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Banking Rule Changes

December 13, 2017 by Cat Tucker
Audit & Accounting, Copeland Buhl, Tax Services

The banking rules for businesses are changing effective May 11, 2018, however some banks are implementing the changes early. Therefore, next time you open a business bank account, or renew your line of credit, don’t be surprised if they ask for additional information regarding the individual owners of the business.

The new customer due diligence requirements indicate that banks must establish and maintain written procedures that are reasonably designed to identify and verify the beneficial owners of legal entity customers. A legal entity is defined as:

  • a corporation,
  • LLC,
  • an other entity created by filing of a public document with a secretary of state or similar office,
  • a general partnership and
  • any similar entity formed under the laws of a foreign jurisdiction.

The new banking requirement is that the ultimate beneficial owner or manager of any entity is identified. The bank must collect identification information for anyone who owns 25% or more of the entity, and in the case where no one person qualifies under that rule, the one individual who has the significant responsibility to control, manage or direct the legal entity.  This could be an executive officer or senior manager, or anyone else that provides this function.

The banks must collect the name, date of birth, address and social security number of these individuals. In the case of a foreign person, a passport number may be used instead of a social security number. Photocopies of original information is permissible.

These business rules are similar to those put in effect by the 2001 Patriot Act for individuals opening accounts.

If you have any further questions on the changing banking rules, please contact me at 952-476-7146 or cat_tucker@copelandbuhl.com

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