18 May 2018
The Financial Crimes Enforcement Network (FinCEN) reminded financial institutions that the Customer Due Diligence Requirements for Financial Institutions (CDD Rule) became effective on 11 May 2018.
What is the CDD Rule?
The Customer Due Diligence Requirements for Financial Institutions (CDD Rule) intends to improve the financial transparency and prevent criminals and terrorists from laundering money generated from illicit activities.
Importantly, the rule adds a new requirement for these covered financial institutions to identify and verify the identity the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.
What are the changes?
The rule has 4 key requirements in terms of financial institutions needing to establish and maintain written policies that are reasonable in design to:
1) identify and verify the identity of customers;
2) identify and verify the identity of the beneficial owners of companies opening accounts;
3) understand the nature and purpose of customer relationships to develop customer risk profiles; and
4) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.
Who does the CDD impact?
The rule impacts US Banks, mutual funds brokers or dealers in securities, future commission merchants and introducing brokers in commodities.
Frequently Asked Questions
FinCEN published an additional set of Frequently Asked Questions article to support financial institutions in understanding the changes.
You can view the Frequently Asked Questions using the link here.
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