FinCEN Issues New Rule Requiring Identification of Beneficial Owners and Risk-Based Customer Due Diligence

16 May 2016
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Key takeaways

  • On May 11, 2016, FinCEN published in the Federal Register a final rule expanding customer due diligence (“CDD”) requirements for certain “covered financial institutions,” including banks, broker-dealers, mutual funds, futures commission merchants and introducing brokers in commodities.
  • First, the final rule requires covered financial institutions to establish procedures to identify, and verify the identity of, the beneficial owners of legal entity customers that open new accounts, unless an exception applies.
  • Second, the final rule adds a “fifth pillar” to existing anti-money laundering (“AML”) program requirements that calls for risk-based procedures for conducting on-going CDD. This on-going CDD obligation will require covered financial institutions to develop customer risk profiles and to monitor and update customer information.
  • The final rule becomes effective on May 11, 2018.