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The government of Delaware has recently adopted enhanced business screening procedure

Feb 26, 2019

Secretary of State has recently announced new rules that take effect on January 1 and will require that new companies incorporated in Delaware should undergo a screening process and examined in relation to the list of persons that were banned from doing business in the USA.

The new KYC ("Know your customer") procedures were developed to ensure that a person applying registration with Delaware’s business entity registry has a good reputation and that this person does not have ill intentions. Secretary of State Jeffrey Bullock stated:

“Delaware’s reputation as the corporate capital of the world should not be undermined by those who would use our state as a place to create their unscrupulous business entities. Combined with the diligent efforts of our business services community, these new regulations will help cut off their access to a legal home in Delaware.”

In conformity with the new regulations, a Delaware registered agent will be required to examine the identity of any potential customer seeking to form a Delaware entity. Afterward, the agent is obliged to inspect that identity information in comparison with registers of persons, foreign nationals, groups and entities that have been sanctioned by federal authorities or are in any other way forbidden to do business in the USA. The OFAC (Office of Foreign Assets Control), a division of the U.S. Treasury, is responsible for maintaining these lists.

Moreover, Delaware registered agents, in compliance with the new regulations, will have to maintain a quarterly review of their registers of existing clients, associated contacts and legal entities in accordance with the OFAC registers. The above-mentioned registry examination also needs to be conducted at any time the client’s information is transferred from another agent, and every time an agent obtains new contact information from its customer.

There are entities that are not represented by a Delaware registered agent. The Division of Corporations will conduct the KYC checks for such entities.

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