Regulations - FinCEN customer due diligence proposals; would facilitate FATCA compliance  

July 31: The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) today released for publication in the Federal Register a notice of proposed rulemaking that is aimed at clarifying and strengthening the customer due diligence requirements for financial institutions—e.g., banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities.

These proposed rules [PDF 435 KB] aim to provide explicit customer due diligence requirements and would include a new regulatory requirement to identify beneficial owners of legal entity customers, subject to certain exemptions.


Reasons for proposed rules include enhanced FATCA compliance

Currently, FinCEN is authorized to impose anti-money laundering (AML) program requirements on financial institutions, as well as to require financial institutions to maintain procedures to ensure compliance with the Bank Secrecy Act (BSA) and related regulations to guard against money laundering.


FinCEN has determined that more explicit rules with respect to customer due diligence are needed. The changes are intended to enhance financial transparency and safeguard the financial system against illicit use, and are proposed as amendments to FinCEN’s existing rules with explicit references to:


  • Collect beneficial owner information on natural persons behind legal entities, with a new separate requirement to identify and verify the beneficial owners of legal entity customers, subject to certain exemptions


  • Add customer due diligence 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 program requirements

These changes would, in part, facilitate reporting and investigations in support of tax compliance, and advancing national commitments made to foreign counterparts in connection with the provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).




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