The US government and its regulators are working very hard on the clarification of what “beneficial ownership” is going to mean and the standards of care that institutions will be required to establish to determine beneficial ownership.
The simple working solution that has served our clients very well for many years is asking the two questions “Who enjoys the fruits of the structure?” and “Who has control of the person who controls how those fruits are allocated?”
But with blind trusts owned by locked corporation administered by people in far away lands or impenetrable trust companies and law firms – it gets hard to make a fair assessment. Further we all believe that a person is entitled to some privacy in their financial matters. Prying to far we almost feel like we have asked one of those forbidden questions – like, “How old are you Ma’am?” or “Nice earrings are those real stones?” But now ask we must and verify we must.
What can we expect to see in the near future.
• Beneficial ownership will be lowered from the 25% threshold to 10%.
• Nominee’s will be excluded from being claimed as beneficial owners.
• Control will be used as part of the test of beneficial ownership.
• There will be a written and verified list of beneficial owners.
• A full KYC risk based assessment will be required on each beneficial owner.
• States will be required to seek full beneficial ownership declarations on entities filed in their states.
• Financial institutions and intermediaries such as law firms and trust companies will be require to possess all beneficial ownership information on all funds held or transferred.
• Law firms will be required to make affirmative assertion that there account will not be used by PEP and criminals for money laundering and will have to have procedures very similar to those of banks and financial institutions.
• PEP disclosure threshold will be lowered from foreign nationals with over 1 MM to all those in control of public choice making both domestic and international.
• I also expect some type of “End User Certificate” EUC documentation will be required when wholesaling goods and services overseas – similar to what is currently required when export restricted items to apply to all items.
While our original questions are still at the heart of the matter, “Who enjoys the fruits of the structure?” and “Who has control of the person who controls how those fruits are allocated?”, further documentation of the diligence will be mandatory.