Fincen Customer Due Diligence Rule Exemptions

Finally, the commenter asked FinCEN to clarify the meaning of the distinction between the terms « account » and « customer » in relation to the statement contained in the proposal that the fifth pillar is not limited to customers for the purposes of the CIP rules, but extends to all accounts created by the institution. This commenter asked FinCEN to clarify this, particularly with regard to the guidelines for the futures industry, stating that CIP obligations do not apply to execution brokers in waiver agreements and omnibus relationships that are concerned that the fifth pillar may otherwise replace the guidelines. We found that all account relationships, not just those that are « accounts » as defined in the EAP rules, would be subject to this requirement, solely to recognize that all accounts must necessarily be monitored in some form to meet current search and rescue requirements. [95] The NPRM proposed a new requirement for covered financial institutions to identify the natural person(s) who are the beneficial owners of customers of corporations opening new accounts, subject to certain exceptions, and to verify the identity of the identified natural person(s). As proposed, a covered financial institution would comply with this requirement when opening a new account by receiving information on a standard attestation form directly from the person opening the new account on behalf of the legal entity`s client and identifying the natural person(s) identified in accordance with existing Client Identification Program (CIP) procedures for verifying the identity of clients. who are natural persons. The NPRM has therefore sought to facilitate this proposed new requirement by using the CIP procedures required by all affected financial institutions since 2003. The NPRM also proposed to amend the anti-money laundering program requirements for all types of financial institutions covered to include appropriate risk-based procedures for conducting ongoing due diligence, including: (i) understanding the nature and purpose of client relationships in order to develop a client risk profile; and (ii) conduct ongoing monitoring to maintain and update customer information and identify and report suspicious transactions. FinCEN did not consider this part of the rule-making to be imposing new requirements, but explicitly as the activities expected of financial institutions on the basis of prudential guidelines and expectations to meet their existing obligations to detect and report suspicious activity. The CDD Rule and Rule 3310 codify existing expectations under the BSA for businesses to identify and report suspicious transactions and know and understand their customers.

This « fifth pillar » requires companies to understand the nature and purpose of the customer relationship, to carry out continuous monitoring and to identify and verify the identity of the beneficial owners of the customers of legal entities. While the Customer Due Diligence Rule has been largely completed since 2016, the date of compliance with the Customer Due Diligence Rule on May 11, 2018 and the effective date of Rule 3310 remind businesses to review their anti-money laundering programs to ensure they are compliant with these rules. Commenters also asked FinCEN to clarify the nature of the ongoing monitoring requirement. One commenter asked FinCEN to remove the clause on the retention and updating of client information, as investment firms are currently not required to continuously monitor client information. Another asked FinCEN to limit the obligation to update customer information to triggers of « negative events » discovered during monitoring. We believe that the clarifying amendments to the continuous monitoring clause for the final anti-money laundering program rules for all covered financial institutions described above in the discussion on banks address these concerns. The last rule states that ongoing monitoring is conducted to identify and report suspicious transactions and to maintain and update client information based on risk. For these purposes, customer information includes information about the beneficial owners of customers of legal entities (as defined in § 1010.230). In response to comments that our estimates of compliance costs were unrealistic in the proposed rule, we conducted telephone interviews with financial institutions that provided comments, as well as with IT providers that currently provide related AML/CFT software to financial institutions. [114] Based on the information gleaned from these interviews, we estimate the costs to financial institutions and their customers in terms of the additional time required to open new legal entity accounts under the customer due diligence rule, as well as the costs for financial institutions to train staff and revise anti-money laundering programming procedures.