Newsroom

September 12, 2018

FinCEN makes permanent its limited customer due diligence exemption

complianceThe Financial Crimes Enforcement Network (FinCEN) recently made permanent its limited exemption to covered financial institutions from obligations under its customer due diligence (CDD) rule. The now-permanent exemption, detailed in today's NAFCU Compliance Blog post, pertains to the rule's beneficial ownership requirements for certain products that automatically rollover and renew.

More specifically, NAFCU Senior Regulatory Compliance Counsel Stephanie Lyon writes in today's blog post that this relief only applies to "rollover, renewal, modification or extension of these accounts and not to initial account opening. This means if any of these account types were opened before May 11, 2018, credit unions will not have to collect beneficial ownership information during subsequent rollovers, renewals or certain modifications."

In the blog post, Lyon explains each type of exempted account, adding that at any time, "FinCEN reserves the right to revoke this limited relief."

The CDD rule requires credit unions to identify and verify the beneficial owner(s) of legal entity accounts, subject to certain exceptions. Previously, a credit union was only required to know the identity of each of its legal entity customers but not necessarily its beneficial, natural person owners.

Beneficial owners include each natural person who directly or indirectly has a 25 percent or more equity interest in the legal entity customer, as well as individuals that have "significant responsibility to control, manage or direct a legal entity customer," such as a CEO, COO or CFO.

NAFCU has a host of resources available, including a webinar and past blog posts (here and here), to help credit unions comply with the rule. These past blogs are about the prior exemptions that were set to expire so they won’t be very helpful anymore with the permanent exemption trumping the prior exemptions. Suggest replacing with these blogs:

In April, NAFCU met with FinCEN to share the credit union perspective on regulations under the Bank Secrecy Act (BSA) and impending CDD rule in an effort to improve the industry's regulatory environment. A recent NAFCU BSA Blast e-newsletter also provides detailed explanations on some of the questions NAFCU has received related to the CDD rule.

FinCEN has an updated FAQ document to help financial institutions better understand the scope of its CDD final rule.