The Financial Crimes Enforcement Network issued an order today exempting covered financial institutions from the requirement to identify and verify the beneficial owners of a legal entity customer each time the customer opens a new account.
Under the revised Customer Due Diligence requirements, financial institutions are required to identify the beneficial owners only under the following circumstances:
- when a legal entity customer first opens an account with the institution;
- when the institution has knowledge of facts that reasonably call into question the reliability of previously obtained beneficial ownership information; and
- as otherwise required based on the institution’s risk-based procedures for ongoing customer due diligence.
The order “supports a more efficient, risk-based approach to customer due diligence and reduces unnecessary regulatory burden without weakening the foundational requirements that protect the U.S. financial system,” FinCEN Director Andrea Gacki said in a statement.
FinCEN also announced it anticipates making further changes to the CDD rule by rulemaking. It added that financial institutions still must comply with all other applicable anti-money laundering/countering the financing of terrorism requirements under the Bank Secrecy Act, including the obligation to conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.
American Bankers Association President and CEO Rob Nichols said the order will significantly reduce unnecessary compliance burden for U.S. banks and the customers they serve while maintaining strong protections against illicit finance.
“As we indicated in a 2024 letter to FinCEN, U.S. banks open between 140 and 160 million new accounts every year,” Nichols said. “By shifting CDD obligations to a customer’s initial onboarding — rather than requiring it every time a new account is opened — and updating it as needed based on risk, FinCEN has taken an important step toward a more efficient, risk-focused regulatory approach that allows banks to devote resources to detecting and preventing illicit financial activity rather than duplicative compliance exercises. ABA has long advocated for these changes, and we appreciate FinCEN’s indication that it plans to incorporate them into an updated version of the 2016 CDD rule.”
