Step 3: Adding Beneficial Owner(s)

The Basics

To help the government fight financial crime, the existing United States Federal customer due diligence rules were amended to clarify and strengthen customer due diligence requirements. The customer due diligence rule imposes a requirement for verifying the identity of beneficial owner(s) of Dwolla’s partners and users that are not natural persons. These legal entities can be abused to disguise involvement in terrorist financing, money laundering, tax evasion, corruption, fraud, and other financial crimes. Requiring the disclosure of key individuals who ultimately own or control a legal entity (i.e., the beneficial owners) helps law enforcement investigate and prosecute these crimes.

If your business is exempt or if there is no individual with at least 25% ownership, your Customer can go straight to certifying that there are no beneficial owners

How do I know what business structure is required to add Beneficial Owners?

Create a beneficial owner for a Business Verified Customer

To create a beneficial owner, use the create a beneficial owner endpoint.

Events

As a developer, you can expect these events to be triggered when a beneficial owner is successfully created and systematically verified:

1. customer_beneficial_owner_created
2. customer_beneficial_owner_verified

Request Parameters

Address JSON object

Passport JSON object

Request and Response

var customerUrl = 'https://api-sandbox.dwolla.com/customers/07d59716-ef22-4fe6-98e8-f3190233dfb8';
var requestBody = {
  firstName: 'Jane',
  lastName: 'Doe',
  dateOfBirth: '1960-11-30',
  ssn: '123-56-7890',
  address: {
    address1: '99-99 33rd St',
    address2: 'Apt 12',
    city: 'Some City',
    stateProvinceRegion: 'NY',
    country: 'US'
    postalCode: '10005'
  }
};

appToken
  .post(`${customerUrl}/beneficial-owners`, requestBody)
  .then(res => res.headers.get('location')); // => 'https://api-sandbox.dwolla.com/beneficial-owners/FC451A7A-AE30-4404-AB95-E3553FCD733F'

Check the status of an individual Beneficial Owner

After a beneficial owner has been created, the beneficial owner’s identity needs to go through a verification process. A beneficial owner that has a status of incomplete or document will impact the business verified Customer's eligibility to send or receive funds. When a beneficial owner has been successfully verified by Dwolla, the business verified Customer’s status will be set to verified. Reference the table below for more information on the events that correspond to each of the beneficial owner statuses:

Individual Beneficial Owner statuses and events

Let’s check to see if the Owner was successfully verified or not. We are going to use the location of the Beneficial Owner resource that was just created.

Request and response - retrieve a beneficial owner status

var beneficialOwnerUrl =
  "https://api-sandbox.dwolla.com/beneficial-owners/07d59716-ef22-4fe6-98e8-f3190233dfb8";

appToken.get(beneficialOwnerUrl).then((res) => res.body.verificationStatus); // => 'verified'

Handling an individual beneficial owner Status

Congrats! You have created a beneficial owner for a business verified Customer, however, the successful creation of a beneficial Owner doesn’t necessarily mean they are identity verified. You will want to ensure that the beneficial Owner is verified, as the business verified Customer will be unable to send or receive funds until the owner has a verified status.

Handling incomplete status

An incomplete status occurs when a beneficial owner's identity scores are too low during the initial verification attempt. Dwolla will trigger a customer_beneficial_owner_reverification_needed event which notifies your application to prompt the Customer to submit another identity verification attempt for the beneficial owner. The second attempt will give our identity vendor more accurate information in an attempt to receive a sufficient score to approve the beneficial owner. The Customer will only have one opportunity to correct any mistakes.

You need to gather new information if the beneficial owner is placed into theincomplete status; simply passing the same information will result in the same insufficient scores. All fields that were required in the initial beneficial owner creation attempt will be required in the incompleteattempt.

Request and Response - update beneficial owner

var beneficialOwnerUrl = 'https://api-sandbox.dwolla.com/beneficial-owners/07d59716-ef22-4fe6-98e8-f3190233dfb8';
var requestBody = {
  firstName: 'beneficial',
  lastName: 'owner',
  dateOfBirth: '1963-11-11',
  ssn: '123-54-6789',
  address: {
    address1: '123 Corrected St',
    city: 'Des Moines',
    stateProvinceRegion: 'IA',
    country: 'US'
    postalCode: '50309'
  }
};

appToken
  .post(beneficialOwnerUrl, requestBody)
  .then(res => res.body.id); // => '07d59716-ef22-4fe6-98e8-f3190233dfb8'

Check the beneficial owner's status again. The beneficial owner will either be in the verified or document state of verification.

Handling document status

If a beneficial owner is not verified, the only other state the beneficial owner can be in is document. If the beneficial owner has a status of document, they will need to upload additional pieces of information in order to verify their identity. Use the create a document endpoint when uploading a colored scan of the identifying document. The document(s) will then be reviewed by Dwolla; this review may take anywhere from a few seconds up to 1-2 business days if manual verification is required to approve or reject.

Determining verification documents needed

US persons

A color scanned photo of the Beneficial Owner’s identifying document can be specified as documentType: license (state issued driver's license), or idCard (U.S. government-issued photo id card). Examples include:

• Non-expired State Issued Driver’s License/Identification Card
• Non-expired US Passport
• Federal Employment Authorization Card
• US Visa

Non-US persons

A color scanned photo of the Beneficial Owner’s identifying document can be specified as documentType: passport. Examples include:

• Non-expired Foreign Passport Note: Foreign Passports are only accepted when the individual does not have an ITIN or SSN and the user must alternatively enter the Passport number.

Uploading a document

To upload a color photo of the document, you’ll initiate a multipart form-data POST request from your backend server to the beneficial owners documents endpoint. The file must be either a .jpg, .jpeg, or .png. Files must be no larger than 10MB in size.

You’ll also get a beneficial_owner_verification_document_uploaded event to let you know the document was successfully uploaded.

Request and Response

var beneficialOwnerUrl =
  "https://api-sandbox.dwolla.com/beneficial-owners/1DE32EC7-FF0B-4C0C-9F09-19629E6788CE";

var requestBody = new FormData();
body.append("file", fs.createReadStream("mclovin.jpg"), {
  filename: "mclovin.jpg",
  contentType: "image/jpeg",
  knownLength: fs.statSync("mclovin.jpg").size,
});
body.append("documentType", "license");

appToken
  .post(`${beneficialOwnerUrl}/documents`, requestBody)
  .then((res) => res.headers.get("location")); // => "https://api-sandbox.dwolla.com/documents/fb919e0b-ffbe-4268-b1e2-947b44328a16"

Remove and update a Beneficial Owner

If an individual beneficial owner wants to update their information, that individual beneficial owner will first need to be removed.

Request and Response

var beneficialOwnerUrl =
  "https://api-sandbox.dwolla.com/beneficial-owners/692486f8-29f6-4516-a6a5-c69fd2ce854c";

appToken.delete(beneficialOwnerUrl);

After removal of a Beneficial Owner, they can be re-added and go through the verification process again. You can also remove a beneficial owner if they no longer own 25% or more of the business.

The successful creation and verification of a beneficial owner doesn’t necessarily mean the business verified Customer is verified and ready to send or receive funds. The final step in creating a business verified Customer is to certify that all information provided is correct. Read on to view the procedures on how to certify your owners.

To learn how to certify beneficial owners to your Customer, read on to the next step.