New Customer Due Diligence requirements may be in place soon

The Financial Crimes Enforcement Network published new proposed rules under the Bank Secrecy Act on Aug. 4. The new rules are a continuation of the current Customer Due Diligence requirements all financial institutions need to follow. They clarify and extend the current due diligence rules so institutions have more information on the accounts they must monitor and report on.

The basics of CDD
The first part of the CDD requirements is the Customer Identification Program, which has been in place since 2003, Credit Union Times reported. The second party requires institutions to know about beneficial owners of businesses – or people who own 25 percent or more of an entity. The reason behind this is that the government has found criminals often hide behind legal entities, according to the Federal Financial Institution Examination Council. Third, institutions will need to know the nature and purpose of their relationships with the customer. Fourth, the new rules adjust the monitoring and reporting requirements financial institutions must perform regarding their members.

The need for information
The purpose of the rule is to increase transparency, the amount of information financial institutions have about customers and for institutions to be able to predict the types of transactions their members will perform. This way, institutions are more in tune with their customers and better able to find suspicious activity.

Credit unions must make changes
According to Deborah Crawford, former banker and current president of Gettechnical, Inc., many of the parts in the new rule are actions financial institutions are already taking, but maybe not to the extent the law will require. Collecting basic customer information is standard now, but credit unions and banks will have to begin gathering more in-depth facts.

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