Compliance Resources

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Financial Crimes Enforcement Network (FinCEN)

Customer Due Diligence Requirements – Effective January 1, 2018

In May of 2016, the Financial Crimes Enforcement Network (FinCEN) issued final rules under the Bank Secrecy Act (BSA). These rules were created to combat fraud and clarify and strengthen CDD (Customer Due Diligence) Requirements.

What you need to know

The US Department of Treasury, through the Financial Crimes Enforcement Network (FinCEN), proposed stronger Customer Due Diligence requirements for Financial Institutions. They, in addition to the intergovernmental organization Financial Action Task Force (FATP), work to combat money laundering and international terrorist financing.


The new rule is described as a “two-prong” approach, which refers to ownership and control. Both will have to be considered for identification:

1. OWNERSHIP: Any natural persons with a 25% or more ownership of the legal entity.
  • If there is no beneficial owner with 25% or more, then there will be no owners listed for the ownership prong.
  • If a trust owns 25% or more of the legal entity, use a trustee as the beneficial owner.
2. CONTROL: At least one natural person within the management structure who has significant responsibility to control, manage or direct the legal entity. Examples include such common, well understood senior job titles as President, Chief Executive Officer, and others.

Both 1 and 2 (from above) will need to submit: Name, Address, Date of Birth, and Social Security Number.

Your financial institution may also ask for additional identifying documents.

Effective Date

Financial institutions have already began complying with this rule as of January 1, 2018 and will not accept applications without one of the above methods of verification. Full compliance with the final rule will be required by May 11, 2018.

Strong rules were created for customer due diligence

Customer Due Diligence exists to ensure that Financial Institutions are:

    1. Verifying who their beneficial owners are, to better
    2. Identify any suspicious or fraudulent activity.

This allows the bank to be able to predict, with relative certainty, the types of transactions that its customers will take part in, allowing them to determine potentially suspicious transactions more easily and efficiently.

To learn more about Customer Due Diligence and delve deeper into Financial Crimes Enforcement Network’s new regulatory requirements, download the following pdf: