The U.S. Department of Treasury has issued the long awaited a Proposed Rule related to Customer Due Diligence (CDD) and Beneficial Ownership that is intended to help combat all forms of illicit financial activity, from terrorist financing and sanctions evasion. Among other highlights, it requires financial institutions to know and verify the identities of the actual people who own, control and benefit from the use of their services. According to the Wall Street Journal, the rule defines a beneficial owner as any individual who owns 25% or more of the equity interest in the legal entity, or an individual with significant responsibility to control the entity.1
The key elements of CDD include2:
- identifying and verifying the identity of customers;
- identifying and verifying the identity of beneficial owners of legal entity customers (i.e., the natural persons who own or control legal entities);
- understanding the nature and purpose of customer relationships; and
- conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions. Collectively, these elements comprise the minimum standard of CDD.
IPSA has many years of experience in Know Your Customer and Enhanced Due Diligence consulting services for financial institutions. Mr. William Goss, Senior Director-AML at IPSA contributed to the focus groups for feedback on the proposed rule. Contact IPSA for more information on our Customer Due Diligence services. You can view the full FinCEN proposed rule here (PDF).
1Proposed Rule to Force Banks to Identify Beneficial Owners, Wall Street Journal Blog, Risk and Compliance Journal, July 30, 2014.
2Customer Due Diligence Requirements for Financial Institutions, Notice of Proposed Rulemaking, Page 4. FinCEN, U.S. Department of Treasury.