FinCEN made technical changes to a final rule relating to customer due diligence standards for banks, brokers or dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities (collectively, "covered institutions").
The rule, titled "Customer Due Diligence Requirements for Financial Institutions" (81 FR 29398), requires covered institutions to "identify and verify the identity of beneficial owners of legal entity customers" and makes changes to anti-money laundering program requirements. The technical changes apply to 31 CFR Parts 1010 and 1024. The changes insert language that was inadvertently omitted from the final rule. Notably, the corrections reinsert the AML training requirement for mutual funds, which was left out of the final rule's text in error.
Institutions must comply with the final rule by May 11, 2018.
Commentary / Joseph V. Moreno
While these are only technical corrections to the upcoming Customer Due Diligence (CDD) requirements, they are a good reminder that the clock is ticking toward the go-live date of May 11, 2018. On that date, banks and other covered financial institutions will need to start identifying the beneficial owners (applying either a 25% ownership standard or an effective control prong) behind legal entity customers that open new accounts. Financial institutions should be planning well in advance how they will comply with these new rules, which are part of a growing trend among U.S. and foreign regulators to make it harder to hide behind legal entities to hide or launder the proceeds of illegal activities or evade paying taxes.
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