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From Banking and Finance Law Daily, May 11, 2018

Customer due diligence requirements take effect today

By Andrew A. Turner, J.D.

Customer due diligence requirements for banks, mutual funds brokers, or dealers in securities, futures commission merchants, and introducing brokers in commodities become effective today. Under the new rules, the Financial Crimes Enforcement Network reminds financial institutions that covered financial institutions must identify and verify the identity of beneficial owners when those companies open accounts.

Covered financial institutions must establish and maintain written policies and procedures that are reasonably designed to:

  • identify and verify the identity of customers;
  • identify and verify the identity of the beneficial owners of companies opening accounts;
  • understand the nature and purpose of customer relationships to develop customer risk profiles; and
  • conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

The new rules amended Bank Secrecy Act regulations (see Banking and Finance Law Daily, May 6, 2016). Technical corrections were then made to the requirements (see Banking and Finance Law Daily, Sept. 27, 2017). FinCEN has also issued Frequently Asked Questions to assist financial institutions in understanding the scope of the customer due diligence requirements for financial institutions (see Banking and Finance Law Daily, April 4, 2018).

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