FinCEN and regulators issue joint guidance on obtaining beneficial ownership information, potentially expanding certain financial institutions' USA PATRIOT Act obligations

The purpose of this paper is to describe guidance (“the Guidance”) issued by the Financial Crimes Enforcement Network (“FinCEN”), the Federal Banking Regulators and the Securities and Exchange Commission on obtaining beneficial ownership information for certain accounts and customer relationships.

The paper summarizes the principal content of the Guidance, including the importance of customer due diligence (CDD) policies as the cornerstone of a Bank Secrecy Act/Anti‐Money‐Laundering program, the need for a CDD program to identify and verify the beneficial owners of an account, steps that should be included in CDD procedures to protect against heightened risks related to the beneficial owners of an account, enhanced due diligence that is appropriate for accounts that pose heightened risk, the suggestion in the Guidance to implement CDD policies and procedures on an enterprise‐wide basis, and requirements for private bank account and correspondent bank account due diligence programs.

The Guidance appears to expand certain concepts previously applied to banks by the Federal Banking Regulators to other financial institutions, including broker‐dealers, futures commission merchants, mutual funds, insurance companies, and money services businesses. It also appears to expand concepts set forth in Rule 312 of the PATRIOT Act beyond private banking and correspondent banking.

The paper provides expert guidance from experienced financial services lawyers.