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Beneficial Ownership Requirements for Cannabis Businesses

Purpose and scope

This guide explains how we identify beneficial owners for cannabis-related businesses (CRBs) and what information we collect. It applies to all legal-entity customers seeking to open or maintain accounts with us.

Summary

  • We identify beneficial owners using two prongs: ownership and control.

  • For cannabis, our sponsor banks require a 10% ownership threshold (instead of the general 25%).

  • We always collect one control person for the legal-entity customer opening the account.

  • For multi-tier structures, we “look through” parent companies to natural persons for the ownership prong; control is anchored to who actually directs the customer entity’s operations.

  • We apply enhanced due diligence (EDD) commensurate with cannabis risk, including license verification and ongoing monitoring.

Key definitions

Legal-entity customer
The company opening the account (for example: dispensary LLC, cultivator Inc., processor LP).

Beneficial owner (two-prong test)

  1. Ownership prong: each natural person who, directly or indirectly, owns or controls a defined percentage of the customer’s equity or voting interests.

  2. Control prong: a single natural person with significant responsibility to control, manage, or direct the legal-entity customer (for example: CEO, president, managing member, general partner, or equivalent).

Cannabis overlay
For cannabis customers, we collect ownership information at 10% or more (direct or indirect). One control person is always required, even if no one meets the ownership threshold.

How the two-prong test works

Ownership prong (10% for cannabis)

  1. Map the full ownership chain from the customer up to natural persons.

  2. Calculate each individual’s effective ownership by multiplying through each tier; aggregate any multiple indirect paths.

  3. Identify every natural person with an effective ownership interest of 10% or more.

  4. If a trust meets the threshold, the trustee is treated as the beneficial owner for the ownership prong (we may request additional trust information based on risk).

Ownership examples

  • Single tier: Holding Co. owns 100% of the customer; Alice owns 15% of Holding Co. → Alice is an ownership-prong BO (15% ≥ 10%).

  • Multiple tiers: Bob owns 20% of ParentCo; ParentCo owns 60% of the customer → Bob’s effective interest is 12% (0.20 × 0.60) → BO.

  • Aggregation: Carol holds 6% of Parent A and 7% of Parent B; each parent owns 50% of the customer → 6%×50% + 7%×50% = 6.5% → not a BO.

Control prong (always required)

Identify one natural person who has significant responsibility to control, manage, or direct the legal-entity customer. This is typically the customer’s CEO/president/managing member.
If a parent company or contracted manager actually directs the customer’s day-to-day operations under a management or operating agreement, an individual at that parent/manager who exercises that authority may be identified as the control person. Document the basis (for example: management agreement, board resolutions).

Control examples

  • Day-to-day at the customer: The customer’s CEO runs operations → list the CEO as the control person.

  • Managed by a parent/manager: ParentCo’s COO runs the customer under a formal management agreement → you may list ParentCo’s COO as the control person (attach the agreement).

  • Nonprofit or certain pooled vehicles: Only the control prong applies but we must understand the governance structure beyond the single Control Prong individual.

    • Board of Directors: Obtain a list of all members of the Board of Directors or Trustees for the client NPO and the parent NPO. While not listed on the UBO form, they must be documented in the EDD file, screened, and risk-rated.

What we collect for each identified person (CIP/KYC)

  • Full legal name, date of birth, residential address.

  • Identification number (for example: SSN/ITIN for U.S. persons; passport or acceptable government ID for non-U.S. persons).

  • A government-issued photo ID for identity verification (documentary and/or non-documentary methods).

  • Additional information as warranted by risk (for example: source of funds/wealth for major owners).

FAQs

If no one owns 10% or more, what happens?
You still identify one control person. We may collect information on additional senior managers if risk warrants it.

Do Corporate Transparency Act (CTA) filings replace this?
No. CTA/BOI reporting (administered by FinCEN) is separate. Banks must identify and verify beneficial owners directly at account opening and update information on a risk basis.

How do you treat complex arrangements (trusts, nominees, brand/licensing parents)?
We follow the ownership calculation to natural persons and identify the trustee for qualifying trusts. If contractual rights give someone real authority to direct the customer, that individual can be the control person even without equity. We may ask for supplemental documents to evidence control at the board level.

What about sanctions risk where an upstream person controls but doesn’t own ≥10%?
Control alone may not trigger blocking under OFAC rules, but it is a high-risk indicator. We perform EDD and escalate per our sanctions program and sponsor-bank requirements.

Data retention and privacy

We retain and protect records in accordance with BSA recordkeeping requirements and our information security program. Access is limited to authorized personnel and regulators as permitted or required by law.

Compliance note

This guide summarizes regulatory expectations and our sponsor-bank overlay for cannabis customers. It is informational only and not legal advice. State-specific requirements may apply.

Appendix — References and Links

FinCEN: Customer Due Diligence Requirements for Financial Institutions (Final Rule, 2016)
https://www.federalregister.gov/documents/2016/05/11/2016-10567/customer-due-diligence-requirements-for-financial-institutions

eCFR: 31 CFR 1010.230 (Beneficial ownership; legal-entity customers)
https://www.ecfr.gov/current/title-31/subtitle-B/chapter-X/part-1010/section-1010.230

FFIEC BSA/AML Examination Manual — Customer Due Diligence / Beneficial Ownership
https://bsaaml.ffiec.gov/manual

FinCEN Guidance: BSA Expectations Regarding Marijuana-Related Businesses (2014)
https://www.fincen.gov/resources/statutes-regulations/guidance/bsa-expectations-regarding-marijuana-related-businesses

FinCEN: Providing Financial Services to Customers Engaged in Hemp-Related Businesses (2020)
https://www.fincen.gov/sites/default/files/2020-06/FinCEN%20Guidance%20Hemp%20Final%206-29-2020.pdf

Interagency Statement on Providing Financial Services to Hemp-Related Businesses (2019)
https://bsaaml.ffiec.gov/docs/InteragencyStatementHemp.pdf

OFAC: 50 Percent Rule and Related FAQs
https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/1521

FinCEN Beneficial Ownership Information (BOI) Resource Center (CTA)
https://www.fincen.gov/boi

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