FinCEN issues exceptive relief on due diligence

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an order granting exceptive relief to covered financial institutions from certain requirements under FinCEN’s Customer Due Diligence Requirements for Financial Institutions rule (the “2016 CDD Rule”). The order exempts covered financial institutions from the requirement to identify and verify the beneficial owners of a legal entity customer each time the customer opens a new account.

“This action reflects FinCEN’s commitment to modernizing the Bank Secrecy Act framework while maintaining strong safeguards against illicit finance,” said FinCEN Director Andrea Gacki. “This relief supports a more efficient, risk-based approach to customer due diligence and reduces unnecessary regulatory burden without weakening the foundational requirements that protect the U.S. financial system.”

TBA’s President and CEO Chris Furlow said, “Overly bureaucratic processes do not make us more safe or secure, it just diverts limited time and resources away dealing with legitimate threats. FinCEN’s announcement of exceptive relief is welcome news.”

Under the order, a covered financial institution is required to identify and verify the beneficial owners of a legal entity customer in only the following circumstances:

• When a legal entity customer first opens an account with the institution;

• When the institution has knowledge of facts that reasonably call into question the reliability of previously obtained beneficial ownership information; and

• As otherwise required based on the institution’s risk-based procedures for ongoing customer due diligence.