FINRA Amends Anti-Money Laundering Rule to Comply With Treasury Program

As FINRA states, the CDD Rule focuses particularly on the second component by adding a new requirement "that covered financial institutions identify and verify the identity of the beneficial owners of all legal entity customers at the time a new account is opened, subject to certain exclusions and exemptions."

The CDD Rule also addresses the third and fourth components by amending 'the existing AML program rules for covered financial institutions to explicitly require these components to be included in AML programs as a new 'fifth pillar,'" FINRA explains.

FINRA's newly amended Rule 3310(f) requires member firms' AML programs to, at a minimum, include appropriate risk-based procedures for conducting ongoing customer due diligence, to include, but not be limited to: (1) understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and (2) conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

During a recent hearing held by the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Rep. Blaine Luetkemeyer, R-Mo., the subcommittee chairman, stated that "One of the problems that we see is that banks are being deputized as law enforcement officers by this [CDD]  rule from Treasury, and it's costing literally millions and millions of dollars."

One large bank "that I've talked to has 1,000 employees that do nothing else but take care of BSA/AML and now they're going to deal with this beneficial ownership situation," he added.

FinCEN issued Frequently Asked Questions guidance on April 3 to assist covered financial institutions with understanding the scope of the CDD rule.