Everything you need to know about FinCEN’s new Beneficial Ownership Rule

Starting May 11, 2018 the United States Department of Treasury, Financial Crimes Enforcement Network ( FinCEN), Beneficial Ownership Rule goes into effect. The new Beneficial Ownership Rule requires financial institutions to verify the identity of all beneficial owners of a legal entity and is intended to crack down on money laundering and other fraudulent activities.

When the Rule goes into effect, PaySimple will be required to collect additional information from some merchants during the application process. These efforts go hand-in-hand with our primary objective: to provide secure payment processing solutions for our customers

What does this mean for PaySimple customers or prospective customers?

If you are a sole proprietor or other exempt business entity, you are not impacted at all. The new regulation is only applicable to legal entities such as corporations, LLCs, limited and general partnerships, business trusts or any other entity registered with a state office. A list of examples is available in the FAQ below.

You will not need to provide any additional ownership information if you own more than 75% of your non-exempt entity. The Beneficial Ownership Rule is intended to identify and verify the identity of individuals who own more than 25% of a business.

If you own less than 75% of a non-exempt business, you are probably subject to the Beneficial Ownership Rule, but don’t fret.

The new requirements are relatively painless. When you complete a new merchant application, be prepared to submit your personal information; i.e., name, address, phone number, date of birth, SSN and percent of ownership. You will need to submit this information for anyone else with a greater than 25% ownership stake.

Not sure you have all this information for all beneficial owners? Don’t worry! If you don’t have everyone’s information you can complete the application without it. We’ll follow up to collect the rest of the information.

We know business owners have enough to worry about so we wanted to make this as simple and painless as possible, but if you are the curious type, here is more information about the FinCEN Beneficial Ownership Rule. Otherwise, everything you need to know, is in the following FAQ.

FAQ’s – FinCEN Beneficial Ownership Rule and Impacts on PaySimple Merchant Applications

Q: When does the rule go into effect?

A: The Beneficial Ownership Rule will go into effect on May 11, 2018 with all new merchant account applications.

Which business types are subject to the new Beneficial Ownership Rule?

Examples of Non-Exempt Legal Entities:

  • private corporations
  • limited liability companies
  • limited or general partnerships
  • business trusts
  • any other entity created by a filing with a state office

Examples of Exempt Legal Entities:

  • sole proprietorships
  • unincorporated associations, such as a local Girl Scout troop or a neighborhood association
  • trusts, other than statutory trusts created by a filing with a state office
  • government or financial legal entities, such as federal or state regulated financial institutions, bank and savings and loan holding companies, publicly held companies listed on the New York, American, or NASDAQ Stock Exchanges, and entities registered with the SEC

Q: Are charities and nonprofits affected by FinCEN’s Beneficial Ownership Rule?

A: It gets complicated as we get into the Ownership and Control prongs of the Rule, but it’s safe to say the majority of charities and nonprofits are exempt. You can read about Charities and the Beneficial Ownership Rule https://www.charityandsecurity.org/node/1475

Q: If myself and the other beneficial owners are not exempt, what information do we need to provide in the new merchant application process?

A: You will need to provide your full name, physical address, email address, phone number, date of birth, social security number and state your percent of ownership of 1 Control owner AND each of the four data points for up to four Beneficial Owners (anyone with 25% or more legal ownership).

Q: My business partner likes me, but they won’t give me their SSN…

A: You can still complete your PaySimple application. When you get to the Beneficial Ownership portion of the application, simply select “I don’t have this information right now.” We will still receive the application and follow up with “Continue Application” instructions so you can finish the application later.

Q: Does this affect my customers?

A: Not at all! The Rule is intended to crack down on money laundering by ensuring financial institutions have the information they need to verify and validate each beneficial business owner.

Start a 14 day Free Trial and streamline your business with PaySimple:
Start My Free Trial