Does your business have a bank account? OCC wants Congress to require info on who owns the entity under ‘beneficial ownership’

Congress should establish a consistent, nationwide requirement that legal entities provide and update accurate beneficial ownership information, a top official of the regulator of national banks told a Senate committee Tuesday.

In testimony before the Senate Banking Committee, Senior Deputy Comptroller of the Currency for Bank Supervision Policy Grovetta N. Gardineer said such a requirement would ensure national banks and other financial institutions “have a resource against which they can verify the beneficial ownership data provided when a company opens a bank account.” She said as an alternative, Congress could consider creating a centralized database for the maintenance of the beneficial ownership information.

Under the beneficial ownership rules issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) in 2016 (and which went into effect last year), banks are required to set and follow policies and procedures to identify the “beneficial owners” who own 25% or more of a legal entity customer, as well as who controls the legal entity, when that customer opens a new accounts, Gardineer told the committee.

She also said financial institutions must also verify the identity of each named owner under risk-based procedures, and must conduct ongoing monitoring and incorporate customer information.

The OCC official told the senators that her agency’s examiners have identified “several challenges” to achieving the rule’s objectives. The most significant of them: the absence of reliable sources against which a bank can independently verify the accuracy of the beneficial ownership information provided when a legal entity opens an account. Gardineer called that the most “significant obstacle” for banks.

“Unfortunately, many states do not collect this information at the time a company is formed, or in subsequent filings or reports. Where this information is collected, there is no consistency in the information captured or maintained,” she asserted.

She told the committee that the bank regulator recommends that all legal entities be required to provide their ownership information as a condition of having a bank account in the U.S., and that the information be updated periodically to ensure accuracy. She also said the OCC further recommends that the information be collected in a consistent format, and that individuals providing the information be “held accountable for making false statements.”

“Regardless of how information is captured, we are keenly aware of the importance of establishing a balance between the need for this information and important data protection and privacy rights,” Gardineer said. “Congress could consider reviewing best practices from other jurisdictions that use corporate registries to collect and maintain beneficial ownership information and consider how these could apply to U.S. needs.”

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