New Know Your Customer (KYC) regulations for banks mandate that their business customers report the names and addresses of nearly all owners and beneficial owners. These measures, driven by concerns about tax avoidance and potential government sanctions, present significant challenges for commercial real estate (CRE) firms due to their complex, multi-layered ownership structures.

Financial institutions may apply a 10% rule (for high risk customers), where ownership under 10% doesn’t need verification, but anything above requires identifying and documenting the individuals, sometimes through face-to-face verification. This process is particularly burdensome for CRE firms, which often have numerous entities and banking relationships. For instance, each owned property might involve a different local bank and several ownership entities, ultimately tracing back to human beneficial owners. Collecting, verifying, and maintaining this information is time-consuming.

These regulations may prompt a shift towards simpler ownership structures in CRE. Some owners might aim to stay below their banks threshold to avoid mandatory identification.

To manage these challenges, CRE firms must have a thorough understanding of their ownership structures and banking relationships, requiring a secure, organized, and data-driven solution with robust document collection and collaboration features.

Millennia Group provides a workflow and meta data driven document management solution that can easily be configured to help gather, store and present information to third parties in a secure manner.  Contact us for more information.