April 5, 2018
Authored by: Barry Hester
The Financial Crimes Enforcement Network (FinCEN) published long-awaited additional Frequently Asked Questions on April 3, 2018 (the “Guidance”) relating to its Customer Due Diligence (CDD) Rule, which FinCEN promulgated pursuant to the Bank Secrecy Act (the “CDD Rule”). This comes at a time when most covered institutions are in the final stages of implementing plans to comply with the CDD Rule by its May 11, 2018 compliance applicability date. FinCEN previously published technical amendments to the Rule on September 29, 2017 and an initial set of FAQs on July 19, 2016. While such Guidance does not have the weight of authority of statute or regulation, it has traditionally helped to form the basis for examination and enforcement expectations. Here we will focus on themes in the new Guidance relating to application of the rule to existing customers.
As a reminder, the CDD Rule was originally published on May 11, 2016 after years of public hearings and comment periods. The rule sets forth CDD as a “fifth pillar” of a BSA/AML compliance program in addition to those established by the Bank Secrecy Act itself: system of internal controls, the appointment of a responsible officer, training, and independent testing. CDD entails upfront due diligence and ongoing monitoring, and this rule establishes the collection of Beneficial Ownership information as a required element of CDD for legal entity customers. In releasing the CDD Rule, FinCEN emphasized that CDD is not technically a new requirement but has always been an expected part of a BSA/AML program that results in effective suspicious activity monitoring and risk mitigation.