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Complying with Amended Bank Secrecy Act Regulations Under the Customer Due Diligence Final Rule

The CDD Rule, which amends Bank Secrecy Act regulations, aims 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 clarifies and strengthens customer due diligence requirements for U.S. banks, mutual funds, brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities. The CDD Rule requires these covered financial institutions to identify and verify the identity of the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.

The CDD Rule has four core requirements. It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to:

–identify and verify the identity of customers
–identify and verify the identity of the beneficial owners of companies opening accounts
–understand the nature and purpose of customer relationships to develop customer risk profiles
–conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information
–With respect to the requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity, and an individual who controls the legal entity.

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