FinCENs Customer Due Diligence Expectations: Some Clarity

On April 3, the Financial Crimes Enforcement Network issued 37 frequently asked questions and responses with the aim of providing covered financial institutions¹ with a better understanding of the scope of the agency's new customer due diligence requirements, or CDD rule, which become applicable to new accounts beginning on May 11, 2018.

In short, the much-publicized new CDD rule requires covered financial institutions to identify and verify the individual beneficial owners of most legal entity customers at the time a new account is opened. Specifically, the CDD rule requires the identification and verification of any individual who owns, directly or indirectly, at least 25 percent of the equity interests of a legal entity customer (the ownership prong), and at least one individual with significant management responsibility over such a customer, for example a CEO, managing member or president (the control prong).