What is Customer Due Diligence (CDD)?

The Customer Due Diligence Requirements issued by the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Under the CDD Rule, the U.S. banks, mutual funds, brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities are required to identify and verify the identity of the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.

The CDD Rule has four core requirements. It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to:

• identify and verify the identity of customers

• identify and verify the identity of the beneficial owners of companies opening accounts

• understand the nature and purpose of customer relationships to develop customer risk profiles

• conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information

With respect to the requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity, and an individual who controls the legal entity.

FinCEN CDD Final Rule https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule#