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ARTICLE · 11 AUGUST 2016

Locke Lord QuickStudy: Final FinCEN Customer Due Diligence Rule Released – Concerns Abound As Covered Financial Institutions Grapple With Implementation

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As part of their new obligations, Covered Financial Institutions must identify and verify the Beneficial Owners of their Legal Entity Customers.

United StatesConsumer Protection
Douglas P. Faucette
Douglas P. Faucette

The United States Department of Treasury's Financial Crimes Enforcement Network's (FinCEN) new customer due diligence rule released in May has caused concern throughout the industry. In what it says is an effort to prevent individuals who conceal ill-gotten gains from entering the financial system, FinCEN's rule requires Covered Financial Institutions to know the individuals who own or control their Legal Entity Customers. While the rule may have been well-intentioned, it has the potential to put undue burden on many entities that will undoubtedly have a hard time identifying these so-called Beneficial Owners.

At its core, FinCEN's new customer due diligence rule, which must be implemented by May 11, 2018, requires Covered Financial Institutions to do four things relative to their customers. They are required to (1) identify and verify their customers, (2) identify and verify the Beneficial Owners of their Legal Entity Customers, with certain exceptions, (3)

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