April 04, 2018

FinCEN updates FAQs on customer due diligence

The Financial Crimes Enforcement Network (FinCEN) on Tuesday issued an updated FAQ document to help financial institutions better understand the scope of the agency's customer due diligence (CDD) final rule under the Bank Secrecy Act (BSA). The rule goes into effect May 11.

The updated FAQ document addresses questions related to legal entity customers with complex ownership structures, required addresses for verification purposes, accounts opened for internal recordkeeping or operational purposes, among others. The FAQ includes 37 questions addressed in detail.

FinCEN had previously issued FAQs that addressed questions like which institutions are covered, the definition of a "beneficial owner" and exemptions under the rule.

The CDD rule, which was published in May 2016 and amended in September 2017, 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 compliance resources on the CDD rule available here.