2024 Beneficial Ownership Rules Explained: How Banks and Credit Unions Can Stay Compliant and Avoid Penalties

In the fight against financial crime, new beneficial ownership rules are becoming increasingly crucial for financial institutions (FIs). Beneficial owners, those who control or own 25% or more of a deposit account, must now be clearly identified and verified. While these regulations may seem cumbersome, they're essential for curbing money laundering and fraud.
Picture of Ravi Sandepudi

Ravi Sandepudi

May 18, 2023

Having a strong KYC and KYB program is vital for FIs to fight fraud and risk. And now, this is becoming less of an option. In an effort to combat financial crimes such as money laundering and terrorist financing, new beneficial ownership rules have been implemented for deposit accounts at financial institutions (FIs). These rules require FIs to identify and verify the beneficial owners of account owners for both new and existing deposit accounts.


So, what exactly is a beneficial owner? A beneficial owner is any individual or business who directly or indirectly owns 25% or more of a deposit account or has significant control over it. This could also include individuals such as executives, directors, or shareholders.


Under the new rules, FIs are required to collect identifying information for beneficial owners, including their full name, date of birth, address, and social security number or passport number. Action is also required to verify this information through reliable sources, such as government-issued identification or publicly available information.


While these rules may seem like an inconvenience for consumers and businesses opening new deposit accounts, they serve an important purpose in preventing financial crimes. By identifying the beneficial owners, FIs can better assess the risks associated with these customers and monitor their transactions for suspicious activity.


Additionally, these rules help ensure a level playing field for businesses by preventing anonymous ownership and promoting transparency. This can help build trust in the financial system and prevent using FIs for illicit activities.


It’s important to note that these rules only apply to new deposit accounts at banks. Existing accounts are not affected by the new rules, although banks may choose to update their customer information as part of their ongoing customer due diligence.


In conclusion, the new beneficial ownership rules for new deposit accounts at banks may seem like a hassle to some, but they play an important role in preventing financial crimes and promoting transparency in the financial system. By identifying and verifying the beneficial owners of legal entity customers, banks can better assess the risks associated with these customers and prevent the use of banks for illicit activities.


At Effectiv, we’ve worked hard to create the world’s best fraud and compliance automation platform with cutting-edge KYC/KYB technologies. We automatically traverse beneficial owners, run ID/document verification, screen sanction lists and scan for negative news in a matter of seconds for both new and existing relationships. So when a business or a consumer deposit account is onboarded, rest assured that always being compliant and protected from fraud is our top priority. 


FIs have done so much; this should be one less thing to worry about.

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