Bank Regulation

CDD Rule Becomes Official

Due diligence

The deadline cometh. Today (May 11) is the day the final rule, served up by the Financial Crimes Enforcement Network (FinCEN), takes effect.

The CDD Rule  titled “Customer Due Diligence Requirements for Financial Institutions” amends the Bank Secrecy Act regulations. And, in a reminder to FIs, FinCEN said the goal of CDD is aimed at boosting transparency in financial reporting, preventing “criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains.”

FinCEN said the CDD Rule has four key requirements: There must be policies and procedures in place to identity and verify customers, identity and verify the beneficial owners of companies that open accounts, understand the “nature and purpose” of relationships in a way that helps develop customer risk profiles, and monitor and report suspicious activity.

As has been widely reported, the beneficial owner someone who owns 25 percent or more of a legal entity, and/or an individual who controls the legal entity  threshold is 25 percent.

The CDD Rule, according to FinCEN, “clarifies and strengthens” customer due diligence requirements across a continuum of financial industry stakeholders, from U.S. banks to mutual fund brokers to commodity brokers.