By Bailee Shipman, Financial Institutions Advisor

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an exceptive relief order that significantly reduces requirements for verifying beneficial ownership of any legal entity customers opening new accounts. The relief order is part of a broader effort to reduce redundant compliance efforts, further align with the Corporate Transparency Act (CTA), and modernize their anti-money laundering (AML) and countering the finance of terrorism (CFT) frameworks.

What’s Changed?

Prior rules required financial institutions to identify and verify the beneficial owners of legal entity customers every time a new account was opened, even for existing customers. Under the revised requirements, it’s no longer required to re-verify beneficial owners information with each new account. Instead, verification is required only in the following three circumstances:

  • Initial relationship: When a legal entity first opens an account with the institution
  • Reliability concerns: When the institution knows of facts that reasonably call into question the reliability of previously obtained beneficial ownership information
  • Risk-based procedures: Otherwise required based on institutions’ risk-based procedures for ongoing customer due diligence

What This Means for Your Institution

This change represents a notable shift from a trigger-based framework to a more efficient, risk-based framework, allowing institutions to rely on previously collected information while still maintaining full AML/CFT obligations. The relief is optional, giving each institution the flexibility to maintain current practices or transition to a streamlined approach based on their risk tolerance.

Implementation Considerations

Those that elect to apply this relief, whether in a phased or hybrid approach, should take the following actions:

  • Update policies and procedures to reflect the revised approach
  • Define clear triggers: Clearly document how and when beneficial ownership information will be refreshed or re-verified
  • Strengthen documentation practices: Maintain an appropriate audit trail supporting reliance on previously collected information
  • Train staff on the revised requirements and expectations

Key Takeaway

This change reduces duplication but does not reduce the responsibility of identifying and managing risk effectively and efficiently. If you need assistance navigating these changes and implementation best practices, reach out to a Pinion advisor.