Today — May 11th — is the go-live date for the Financial Crimes Enforcement Network (FinCEN)’s long-awaited implementation of the Customer Due Diligence Rule (CDD) or Beneficial Ownership Rule. Simply put, financial institutions must now identify and verify beneficial ownership information on legal entity customers at the time of the account opening. The rule also requires financial institutions to monitor customer transactions and, on a risk-basis, maintain and update customer information.
So, does that mean that regulators are coming to break down your doors on May 12th? Not necessarily, but being adequately prepared, both from an institutional standpoint, as well as a customer awareness standpoint, is key. Be proactive when informing current and potential customers of the rule to ensure a smoother transition.
The goods news? The CDD Rule does not require financial institutions to “look back” to obtain beneficial ownership information from existing customers unless those customers open a new account. Keep in mind, certain events can “trigger” the rule and hence, collection of Ultimate Beneficial Ownership information.
Also of note, covered financial institutions will want to ensure they have adequate technology in place to handle this change. Be sure your Know Your Customer (KYC) procedures are up-to-speed to ensure information gets updated as needed.
Beneficial Ownership Refresher
Because of the serious nature of this rule, perhaps we could all use a little refresher on the definition of a beneficial owner. Below you will find a useful chart highlighting the definition of a beneficial owner. For more information, listen to our recent podcast with Reuters Senior Financial Crimes Correspondent Brett Wolf and Jim Richards, founder of RegTech Consulting and former Wells Fargo executive in its financial crimes unit.