Update: Customer Due Diligence Rule Now in Effect

Despite some last minute pushback, the Financial Crimes Enforcment Network’s (FinCEN) long-anticipated Customer Due Diligence Requirements for Financial Institutions (CDD Rule) became fully effective on May 11th. The CDD Rule, which was proposed initially in August 2014, amends Bank Secrecy Act regulations to clarify and strengthen customer due diligence obligations for financial institutions. FINRA stated that the purpose behind the CDD Rule is “to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains.”

The CDD Rule requires covered financial institutions to develop procedures to identify and verify a customer’s beneficial owners when an account is opened, and to establish risk-based procedures for conducting ongoing customer due diligence. Bates Group has been following the developments of the CDD Rule (see, e.g. here, here and here) including the most recent publication of FinCEN FAQs and the application of FINRA Rule 3310 Anti-Money Laundering (AML) Compliance. The FINRA rule requires members to have an AML written policy in order to ensure understanding of the nature and purpose of customer relationships and for developing a customer risk profile. It also requires firms to conduct ongoing monitoring to identify and report suspicious transactions and to maintain and update customer information.

Regulator emphasis on AML enforcement continues to be a high priority. Firms will need to ensure that their AML programs are reviewed and revised as necessary to ensure compliance with the CDD Rule. Learn more about Bates' AML Compliance Services and AML Investigations. For more information, please contact us by phone at (503) 670-7772 or email Robert Lavigne, Bates Compliance Solutions Managing Director at rlavigne@batesgroup.com to set up an appointment today.