Anti-Money Laundering — Beneficial Ownership

A New Corporate Client’s Ownership Runs Through Three Jurisdictions, and We Cannot Identify the Ultimate Beneficial Owner. Their Representatives Say the Structure Is Standard. Can We Onboard Them?

A real AML compliance scenario — with three decision options and the right answer.

The Situation

A commercial banking team is onboarding a new corporate client — an import/export company seeking a significant credit facility. During the KYC process, the compliance team discovers that the company is wholly owned by a holding company registered in the British Virgin Islands, which, in turn, is owned by a trust structure in Liechtenstein. The trust’s beneficiaries are listed as a class of unnamed “family members” with no further identification.

The client’s legal representative says the structure is standard for family-owned businesses in their industry and that the financial statements are audited and show legitimate revenue. The credit facility would generate significant fee income for the bank. The relationship manager wants to proceed and is willing to accept a letter from the client’s law firm attesting to the legitimacy of the ownership structure.

Choice AAccept the attorney attestation letter as a substitute for beneficial ownership documentation. If a law firm is willing to attest to the legitimacy of the structure, that provides sufficient third-party verification to satisfy the due diligence requirement.

Choice BDecline to open the account until the beneficial owners can be identified and verified by name. An attorney attestation letter does not satisfy FinCEN’s beneficial ownership identification and verification requirement — it substitutes one party’s opinion for the required documentation.

Choice COpen the account for limited transactions only — a restricted facility that generates less risk while the beneficial ownership documentation is pursued over the next 90 days.

The Right Call

Choice B — Do not open the account until beneficial owners are identified by name.

Choice A mistakes an attestation for a verification — FinCEN’s rule requires the institution itself to identify and verify, not to collect a third party’s opinion about the structure. Choice C opens the institution to the same liability as full onboarding — a “limited” account that processes any transactions without completed beneficial ownership documentation is still a violation. The audited financial statements and attorney letter may be legitimate — but they do not identify who actually owns the entity, as the law requires.

Legitimate businesses sometimes use complex ownership structures — and illegitimate ones always do.

Family-owned businesses, private equity structures, and international holding companies often have layered ownership for legitimate tax and estate planning reasons. The existence of a complex structure is not, in itself, proof of wrongdoing. But the inability to identify the individuals who ultimately own or control the entity — regardless of the reason — means the institution cannot meet its legal obligation. The business’s legitimacy doesn’t change what the rule requires.

Attorney attestation letters are not a regulatory substitute for beneficial ownership documentation.

This is a common workaround that compliance teams encounter regularly — and one that regulators specifically flag. An attorney’s letter says the structure is legitimate in the attorney’s opinion. FinCEN’s rule requires the institution to independently identify and verify. A letter from a law firm in the same jurisdiction as the BVI holding company does not provide the institution with the individual names, nationalities, and identification documents that the rule requires.

What is the FinCEN beneficial ownership rule and who does it apply to?

FinCEN’s Customer Due Diligence Rule (31 CFR § 1010.230) requires covered financial institutions to identify and verify the identity of beneficial owners of legal entity customers at the time a new account is opened. Covered institutions include banks, broker-dealers, mutual funds, futures commission merchants, and introducing brokers. The rule defines beneficial owners as individuals who own 25% or more of the equity interests and one individual with significant responsibility to control, manage, or direct the entity.

What should an institution do when a client cannot or will not identify their beneficial owners?

The institution should decline to open the account and document the reason. Depending on the circumstances — particularly if the client’s inability to identify beneficial owners is combined with other red flags — the institution should evaluate whether a SAR is required. FinCEN has issued guidance specifically noting that a customer’s refusal to provide beneficial ownership information is a factor in SAR filing decisions.

How to Use This Scenario in Training

Recommended for commercial banking onboarding teams, KYC analysts, compliance officers, and relationship managers who work with corporate clients. The key recognition skills are: understanding that an attorney attestation letter is not a regulatory substitute for beneficial ownership documentation, and understanding that a “limited account” pending documentation is the same compliance risk as full onboarding.

This scenario demonstrates the ambiguity and incentive pressure signals from the Decision Readiness Engine™. The client’s complex structure may be entirely legitimate — and the revenue opportunity is real. Decision-ready compliance professionals recognize that “the business may be legitimate” and “we can verify the beneficial owner” are distinct conclusions, and that the compliance obligation requires the latter before proceeding.

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