Final ‘customer due diligence’ rule takes effect

(UPDATED) May 11, 2016 -- FinCEN’s final rule on “customer due diligence” under BSA – announced last week by the Treasury Department – was published today and is now in effect..

The final CDD rule, Treasury stated in a release May 5, adds the requirement that financial institutions – including credit unions, banks, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities – “collect and verify the personal information of the real people (also known as beneficial owners) who own, control, and profit from companies when those companies open accounts.”

Treasury stated that the final rule also amends existing Bank Secrecy Act (BSA) regulations to clarify and strengthen obligations of these entities.

The rule incorporates a new requirement for covered financial institutions to collect beneficial ownership information, with three core requirements:

  • identifying and verifying the identity of the beneficial owners of companies opening accounts;
  • understanding the nature and purpose of customer relationships to develop customer risk profiles; and
  • conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

“With respect to the new requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25% or more of a legal entity, and an individual who controls the legal entity,” Treasury stated. The agency added that, based on comments on the proposal published in August 2014, the final rule extends the proposed implementation period from one to two years, expands the list of exemptions, and makes use of a standardized beneficial ownership form optional as long as a financial institution collects the required information.


NASCUS summary of final rule

Final Rule from the May 11 Federal Register

Treasury May 5 release on final rule (and other topics)

NASCUS Aug. ’14 summary of proposed rule