Fin Cen Roll Out for Merchant Services

“Why do I have to give you all of this information?”

Anyone selling merchant services has encountered this question at least once while helping a merchant complete an application. A response can be just as sensitive as the information that is being asked of the signor.

Merchant services applications require the following from the signor (historically with the majority share of ownership):

·        Full Name

·        Title

·        Date of Birth

·        Address

·        Social Security Number (U.S. persons)

·        Passport Number and Passport Country of Issuance (Foreign persons)

Discussing the personal information associated with the primary owner attached to a merchant account has been a tough subject for some. References to the Patriot Act has helped to lessen some of the hesitance but applicants still question the need for supplying their personal information.

As of May 11, 2018, an industry-wide change has taken affect due to Financial Crimes Enforcement Network (FinCEN) rule regarding Customer Due Diligence (CDD) Requirements for Financial Institutions. FinCEn is now requiring financial institutions, such as banks, to collect information for all beneficial owners associated with a business when establishing accounts.

FinCEN defines a beneficial owner as an individual or entity who directly or indirectly owns 25% or more of the equity interests of a legal entity customer or an individual with significant responsibility to control, manage, or direct a legal entity customer (e.g. CFO, CEO, COO).

FinCEN believes that collecting this additional information “provides highly valuable information that supports law enforcement, tax, regulatory or counterterrorism investigations.”

Covered institutions do have the option of requesting additional owners at lower percentages. However, the ruling only mandates that 25% or more is required. It is at the discretion of the institution to determine if it is helpful or needed for risk mitigation. Should an institution decide that it needs to collect the additional, lower percentage owners, it is recommended that written policies are in place to support this need.

It’s important to remind your merchants that their information is required for multiple reasons as mandated by the Federal government. It is for both the bank’s and the merchant’s protection that this information is being requested.

This new ruling will directly impact businesses looking to establish new bank accounts or merchant accounts. Subsequently, this will impact those selling these services.

In a time where providing sensitive information is reliant on trust that it will not be misused or shared, it creates a difficult conversation with business owners.

FinCen has created a resource in the form of a FAQ that can be found here. This is an excellent tool to not only increase your understanding of this recent FinCEN ruling but to also help merchants understand the requirement.