Silicon Valley Bank, Santa Clara, California, was closed on March 10 by the California Department of Financial Protection and Innovation (CDFPI).1 On March 12, the New York State Department of Financial Services (NYSDFS) similarly took possession of Signature Bank “in order to protect depositors.”2 The CDFPI and the NYSDFS appointed the Federal Deposit Insurance Corp. (FDIC) as receiver of both banks. On the evening of March 12, the FDIC issued a joint statement with the U.S. Treasury and the Federal Reserve Board advising that depositors would have access to all of their money.3
To the extent any clients are considering diversifying their banking relationships, this Client Alert sets forth the standard requirements, information, and documentation necessary to efficiently address bank onboarding, anti-money laundering (AML), and know your customer (KYC) requirements.
Banks request information pursuant to requirements under the Bank Secrecy Act of 1970 and its amendments, including the USA PATRIOT Act of 2001, the Anti-Money Laundering Act of 2020, and other federal regulations. Banks are also subject to Office of Foreign Asset Control (OFAC) obligations for identifying and verifying the identities of customers.
A key component of the AML and KYC regulatory framework is the obligation for banks to undertake efforts to identify and verify the identities of its prospective customers. Specifically, banks are required to identify and verify any person or entity seeking to open an account, maintain records of such information used to verify the account holder’s identity, and determine whether the person or entity appears on any list of known or suspected terrorists or terrorist organizations. Customers that are unwilling or unable to provide such information, or responses to any supplemental requests, will not be able to open accounts with a bank.
Required Bank Onboarding Information/Documentation
The information/documentation set forth below is required to establish a relationship with a bank (KYC Documentation). Such KYC Documentation will satisfy a bank’s initial onboarding requirements and may be augmented by supplemental requests that are specific to each bank and/or the specific AML/OFAC risks posed by the client.
- Legal Entity4
- Formation certificate (e.g., Certificate of Incorporation, Certificate of Limited Partnership)
- Operating agreements (e.g., Limited Liability Company Agreement, Limited Partnership Agreement)
- Officer appointment and authorization documents (i.e., documentation showing the authorized signers of the entity), if authorizations are not included in the operating agreements
- Identity documentation similar to the description below for individual account holders may be requested for account signers (e.g., a Treasury officer) and certain officers of entity customers
- Tax documents (i.e., the entity’s W-series tax form)
- Structure chart
- Valid government-issued photo ID (e.g., driver’s license, passport)
- Social Security number or individual Taxpayer Identification Number
- Proof of address (e.g., from a utility bill)
- Tax document
- Power of Attorney or other similar document
As the onboarding process continues, additional documentation and/or information may be required by the bank. Banks assess the AML and OFAC risks posed by the prospective customer based on the totality of the documentation and information reviewed during their customer due diligence review. A customer with a higher risk level (e.g., a politically exposed person is a director) may be required to submit additional documentation and/or certifications. Expeditiously providing such information to the requesting bank will avoid undue delays during the onboarding process.
Any information that may raise a customer’s AML/OFAC risk profile should be provided to the bank when initiating onboarding. Clients should address these elevated AML/OFAC risks earlier in the onboarding process to avoid significant delays. Moreover, without providing such information in advance, clients risk potential refusal by the bank to open an account after committing significant time and resources.
While each bank has different onboarding requirements, procedures, and timelines, the KYC Documentation is a starting point that will position clients to open accounts promptly. Accordingly, clients should consider preparing their KYC Documentation in advance of onboarding with any new prospective banking partners.
Lowenstein Sandler LLP can assist clients with navigating and managing the account opening process at any new banking partners clients are considering, including establishing credit lines, bank accounts, and other banking services. Clients are encouraged to contact one of the listed authors on this Client Alert, LSAMLTeam@lowenstein.com, or your regular Lowenstein Sandler representative should you require assistance with assessing your banking options and navigating the onboarding process in an efficient and effective manner.
To see our prior alerts and other material related to the collapse of Silicon Valley Bank, please visit our resource page by clicking here.
4 Trusts will require additional onboarding documentation depending upon the nature of the trust (i.e., revocable, irrevocable) including, without limitation, the name of the settlor, beneficiaries, and trust document.