The Financial Crimes Enforcement Network (FinCEN) published its long-awaited customer due diligence (CDD) proposal in August.
The proposal would amend existing Bank Secrecy Act (BSA) regulations to “clarify and strengthen” CDD obligations of financial institutions.
It also would add a new requirement that institutions know and verify the identities of the “beneficial owners” (natural persons) who own, control, and profit from the companies they service.
The proposed CDD rule would include four core elements:
1. Identifying and verifying the identity of members or customers (satisfied by a credit union’s existing Customer Identification Program);
2. Identifying and verifying the beneficial owners of companies;
3. Understanding the nature and purpose of member or customer relationships; and
4. Conducting ongoing monitoring to maintain and update member/customer information and to identify and report suspicious transactions.
The proposed requirement to identify and verify the identity of beneficial owners would require financial institutions to collect beneficial ownership information directly from the individual opening the account on behalf of the “legal entity customer” using a standardized certification form.
The proposed requirement would focus on verifying the identity of the beneficial owners, but would not require the verification of their status as beneficial owners.
Financial institutions would have to identify and verify any individual who owns 25% or more of a legal entity, and an individual who controls the legal entity.
Recognizing that financial institutions will need to modify existing account opening processes to incorporate the beneficial ownership requirement, FinCEN proposed an effective date of one year from the date the final rule is issued.
Comments are due on or before Oct. 3, 2014. File your comments at regulations.gov [Docket Number: FINCEN-2014-0001].
CUNA also welcomes input from credit unions on this proposal, even beyond the Oct. 3 deadline, by emailing firstname.lastname@example.org.
For more information, visit fincen.gov.