The long-awaited final rule on customer due diligence (CDD) will be published in the Federal Register next week, making it effective within 60 days of publication. However, the compliance date for the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) rule won’t be until May 11, 2018.
The rule, first proposed in August 2014, would amend existing CDD regulations under the Bank Secrecy Act (BSA). Specifically, it would clarify and strengthen CDD obligations of financial institutions, including credit unions.
While CUNA supports FinCEN’s objective of improving tracking of money laundering and terrorist financing, it is concerned that this rule will impose additional compliance costs on credit unions.
In its comment letter, filed in October 2014, CUNA said the increased costs are likely to outweigh any benefits to FinCEN.
CUNA is particularly concerned about the proposed expansion of “beneficial ownership,” which it believes could lengthen the amount of time needed to open a “legal entity” account.
Once the rule becomes effective in May 2018, credit unions will be required to identify and verify the identity of the beneficial owners of all business accounts at the time the account is opened. This can be accomplished by obtaining a standard certification form, or by other means that complies with the rule’s substantive requirements.
A recent entry in CUNA’s CompBlog summarizes what the changes could mean for credit unions.
According to FinCEN, key elements to a CDD program include:
CUNA will be reviewing the rule carefully once it is released, and will provide comprehensive compliance information soon.