The Financial Industry Regulatory Authority has amended Rule 3310, its Anti-Money Laundering Compliance Program rule, to reflect the Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions.
According to FINRA’s Regulatory Notice 18-19, released Thursday, broker-dealers should ensure that their AML programs are updated and comply with the CDD Rule by May 11, 2018.
Treasury’s FinCEN, which is responsible for administering the Bank Secrecy Act and its implementing regulations, issued the CDD Rule on May 11, 2016, to “clarify and strengthen customer due diligence for covered financial institutions, including broker-dealers.”
FinCEN identifies four components of customer due diligence: (1) customer identification and verification; (2) beneficial ownership identification and verification; (3) understanding the nature and purpose of customer relationships; and (4) ongoing monitoring for reporting suspicious transactions and, on a risk basis, maintaining and updating customer information.
As FINRA states, the CDD Rule focuses particularly on the second component by adding a new requirement “that covered financial institutions identify and verify the identity of the beneficial owners of all legal entity customers at the time a new account is opened, subject to certain exclusions and exemptions.”