What you need to know
The enhanced Customer Due Diligence requirements (otherwise known as “Beneficial Ownership”) are in full effect. With that, the Federal Financial Institutions Examination Council (FFIEC) issued new examination procedures that apply to financial institutions, including banks; savings and loan associations; credit unions; and branches, agencies, and representative offices of foreign banks. These procedures were created in close collaboration with FinCEN and the U.S. Department of the Treasury.
The new procedures are replacing those in the current section titled “Customer Due Diligence - Overview and Examination Procedures”. You can read the full documents here, but we wanted to highlight a few major changes that you should pay special attention to.
In addition to updated overviews and key definitions as they relate to the revised rule, the FFIEC also provides guidance on the creation of policies and procedures, including:
- Conducting customer due diligence – Specifically, all banks are required to “develop and implement appropriate risk-based procedures for conducting ongoing customer due diligence.” Your risk profile is unique to your financial institution and you have to create a CDD program that reflects that.
- Gathering customer information on a risk-based approach – The level and type of information you need to record varies based on a customer’s risk profile: more information is required on customers with a higher risk profile and less information on lower risk customers.