify, my questions are related to the collection of BO info and how the customers are reacting and how the process is going thus far, not anything in particular to the percentage of ownership being asked for. I haven't heard of any banks who have implemented this prior to the effective date so I'm curious as to how it's being received.