FinCEN’s New Customer Due Diligence Rule

With the upcoming due date for the implementation of FinCEN’s Final Rule, companies should be implementing due diligence programs, if they haven’t already, that are intrinsic and sustainable in order to build long term strategies towards compliance.  Furthermore, as organizations work toward improving their customer due diligence programs, their short-term goals will become a reality in order to obtain proper compliance.

By May 11th, 2018, under the Final Rule law, all financial institutions must ensure their due diligence programs are compliant with the Financial Crimes Enforcement Network’s (FinCEN) regulations on core elements of a customer due diligence program.

The Four Core Elements:

  • Customer identification and validation, beneficial ownership identification and verification
  • Understanding the nature and purpose of customer relationships to develop a customer risk profile
  • Ongoing monitoring for reporting suspicious transactions and,
  • On a risk-basis, maintaining and updating customer information.

In preparation for this change, companies should consider different strategies in order to build a sustainable program.

Identifying and validating customers is a necessity to ensuring data integrity and consistency for regulatory reporting.  Along with identifying customers, it is important to identify beneficial owners to authenticate and validate business relationships.

Identifying potential risks within an organization is also key in establishing a due diligence program.  Screening and due diligence will establish a baseline score for third party relationships.  Additionally, it will help companies evaluate and understand customer profiles by utilizing technology that will vet, score, and record data for risk-ranking.

The right technology will help an organization stay up to date with compliance regulations and rules, and monitoring and maintaining information to further advance towards complying with the Final Rule.  It will also ensure that organizations are able to evaluate alerts and red flags identified in a timely fashion which will help prevent illicit transactions and activities.

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