- within Government and Public Sector topic(s)
- in European Union
- in European Union
- in European Union
- with readers working within the Property, Law Firm and Construction & Engineering industries
- within Insolvency/Bankruptcy/Re-Structuring topic(s)
On February 13, 2025, FinCEN issued an order granting exceptive relief for covered financial institutions from certain Customer Due Diligence ("CDD") requirements for new account openings. The exceptive relief is part of deregulation efforts, consistent with Executive Order 14192, "Unleashing Prosperity Through Deregulation," and Section 6403(d) of the Corporate Transparency Act (the "CTA").
What's Covered by the Exceptive Relief?
The CDD rule requires covered financial institutions to identify and verify the beneficial owners of legal entity customers at account opening. Under the exceptive relief, FinCEN will now require covered financial institutions to obtain and verify the beneficial owners of legal entity customers:
- When a legal entity customer first opens an account;
- Any time the covered financial institution has knowledge that would reasonably call into question the reliability of beneficial ownership information that was previously provided; and
- As necessary for on-going CDD compliance.
Covered financial institutions must still adhere to other Bank Secrecy Act/Anti-Money Laundering requirements, including all other CDD requirements.
Nothing precludes a covered financial institution from continuing the practice of collecting or verifying beneficial ownership at each new account opening or following the institution's own risk-based policies and procedures. FinCEN highlights that it is "within the discretion of the covered financial institution" whether to avail themselves of this exceptive relief.
FinCEN's Previous Guidance and Exceptive Relief Efforts
FinCEN noted that the exceptive relief was due, in part, to the industry's reactions to previous relief efforts. Ultimately leading FinCEN to provide this broader relief.
FinCEN has previously issued guidance, allowing covered financial institutions to utilize previous beneficial ownership forms or information obtained from legal entity customers at new account openings, provided that the customer certified or confirmed that the information was still accurate and the financial institution had no knowledge calling into question the accuracy of the information. In addition, FinCEN previously provided exceptive relief to legal entity customers who open new accounts as a result of: a certificate of deposit rollover; a renewal, modification, or extension of a loan where there was no underwriting requirement or approval; a renewal, modification, or extension of a commercial line of credit or credit card account that does not require underwriting review and approval; or a renewal of a safe deposit box rental. This current exceptive relief supplements FinCEN's previous guidance and exceptive relief.
Looking Ahead at the CDD Rule
The CTA promised revisions to the CDD rule to account for the changes made by the beneficial ownership information and access rules. FinCEN's current rulemaking agenda lists a notice of proposed rulemaking slated for this Spring. Given the changes to the scope of the CTA, it is unclear how the CDD rule will be revised.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
