Must a bank identify the beneficial owners of a legal entity customer when opening an account?
A covered financial institution must establish procedures to identify and verify the beneficial owners of each legal entity customer at the time a new account is opened under 31 CFR 1010.230.
The answer
The customer due diligence requirement
31 CFR 1010.230 requires a covered financial institution to establish and maintain written procedures to identify and verify the beneficial owners of each legal entity customer at the time a new account is opened, identifying both the ownership prong and the control prong of beneficial ownership.
What counts as a beneficial owner
The rule defines beneficial ownership through two prongs. It reaches each individual who owns 25 percent or more of the equity interests of the legal entity customer and a single individual with significant responsibility to control or manage the entity.
The judged input
What the AI drafted
Submitted to the judgeThis is an excerpt from a draft BSA/AML compliance memo — the kind of work product a lawyer generates with a legal-AI drafting tool, then has to stand behind. Kingsfield does not write it; it rules on the citations the model put in it. This draft cites two authorities; one of them is wrong.
The judge ruled on every citation as the draft used it — it accepted 31 CFR 1010.230 and rejected 31 U.S.C. § 5318(h). Here is why.
The verdict
How Kingsfield ruled
Ruled 2026-06-23Each citation in the draft above was submitted to the Kingsfield judge and ruled against the primary-law corpus — Accept, Reject, or Inconclusive, per citation. These are live verdicts, not editorial. Each card shows the claim the draft made and the verbatim authority the verdict was rendered against.
The draft claimed: A covered financial institution must establish and maintain written procedures to identify and verify the beneficial owners of each legal entity customer at the time a new account is opened.
“In general. Covered financial institutions are required to establish and maintain written procedures that are reasonably designed to identify and verify beneficial owners of legal entity customers and to include such procedures in their anti-money laundering compliance program required under 31 U.S.C. 5318(h) and its implementing regulations.”
Cite found; proposition supported by the cited text.
The draft claimed: Section 5318(h) is the provision requiring a financial institution to identify and verify the beneficial owners of its legal entity customers at account opening.
Cite found, but the cited text does not support the claim. 31 U.S.C. 5318(h) requires financial institutions to establish anti-money-laundering programs with internal policies, a compliance officer, training, and independent testing; the beneficial-ownership identification obligation is imposed by the customer due diligence rule at 31 CFR 1010.230. Regenerate with the correct authority.
Run your own work through the judge
Kingsfield rules on every citation, quote, and proposition your AI produces, against the primary law we cover. Accept, Reject, or Inconclusive, per citation, with a signed Audit Capsule.
Connect the Judge See the architectureThis page is legal information, not legal advice, and does not create an attorney-client relationship. The draft shown is an illustration of a typical AI answer; verdicts reflect the cited authority in the Kingsfield corpus as of the ruling date shown above.