FinCEN Issues Final Customer Due Diligence Rule

Financial Crimes Enforcement Network today released the text of its long-awaited final customer due diligence rule, which is expected to be published in the Federal Register on May 11. While the final rule reflects many changes made as the result of patient ABA advocacy, ABA President and CEO Rob Nichols expressed concern that “the application of the rule could add to the existing challenges of maintaining certain account relationships when customer information is not easily obtainable, leading to further derisking.”

The final rule will require banks to collect information on beneficial owners when an account is opened, using the model form included with the rule or taking other steps to collect the same information, and the bank can rely on the information provided by the customer. A beneficial owner is an individual who owns more than 25 percent of the equity interests in a company or is the single individual who exercises control. The bank must use Customer Identification Program procedures to verify the identity of beneficial owners, although when documentation is used, the bank can rely on copies. The rule also includes a number of exceptions from coverage.

Although the actual rule will be effective July 11, compliance is not mandatory until May 11, 2018, reflecting ABA’s request for a sufficient transition period to allow banks to fully adapt. “As we have frequently emphasized to policymakers, law enforcement and the banking industry share a common objective of fighting the use of the payments system for criminal and terrorist purposes,” Nichols said. “The inclusion of a two-year transition period, along with manageable expectations for customer and beneficial ownership identification, alleviates some of the potential burden.

As a companion to the rule, Treasury also sent a letter to House Speaker Paul Ryan (R-Wis.) encouraging the adoption of legislation that would require companies to disclose beneficial ownership information to the states at the time the company is created.

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