New Owner Identification Requirements: What You Need to Know

If you’re shopping around for a new credit card processor, you may notice a few new questions being asked on the application form. Data theft and financial fraud have been climbing steadily over the past few years, so federal agencies are cracking down and fighting back. Starting May 1, 2018, the Financial Crimes Enforcement Network (FinCEN)’s new Customer Due Diligence (CDD) requirements for financial institutions are being enforced. Let’s break down the changes and what they mean for you, the business owner.

 

 

Beneficial Owners, Step Right Up

 

 

The major change with the new FinCEN rule is that all individuals and entities who own 25% or more of a business will need to be identified on a credit card processing application. This means that some businesses may go from listing just one primary owner to listing two, three, or more depending on how their business is structured. Furthermore, businesses will have to disclose if there is a single individual with significant control over the business, regardless of whether or not that person actually has an ownership stake (This could be the CEO, CFO, etc.). Because of this additional requirement, a business could theoretically list up to five people on their application – four owners at 25% each and one additional non-owner who has significant control.

 

 

What Information Will I Need to Give?

 

 

Each person on the application will need to provide their full legal name, date of birth, address, and social security number. Only the first owner listed will have their credit run, but the processor will keep the information for all other applicants on file. It’s important to note that gone, too, are the days of “nominee owners,” people or institutions named on behalf of the business to stand in for actual owners. FinCEN wants to be 100% sure they know exactly who owns and is in charge of a given business, so they are insisting upon knowing the identities of the actual owners.

 

 

Why is This Happening?

 

 

While it may feel annoying or invasive to have to fork over this kind of sensitive information for so many people related to your business, the new requirements are ultimately designed to keep you and your business safe. The financial services industry as a whole has experienced a spike in fraud over the past several years, and credit card processing is no exception. When businesses list only one owner on their applications or select nominee owners to take their place, it can be very hard to figure out who the actual owners are in the event that something goes wrong. By keeping a clear record of all the owners and decision makers who affect a business’s financial future, FinCEN is helping cut down on fraud across the industry. This ultimately means your business is safer and can be more successful.

 

 

We Can Help

 

 

If you’re frustrated by these new requirements or concerned about obtaining or providing this information, don’t hesitate to reach out to us. Give us a call at 408-295-8360 or drop us a line on our website. We will help you navigate the application process with as little stress and inconvenience as possible.

 

 

PS – Credit card error codes giving you grief? Here’s how to decipher what they mean.

 

 

PPS – You can still be a great manager, even if your team all works remotely. Here’s how.

 

 

By |2018-05-31T14:20:08+00:00May 31st, 2018|Credit Card Processing|0 Comments

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