A controller is a natural person who holds significant responsibilities to control, manage or direct a company or other corporate entity (i.e. CEO, CFO, General Partner, President, etc). A company may have more than one controller, but only one controller’s information must be collected.
A beneficial owner is a natural person who, directly or indirectly, owns 25% or more of a company. If there are no natural persons who own 25% or more of a company, then no information needs to be collected. A beneficial owner cannot be another company (or other corporate entity), nor a nominee owner.
If a natural person owns 25% or more of a company, then he or she is a beneficial owner. For example, if three people each directly own 33% of a company, then each individual is a beneficial owner. However, where a company is owned by other companies (or other corporate entities), indirect ownership must be identified. For example, Big Corp, Inc. opens a business VCR account. Big Corp’s ownership structure is as follows:
The customer due diligence rule requires the identification of any natural person who owns 25% or more of a company. Therefore, both Kathy Smith and Jane Lee must have their information collected and verified.
In our example, we must also extend our examination into the ownership structure of Small Corp, Inc. Small Corp’s ownership structure is as follows:
Michael Doe owns 50% of Small Corp, which owns 50% of Big Corp, which means that Michael Doe indirectly owns 25% of Big Corp. As a natural person who owns 25% or more of Big Corp, Michael Doe is a beneficial owner of Big Corp, and his information must be collected and verified as well.
Impacted customers will need to collect the following: