Delaware Law Update - Key Considerations in the New “Know Your Customer” Regulations

02/22/19

Customers working with businesses that are formed, registered, or qualified in Delaware must now be verified and screened against lists of individuals and groups who are prohibited from doing business in the United States.

The Delaware state legislature recently enacted these “Know Your Customer” regulations to bring more uniformity to customer verification procedures. They impact anyone seeking to form a new Delaware business and anyone working with an existing Delaware business (See 22 DE Reg. 519).

Key Highlights

  • Delaware-registered agents are now required to (1) verify the identity of potential customers seeking to form a new Delaware business and (2) compare new customer information against the lists maintained by the Office of Foreign Assets Control (OFAC).

  • Delaware-registered agents must perform ongoing quarterly reviews of their complete customer registry against OFAC lists. Reviews are mandated any time client information is transferred from another registered agent and whenever an agent receives new contact information from a client.

  • Delaware-registered agents are only required to obtain contact information for the entity—however, if an agent collects or is provided with additional information (e.g., names of officers, directors, or members) then the registered agent must check this information against OFAC lists.

  • The Division of Corporations has more freedom to refuse to process filings from a registered agent that repeatedly fails to comply with the regulations.