FinCEN Customer Due Diligence 2014 |
•  The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) recently issued a proposed rule to amend existing Bank Secrecy Act (BSA) regulations on customer (member) due diligence (CDD), following a related advance notice of proposed rulemaking from 2012.
•  Specifically, the proposed rule would clarify and strengthen CDD obligations of financial institutions, including credit unions. The key elements for CDD include: 1) Identifying and verifying the identity of customers; 2) identifying and verifying the identity of “beneficial owners” of legal entity customers (i.e., natural persons who own or control legal entities); 3) understanding the nature and purpose of customer relationships; and 4) conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.
•  There would be a new explicit regulatory requirement for a financial institution to establish and maintain written CDD procedures that are reasonably designed to identify and verify “beneficial owners” of “legal entity customers” (e.g., corporation, limited liability company, partnership or other similar business entity), subject to certain exemptions. Existing supervisory guidance would also be incorporated into the CDD obligations.
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- Identification – A financial institution would identify the “beneficial owner(s)” of each “legal entity customer,” unless they are otherwise exempt. To identify the “beneficial owner(s),” a financial institution would obtain at the time a new account is opened a certification form from Appendix A from an individual opening the account on behalf of the legal entity customer.           
- Verification - With risk-based procedures to the extent reasonable and practicable, a financial institution would verify the identity of each “beneficial owner.” This verification should be at least identical to the institution’s Customer Identification Program (CIP) procedures for verifying the identity of individuals. It is important to note that the proposed verification of the identity of a “beneficial owner” does not require verification of the status of whether an identified “beneficial owner” is in fact a “beneficial owner.”
•  Comments for the proposed rule are due to FinCEN by October 3, 2014; please submit your comments to CUNA by September 22, 2014.
•  For further details, please see the FinCEN’s proposed rule in the Federal Register.
•  If you have any questions or comments, please contact CUNA Assistant General Counsel for Regulatory Research Dennis Tsang at dtsang@cuna.com.