Beneficial Ownership

To help the government fight financial crime, Federal regulation 31 CFR 1010.230 requires certain financial institutions to obtain, verify, and record information about the beneficial owners of legal entity customers. Legal entities can be abused to disguise involvement in terrorist financing, money laundering, tax evasion, corruption, fraud, and other financial crimes. Requiring the disclosure of key individuals who own or control a legal entity (i.e., the beneficial owners) helps law enforcement investigate and prosecute these crimes.

A beneficial owner is defined as one of the following:

• Any individual who owns directly or indirectly, 25 percent or more of the equity interests of the legal entity registering for a merchant account; AND/OR
• An individual with significant responsibility for managing the legal entity (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer).

For more information on Beneficial ownership please see the links below:

• https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule
• https://www.fincen.gov/sites/default/files/shared/CDD_Rev6.7_Sept_2017_Certificate.pdf
• https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf

Why are Social Security Numbers and/or Tax IDs required?

This information is required to verify the identity of the beneficial owners registering for the account and to verify the EIN of the legal entity to comply with IRS regulations.

 

What if there are no beneficial owners that meet the 25% ownership criteria?

If there are no owners with 25% or greater equity in the legal entity only the officer section needs to be completed with information on an individual who has significant responsibility for managing the legal entity.

 

What if the merchant is a sole proprietorship?

If the merchant is a sole proprietorship, non-profit or government entity only the officer section needs to be completed on a merchant application. These entity types are excluded from the rule.