You may or may not remember that back in February 2012, FinCEN started soliciting comments regarding how banks adhered to the Customer Due Diligence (CDD) requirements within their Bank Secrecy Act (BSA) Program. Well, they have finally issued a Notice of Proposed Rulemaking (NPRM) to amend existing BSA regulations. FinCEN has determined that more explicit rules for banks with respect to CDD are necessary to clarify and strengthen CDD within the BSA administration.
For FinCEN, the key elements of CDD include:
1. Identifying and verifying the identity of customers;
2. Identifying and verifying the identity of beneficial owners of legal entity customers (i.e., the natural persons who own or control legal entities);
3. Understanding the nature and purpose of customer relationships; and,
4. Conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions. Collectively, these elements comprise the minimum standard of CDD, which FinCEN believes is fundamental to an effective AML program.
Accordingly, this NPRM proposes to amend FinCEN’s existing rules so that each of these pillars is explicitly referenced in a corresponding requirement within FinCEN’s program rules. The first element, identifying and verifying the identity of customers, is already included in the existing regulatory requirement to have a Customer Identification Program (CIP). Given this fact, FinCEN is addressing the need to have explicit requirements with respect to the three remaining elements via two rule changes:
1. FinCEN is addressing the need to collect beneficial owner information on the natural persons behind legal entities by proposing a new separate requirement to identify and verify the beneficial owners of legal entity customers, subject to certain exemptions; and,
2. FinCEN is proposing to add explicit CDD requirements with respect to understanding the nature and purpose of customer relationships and conducting ongoing monitoring as components in each covered financial institution’s core Anti-Money Laundering (AML) program requirements.
We’ll give the proposal a light read and when the final rule is released, we’ll research it thoroughly and give you a full understanding via our newsletter and seminars.
David’s banking career began as a field examiner for the FDIC in 1990. He later became a Compliance Officer and Loan Officer for a small bank. In 1993, he established Banker’s Compliance Consulting. Along with his amazingly talented Team, he has written numerous compliance articles for prestigious banking publications and has developed compliance seminars that Banker’s Compliance Consulting produces.
He is an expert in compliance regulations. He is also a motivational speaker and innovative educator. His quick wit and sense of humor transforms the usually tiring topic of compliance into an enjoyable educational experience. David is on the faculty of the American Bankers Association National Compliance Schools and has served on the faculty of the Center for Financial Training for many years. He also is a frequent speaker at the ABA’s Regulatory Compliance Conference. He is also a trainer for hundreds of webinars, is a Certified Regulatory Compliance Manager (CRCM) and has been a BankersOnline Guru for many years. The American Bankers Association honored David with their Distinguished Service Award in 2016.
David and his wife Karen have three adult children, four grandchildren (none of whom live at home!) and two cats (of which Dave is allergic … the cats, not the children!). They recently moved to an acreage outside of Lincoln, Nebraska where he gets to play with his tractor. When possible David can be found fishing, making sawdust in his shop, or playing the guitar and piano. He also enjoys leading worship at his church.