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Understanding the new Customer Due Diligence rule

By: Jennifer Morrison, VP, Senior Risk Manager

The new Customer Due Diligence Requirements for Financial Institutions (CDD rule), which was issued by the Financial Crimes Enforcement Network (FinCEN) back in 2016, is the most important change in the BSA/AML industry in the U.S. in many years.

Meant to clarify and strengthen existing Member Due Diligence (MDD) requirements, the new rule requires financial institutions to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exemptions. And it goes into effect May 11. Are you ready?

To help facilitate readiness with implementation of the new CDD rule, this article touches on the following topics:

  • Four key elements of the new rule
  • Review of key terms
  • Discussion of beneficial ownership
  • Analyzing the terms “identify” and “verify”
  • Reviewing important elements of Member Identification Programs (MIP)
  • FAQs from FinCEN
  • Checklist of action steps to promote readiness
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