WASHINGTON—A “period of fine tuning” should be expected for both financial institutions and regulators dealing with new customer verification obligations, the head of the Treasury Department’s anti-money laundering unit said last week.
Financial Crimes Enforcement Network Director Kenneth Blanco told the House Financial Services Committee’s Terrorism and Illicit Finance Subcommittee that “it will take time” to perfect both industry compliance and regulatory oversight of an account supervision rule that went into effect May 11, BNA.com reported.
FinCen is committed to working with other agencies and industry members to ensure covered financial institutions are implementing the rule “effectively, in a way that makes practical sense,” Blanco said. “We understand that it won’t happen overnight.”
About the Rule
The Bureau’s customer due diligence rule was adopted by the Obama administration two years ago as part of amendments to the 1970 Bank Secrecy Act to better identify owners of small companies that could be money laundering fronts for organized crime or terrorist groups. FinCEN, a bureau in Treasury Department’s Office of Terrorism and Financial Intelligence, gave financial institutions the interim time to prepare to comply with the rule, which adds to other screening requirements designed to detect criminal activity, BNA.com explained.
The rule instructs certain federally regulated banks and federally insured credit unions, mutual funds, and other financial institutions to maintain procedures for identifying the “beneficial owners” of “legal entity customers” like limited liability companies or LLCs.
FIs must now collect information to determine the identity of the “beneficial owner” — direct or indirect holders of at least 25% of equity interests — when a new account is opened. Covered financial institutions also must gather data to pinpoint any individual with control of, or responsibility to manage, a legal entity customer.