Compliance Blog

Written by JiJi Bahhur, Regulatory Compliance Counsel

The Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking (ANPR) last week with the objective of creating an express customer due diligence (CDD) rule so that there will be consistency and uniformity amongst financial institutions.  

Currently, financial institutions are required to have a BSA/AML compliance program, which includes comprehensive CDD policies, procedures, and processes for all customers.  But despite these obligations, FinCEN believes that issuing an express CDD rule, which will include an obligation to categorically obtain beneficial ownership information, may be necessary to protect the United States financial system from criminal abuse and to guard against terrorist financing, money laundering, and other financial crimes.  FinCEN believes that an effective CDD program includes the following elements:

1. Conducting initial due diligence on customers, which includes identification and verification of customer at the time of account opening;
2. Understanding the purpose and nature of the account, and the expected activity associated with the account;
3. Identifying the beneficial owner(s) of all customers, and verifying the beneficial owner(s)’ identity; and
4. Conducting ongoing monitoring of the customer relationship and conducting additional CDD as appropriate.

The ANPR discusses each one of these elements in detail.  It’d definitely be a good idea to read the ANPR in its entirety because there are several items within each element that FinCEN is seeking comment on, especially the third element.  

The ANPR is 37 pages long, but it’s an easy read and provides a good summary of what is currently expected versus what will be required if the rule is codified.  You can access the ANPR here: Press Release & ANPR.

NAFCU Members:  Please note that NAFCU’s Regulatory Affairs team will be publishing a Regulatory Alert and soliciting comments from NAFCU members.