The Financial Crimes Enforcement network (FinCEN), part of the United States Department of Treasury, has issued Frequently Asked Questions to assist financial institutions in understanding the scope of the Customer Due Diligence (CDD) Requirements for Financial Institutions published in May of this year.
FinCEN is issuing the CDD Rule to amend existing BSA regulations in order to clarify and strengthen customer due diligence requirements for certain financial institutions.The CDD Rule outlines explicit customer due diligence requirements and imposes a new requirement for these financial institutions to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions. Within this construct, as stated in the preamble to the Rule, FinCEN intends that the legal entity customer identify its ultimate beneficial owner or owners and not “nominees” or “straw men.” The CDD rule covers financial institutions that are federally regulated banks and federally insured credit unions, mutual funds, brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities.
The CDD is introducing new rules that cover Anti-Money Laundering (AML) as well as Know Your Customer (KYC) for financial institutions. In May of this year IIUSA approved Best Practices: Anti-Money Laundering and Customer Information Selected Requirements.