Topic: Account Opening
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We received a call from a potential customer who said that we are on the list of authorized institutions for holding debtor-in-possession (DIP) accounts. Where can we find the list to confirm? If we are indeed on the list, are we obligated to open this account? We would prefer not to.
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The list of authorized depositories for southern and central Illinois is available only on request. We obtained the list by calling the local U.S. Bankruptcy Trustee’s office number, which is (317) 226-6101. The list of authorized depositories for northern Illinois is available online at this URL: https://www.justice.gov/ust-regions-r11/file/chicago_authorized_depositories.pdf/download. We do not believe that a bank would…
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When we open memorial/benefit accounts, we ask that an individual open the account in his or her name. We have an engagement letter that our lawyer drafted several years ago stating that the bank has no duties, responsibilities or obligations other than to accept the deposits and requiring the individual to hold the bank harmless for the consequences of any action or inaction that the bank takes in regard to the account. Is that the correct way to handle these accounts?
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When opening memorial and benefit accounts, we believe it is a best practice to ask the individuals establishing the accounts to obtain separate EINs to avoid a number of potential problems. For example, using a separate EIN with the memorial fund’s name in your account records should help to avoid confusion for IRS reporting and…
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One of our business customers is a law firm that is opening an office in another state. The law firm established a new LLC for the new office in the other state, and the LLC wants to open a checking account at our bank. Our account opening procedures require us to check that business customers have appropriate business registrations in place. Does the foreign LLC need to register in Illinois, even if it will not be transacting business in Illinois?
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Whether a foreign LLC is “transacting business” in Illinois and therefore required to register with the Secretary of State is a highly fact-specific question, particularly with respect to a multi-state law firm; notably, this question also raises tax issues in some states. Fortunately, this is a question for the law firm and not for your…
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At the time of account opening, business accounts are verified through the Illinois Secretary of State’s website. We obtain proof that the entity is registered and that its status is valid. Are we required to check that our business customers also maintain their business registrations on an ongoing basis with the Secretary of State?
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No, we are not aware of any law or regulation requiring your bank to determine whether a business customer is in good standing with the Illinois Secretary of State or the secretary of state of any other state. It is common, however, for commercial account agreements to require a commercial customer to remain in good…
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We have a potential customer who is interested in opening a Series LLC account that would consist of a master account with several sub-accounts. What are the requirements for these types of accounts?
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Although series accounts may create certain BSA/AML challenges for your institution, they are permissible in Illinois, and we are not aware of any specific requirements or restrictions for opening these accounts. However, from the customer’s perspective, series LLC accounts may not be advisable. To maintain liability protection, each series LLC must be treated as a…
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If an LLC establishes FBO accounts as the agent of its clients, are the accounts subject to a garnishment or tax levy against the agent for the obligations of the LCC?
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Provided that the FBO accounts are set up to clearly establish that the LLC is only the agent for the third parties who have the equitable interests in the accounts’ funds, the accounts should not be subject to a garnishment or levy for the obligations of the LLC. For resources related to our guidance, please…
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We have a business customer that operates a farm management limited liability company. The company receives lots of checks payable to its clients that it would like to deposit, so the company wants to open a “for the benefit of” (FBO) account for each client. The clients would have no authority on the accounts, and would sign a limited power of attorney giving the company permission to deposit checks made out to them. Is this compliant with Illinois laws? Also, does the designation “FBO” have any bearing on the account itself?
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We are not aware of any Illinois law that expressly relates to the “FBO” designation for deposit accounts. However, this designation is relatively common, and in similar situations, some banks do choose to add the FBO designation to the account title for various reasons. The FBO designation is relevant in determining whether an account is…
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John Doe runs a farm management company, John Doe, LLC. He would like to open a business account for the company at our bank. Sometimes he receives checks that list the payee as “[client name], c/o John Doe, LLC.” Can he deposit these checks into his business account without the client’s endorsement if he has their written authorization to do so?
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Yes, we believe that John Doe, LLC may deposit these checks in its account at your bank without its clients’ endorsements. However, this practice could pose minor residual risks to your bank (even with written authorizations from your customer’s clients on file). Under the Uniform Commercial Code (UCC), if a check is made out to…