New Requirements for Customer Due Diligence and Identification of Beneficial Owners

- Becomes mandatory from May 11, 2018

17 April 2018

Financial Crimes Enforcement Network (FinCEN), on May 11, 2016, released Final Rule for Customer Due Diligence (CDD Rule) that will require certain financial institutions to “look through” nominal legal entity account holders to identify the account’s beneficial owners who own or control the entity. The rule is considered as “fifth pillar” in FinCEN’s AML program requirement which mandates that certain institutions will implement risk-based procedures for conducting customer due diligence on all customers. Compliance with the CDD Rule becomes mandatory from May 11, 2018.

Requirement: The CDD Rule is destining to prevent criminals, kleptocrats and others looking to hide ill-gotten proceeds from accessing the financial system anonymously. The CDD Rule intend to remove weakness in the U.S. AML regime identified by the FATF in its “mutual evaluations” of the United States-namely, shortcomings with respect to the identification & verification of the individuals associated with legal entity customers. The rule does so by requiring the identification of the newly introduced “beneficial owners” of legal entity customers.

“Beneficial owners” are defined as each individual\corporate who owns 25 percent or more of the entity, and a single individual who has significant responsibility for controlling the entity. Furthermore to beneficial ownership requirement, the CDD Rule includes CDD standards for covered financial institutions subject to AML program requirements. According to FinCEN, formalizes existing practice, will require covered financial institutions to establish risk based procedures to understand the “nature and purpose of the customer relationship,” and to conduct monitoring to identify & report suspicious transactions and update customer information. An institution must update customer information, including beneficial ownership, if during its normal monitoring it detects information relevant to assessing or re-evaluating customer risk.

Applicability: Banks, brokers, dealers, mutual funds, futures commission merchants, and commodities introducing brokers, which are already subject to Customer Identification Program (CIP) requirements.

Xoriant CDi contribution: Our solution CDi Ondemand comes with a range of pre-defined processes, workflows and investigative paths which can consolidate relevant information from distinct systems and enables to make better decisions deciding Ultimate Beneficial Owner’s.


Key Features:

* Manages complete and accurate counterparty beneficial ownership structure.

* Tracks corporate action associated with the entity and implements same to maintain accuracy in customer relationship and ownership.

* CDi Ondemand offers a clear view of beneficial ownership; ultimate or complete structure. Also showcases scenarios with broken tree & circular relationships

* CDi Ondemand has a unique feature that allows effective cross-referencing of beneficial ownership information by certain identifiers.

* Proactively managing data quality errors, such as duplicity in counterparty hierarchy, invalid values, etc.

For more information and any inquiries please contact Steven Levine,

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