FinCEN's New Customer Due Diligence Requirement

Effective May 11, 2018, the U.S. Treasury's Financial Crimes Enforcement Network ("FinCEN") implemented a new customer due diligence requirement. The requirement applies to certain financial institutions, including banks, broker-dealers and mutual funds, at the time each new account is opened. The rule enhances the information that financial institutions must collect regarding the identity of individuals (i.e., beneficial owners) who own or control their legal entity customers, which includes any corporation, limited liability company or partnership. Information must be collected for each owner of 25% or more of the equity interests of a legal entity customer. As a result of the rule's recent implementation, financial institutions are devoting significant time and resources to modifying their internal systems and to implementing appropriate procedures to ensure compliance with the rule. Certain entities are excluded from the definition of "legal entity customer." For