FinCEN Proposes Fifth BSA Pillar

On July 30, 2014, the Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (the Proposed Rule) to clarify and strengthen customer due diligence (CDD) requirements as a fifth pillar under the Bank Secrecy Act (BSA) for banks and other covered financial institutions. Under the Proposed Rule, covered financial institutions would be required for the first time to identify and collect information on the beneficial owners of their legal entity customers.

U.S. policymakers, including Treasury,¹ seeking to balance privacy² concerns with transparency and alignment with the Financial Action Task Force (FATF) recommendations,³ United States G-8 Action Plan for Transparency of Company Ownership and Control⁴ and pending rulemaking at the European Union,⁵ have proposed a risk-based approach, to be adopted by a covered financial institution's board of directors. The four elements of the CDD in the Proposed Rule align with the approach set out in the