Compliance Blog

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

FinCEN’s Customer Due Diligence Rule May Be Finalized Later This Summer. According to the Spring 2015 Semiannual Unified Regulatory Agenda (Agenda), FinCEN may be releasing a final Customer Due Diligence (CDD) rule later this summer. Dates listed in the Agenda are tentative, and may change, but final action on this rule is currently noted for August 2015.  This CDD rule has been in the works for some time, and if finalized as proposed, would amend existing rules to include explicit CDD requirements, including a requirement to identify beneficial owners of legal entity customers, subject to certain exemptions. For additional details on the proposed rule, check out our previous blog post.

Another item of note from FinCEN on the Agenda that caught my eye –

There is a potential proposal in the works regarding reporting requirements for cross-border electronic transmittals of funds. Back in 2010, there was a proposal to require certain financial institutions to report transmittal orders associated with certain cross-border electronic transmittals of funds to FinCEN. That proposal generated a lot of feedback and was not finalized, however it looks like FinCEN may be issuing another notice of proposed rulemaking in August.

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National Money Laundering Risk Assessment and National Terrorist Financing Risk Assessment.  Last week, Treasury released the National Money Laundering Risk Assessment and National Terrorist Financing Risk Assessment.  Intended to help the public and private sectors more effectively detect and combat illicit finance, these assessments provide a review of money laundering and terrorist financing methods used in the U.S., the risks these activities pose to the U.S. financial system and national security, and an update on current efforts to combat illicit finance.

Here’s a snippet from page 3 of the National Money Laundering Risk Assessment, discussing vulnerabilities:

“The size and sophistication of the U.S. financial system accommodates the financial needs of individuals and industries globally. The breadth of products and services offered by U.S. financial institutions, and the range of customers served and technology deployed, creates a complex, dynamic environment in which legitimate and illegitimate actors are continuously seeking opportunities.

This assessment finds that the underlying money laundering vulnerabilities remain largely the same as those identified in the 2005 United States Money Laundering Threat Assessment. The money laundering methods identified in this assessment exploit one or more of the following vulnerabilities:

• Use of cash and monetary instruments in amounts under regulatory recordkeeping and reporting  thresholds;

• Opening bank and brokerage accounts using nominees to disguise the identity of the individuals who control the accounts;

• Creating legal entities without accurate information about the identity of the beneficial owner;

• Misuse of products and services resulting from deficient compliance with anti-money laundering obligations; and

• Merchants and financial institutions wittingly facilitating illicit activity.”

Both reports are well worth a read for anyone with Bank Secrecy Act program management responsibilities.