CLS Blue Sky Blog

Debevoise Discusses FinCEN’s Guidance on the Customer Due Diligence Rule

On April 3, 2018, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued long-awaited frequently asked questions (“FAQs”) regarding its new customer due diligence requirements (“CDD Rule”) that become effective on May 11, 2018.1 As a reminder, on May 11, 2018, the CDD Rule will require covered financial institutions (1) to establish procedures to identify and verify the identity of the beneficial owners of legal entity customers that open new accounts unless an exception applies and (2) ensure their anti-money laundering (“AML”) compliance programs include appropriate risk-based procedures for ongoing CDD efforts, including developing customer risk profiles and periodically updating the beneficial ownership information of existing customers.

Covered financial institutions and industry associations have sought clarification and guidance from FinCEN on a range of topics, several of which have been addressed in the FAQs. We highlight a few of the most pertinent points made:

Administrative and Internal Accounts 

Claims for Exclusions from the Definition of Legal Entity Customer

Pooled Investment Vehicles

Foreign Publicly Traded Companies

Sovereign Wealth Funds

Existing Customers as Beneficial Owners of Legal Entities Seeking to Open New Accounts

Renewals of Existing Accounts

Refreshing Existing Beneficial Ownership Information

Record Retention

Aggregation for Currency Transaction Reporting

Requirements to Understand the Nature and Purpose of a Customer Relationship

This post comes to us from Debevoise & Plimpton LLP. It is based on the firm’s client update, “FinCEN Issues Long-Awaited Guidance on the Customer Due Diligence Rule,” dated April 5, 2018, and available here.

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