FinCEN Eases Beneficial Ownership Reporting Requirements for Financial Institutions

The Financial Crimes Enforcement Network (“FinCEN”) has issued an order streamlining customer due diligence (“CDD”) requirements for covered financial institutions under FinCEN’s CDD Rule. The order allows covered financial institutions to limit the identification and verification of beneficial owners so that such review does not need to occur each time a legal entity customer[1] opens an account.

Under the order, FIN-2026-R001, covered financial institutions are required to identify and verify the beneficial owners only under the following circumstances:

• When a legal entity customer first opens an account with a covered financial institution;
• Any time thereafter when the covered financial institution has knowledge of facts that would reasonably call into question the reliability of beneficial ownership information previously obtained about the legal entity customer; and
• As needed based on a covered financial institution’s risk-based procedures for conducting ongoing customer due diligence.

FinCEN is in the process of updating the CDD Rule FAQs to reflect the exceptive relief granted in the order. In the meantime, covered financial institutions should refer to the order for the most current information regarding the requirement to identify and verify beneficial owners at each account opening.

Note that covered financial institutions must continue to comply with all other applicable anti-money laundering/countering the financing of terrorism (“AML/CFT”) requirements under the Bank Secrecy Act (“BSA”) and its implementing regulations.

Please note this is a general overview of developments in the law and does not constitute legal advice. Nothing herein creates an attorney-client relationship between the sender and the recipient. If you have any questions about the order or FinCEN’s 2016 CDD Rule, please feel free to contact Joseph D. Simon at (516) 357-3710 or via email at jsimon@cullenllp.com, Elizabeth A. Murphy at (516) 296-9154, or via email at emurphy@cullenllp.com, David Curatolo at (516) 357-3773 or via email at dcuratolo@cullenllp.com, or Gabriela Morales at (516) 357-3850 or via email at gmorales@cullenllp.com.

Footnote

[1] A “legal entity customer” is a “corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction that opens an account.” 31 C.F.R. § 1010.230(e)(1).