TCH Files Comment Letter on FinCEN’s Customer Due Diligence Proposal

The Clearing House submitted a comment letter responding to FinCEN’s proposal to codify customer due diligence (CDD) requirements within its regulations and to impose a new requirement to identify the beneficial owners of certain legal entity customers. TCH strongly supports the significant improvements FinCEN made from its 2012 advanced notice of proposed rulemaking on the same topic. TCH also suggested a number of changes including: (i) revising language that significantly undermines the clarity and consistency of the regulatory CDD framework by suggesting that federal functional regulators have the ultimate authority to determine CDD standards in practice; (ii) not requiring financial institutions to re-identify beneficial owners of existing customers, provided they have a reasonable belief that they have previously identified current beneficial owners; (iii) allowing financial institutions to collect beneficial ownership information through means other than the model certification form; and (iv) allowing financial institutions to use a risk-based approach to determine when it is necessary to verify the identity of beneficial owners and how such verification should be performed.