Bankers Alliance Compliance Corner

Editor's Note: The following was submitted by Bankers Alliance. LBA, through its subsidiary Louisiana Bankers Service Corporation, has partnered with Bankers Alliance to give banks access to three compliance-related programs. Click here for more information.

Q. We have an instance where a customer is wanting to open a benefit account for a fellow church member whose wife has recently become ill. His initial intention was to set the account up under his name and tax ID information and he would direct the funds to the individuals. However, our institution does not typically open these types of accounts and we're hoping for recommendations and/or what is consistent in the banking industry for these types of benefit accounts.

A. There are several methods that may be used when opening these types of accounts:

  • A simple trust can be drafted and an account can be opened in the name of the trust. Treat the account as you would treat any account opened under an irrevocable trust agreement. 
  • An account opened in the name of the persons to be benefitted. Treat the account as you would treat any individual/single-party or joint/multiple-party account. The victim(s) must be authorized to transact on the account.
  • An organization actively involved in the process of assisting the family may be willing to open an account in the name of the organization into which the collected funds will be deposited. For example, a local church or other charitable organization assisting the victim(s) may be willing to open and administer the account. Treat the account as you would treat any account opened by an organization. 

The three methods described above are the only practical methods which should be considered. However, there are some banks that allow customers to open these types of accounts as informal trust, such as for benefit of or in trust for accounts. If the bank will consider this, please note the following: 

  • Treat the account as you would any individual/single-party or joint/multiple party account with a payable on death. 
  • The person establishing the account is the owner of the account and the victim is the designated beneficiary. This means that the funds given to the victim to establish the account will not belong to the victim once deposited into this type of account. 
  • Ownership passes at the death of the account owner to the victim. 
  • If the victim dies, the funds do not pass to his/her estate. The funds belong to the owner of the account. 
  • Checks made payable to the victim should not be deposited into this type of account unless the victim properly endorses the check. 
  • The owner’s taxpayer identification number is used for Internal Revenue Service and customer identification program purposes.   

In addition, Compliance Alliance has a thorough cheat sheet regarding benefit and memorial accounts—click here to view.  

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call (888) 353-3933 or email and ask for our Membership Team. 

Did you know that Regulation CC does not apply to savings accounts? 

  • Regulation CC applies to transaction accounts.  
  • A savings account is not considered a transaction account for the purpose of Regulation CC. 
Review Alliance, an independent group of compliance specialists offering banks deep-dive audits of their existing transactions, recommendations about program enhancements or guidance on future safety and soundness. Virtual Compliance Officer was added in 2020—a new shared service-model using bank-dedicated compliance officers; perfect for monitoring and guiding your bank remotely. To learn how to put them to work for your bank, call (833)-683-0701or email and ask for the Membership Team.

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