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Financial Planning > Behavioral Finance

Treasury’s Customer Due Diligence Rule Is Now Effective

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The Treasury Department’s Financial Crimes Enforcement Network reminded financial institutions on Friday that its final customer due diligence rule is now effective.

The Financial Industry Regulatory Authority recently amended Rule 3310, its Anti-Money Laundering Compliance Program rule, to reflect FinCEN’s adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions.

The CDD Rule has four core requirements, requiring “covered financial institutions” to establish and maintain written policies and procedures that are reasonably designed to:

  • identify and verify the identity of customers;
  • identify and verify the identity of the beneficial owners of companies opening accounts;
  • understand the nature and purpose of customer relationships to develop customer risk profiles; and
  • conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

FinCEN issued the CDD Rule, which amends Bank Secrecy Act regulations, to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains.

The rule’s controversial new requirement to obtain beneficial ownership information means financial institutions will have to identify and verify the identity of any individual who owns 25% or more of a legal entity, and an individual who controls the legal entity.

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