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Daniel P. Stipano and Benjamin W. Hutten Authored The Review of Banking & Financial Services Article, "FinCEN's Customer Due Diligence and Beneficial Ownership Rule"

The Review of Banking & Financial Services

Daniel P. Stipano, Benjamin W. Hutten

On May 11, 2016, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published a long-awaited final rule, Customer Due Diligence Requirements for Financial Institutions (the “Final Rule”). The Final Rule, which impacts anti-money laundering (“AML”)-related obligations imposed on financial institutions under the authority of the Bank Secrecy Act (“BSA”), was the culmination of a four-year rulemaking process. The Final Rule explicitly codifies customer due diligence (“CDD”) requirements for covered financial institutions, and imposes a new requirement to obtain and verify the identity of beneficial owners of legal entity customers. The Final Rule imposes significant new compliance burdens on financial institutions.

While the Final Rule technically took effect on July 11, 2016, compliance is not mandatory until May 11, 2018 (the “Applicability Date”). As of the date of this publication, covered financial institutions are approximately half-way through the two-year period provided by FinCEN to come into compliance with the Final Rule. As financial institutions covered by the Final Rule, in particular banks, continue to prepare for implementation of the Final Rule, there are some practical steps that institutions can consider taking to avoid pitfalls in the Final Rule’s requirements.

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Originally published in The Review of Banking & Financial Services; reprinted with permission.

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