US Issues Correspondent/Private Bank Account Due Diligence Rules

Originally published in Financial Services Advisory Update, Volume 3, No. 1 February 2006

Among other provisions, the 2001 USA PATRIOT Act required the US Treasury Department to issue regulations regarding due diligence and enhanced due diligence with respect to correspondent accounts established or maintained by US financial institutions for non-US financial institutions and private banking accounts established or maintained for non-US persons. In 2002, the Treasury Department issued an interim rule requiring only certain financial institutions such as banks to comply with the due diligence provisions in the statute. On January 4, 2006, the Treasury Department published final rules on the topic. The regulations are effective February 3, 2006, but carry a delayed effective date of April 4, 2006, for new accounts and October 2, 2006, for accounts established prior to April 4. US financial institutions covered by these rules are banking organizations, broker-dealers, futures