CDD Final Rule | FinCEN.gov (2024)

FAQs

What is the final rule of FinCEN CDD? ›

1 The Final Rule requires these covered financial institutions to identify and verify the natural persons behind legal entity customers (beneficial owners), subject to certain exemptions. The new CDD requirements present significant compliance challenges for covered financial institutions.

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.

The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) has issued a final rule (the Access Rule) regarding access to and use of beneficial ownership information (BOI) maintained by FinCEN. The Access Rule details the circ*mstances under which FinCEN can disclose BOI to authorized recipients.

The CDD process helps banks understand and manage their entire client risk base, and prevent financial crimes like money laundering and fraud. CDD is a process used to verify a person's identity - usually through documentation or data checks - and to assess any risk associated with them.

Under the final rule, the Board, in its discretion, may issue a preliminary determination of control if it appears that a company has the power to exercise a controlling influence over a bank or other company.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company's creation or registration to file its initial BOI report.

New Rule Requires Small Businesses and LLCs to Report Ownership Information. Share: As of Jan. 1, 2024, many businesses will be required to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) to identify those who directly or indirectly own or control the company.

Requires reporting companies to disclose information to the United States Treasury about their owners and persons who exercise control. Establishes tight reporting deadlines for entities formed after January 1, 2024.

To this end, the final rule aims to ensure that: (1) only authorized recipients have access to BOI; (2) authorized recipients use that BOI only for purposes permitted by the CTA; and (3) authorized recipients re-disclose BOI only in ways that balance protection of the security and confidentiality of the BOI with ...

The CDD Rule requires that all information used to identify and verify a beneficial owner of an account must be retained for the required period, which is five years from the date of account closing for identifying information and five years from the date the record was made for verifying information.

What are the three types of CDD? ›

There are three main types of CDD measures that organisations may use: standard CDD, enhanced CDD, and ongoing CDD. Standard Customer or Client Due Diligence refers to the basic level of information organisations must collect and verify about their customers.

These are the 23 exempt entities: SEC-reporting issuers, domestic governmental authorities, banks, domestic credit unions, depository institution holding companies, FinCEN-registered money transmitting businesses, SEC-registered broker-dealers, securities exchange or clearing agencies, other Securities Exchange Act of ...

Under section 31 of the AML/CFT Act ongoing CDD is required to ensure the ongoing business relationship is consistent with the reporting entity's knowledge about the customer's business and risk profile and to identify grounds for reporting any suspicious transaction.

In particular, the CDD Rule requires covered entities to establish and maintain written policies and procedures to verify the identity of customers and beneficial owners of companies, update customer information, develop risk profiles, and monitor suspicious transactions.

The CIP Rule requires a bank to implement a program that includes risk-based verification procedures that enable the bank to form a reasonable belief that it knows the true identity of its customers.

Ongoing customer due diligence (OCDD) processes enable you to identify, mitigate and manage your money laundering and terrorism financing (ML/TF) risks.