FinCEN CDD Beneficial Ownership Rule
United States
2001
AML/CFT
Overview
The FinCEN Customer D ue Diligence (CDD) Beneficial Ownership Rule, adopted in 2016 and effective from 2018, strengthened the U.S. Bank Secrecy Act (BSA) by requiring financial institutions to identify and verify the beneficial owners of legal entity customers. The rule addresses risks of money laundering, terrorist financing, and tax evasion by eliminating the anonymity of shell companies and enhancing financial transparency.It introduced a uniform definition of beneficial ownership, requiring identification of any individual with 25% or more ownership as well as a control person. Institutions must incorporate these checks into their AML programs, update records when risk triggers arise, and retain information for regulatory and law enforcement use.The regulation applies to banks, broker-dealers, mutual funds, futures commission merchants (FCMs), and introducing brokers in commodities,bringing them in line with international FATF standards and complementing later laws such as the Corporate Transparency Act (2021).
Key Obligations
- Collect and verify information on beneficial owners (≥25% ownership) and control persons of legal entities
- Conduct Customer Due Diligence (CDD) at onboarding and maintain updated records
- Apply Enhanced Due Diligence (EDD) for high-risk customers and politically exposed persons (PEPs)
- Integrate beneficial ownership checks into AML compliance programs
- Retain records for at least 5 years
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