FinCEN Modernizes Beneficial Ownership Verification Requirements

The Financial Crimes Enforcement Network (FinCEN) recently issued an order that provides exception relief to covered financial institutions (i.e., certain banks, brokers or dealers in securities, futures commission merchants or introducing brokers, and mutual funds) from requirements under FinCEN’s 2016 Customer Due Diligence Rule (CDD Rule).  See WBK’s previous article on FAQs regarding the CDD Rule.

Prior to this exception relief, covered financial institutions were required to identify and verify the beneficial owners each time an existing legal entity customer opened a new account. Now, the financial institutions need to verify beneficial owner information only in the following scenarios:

• When the legal entity first opens an account and becomes a customer;
• Thereafter if the financial institution has knowledge of facts that call into question the reliability of the beneficial owner information; and
• As needed based on internal risk-based procedures for conducting ongoing customer due diligence.

In the event of the third scenario, if a covered financial institution determines it needs to identify and verify the beneficial owner of a legal entity customer, it may do so by relying upon the previously obtained information if the customer certifies or confirms (verbally or in writing) that the information is current and accurate.  The financial institution must maintain a record of such verbal or written certifications or confirmations.  If the customer cannot certify or confirm the information, or if facts arise calling into question the reliability of the information, then the financial institution must obtain and verify the identity of the legal entity’s beneficial owners.

This relief, effective February 13, 2026, aligns with executive orders to reduce regulatory burdens while still prioritizing and requiring compliance with anti-money laundering and countering the financing of terrorism safeguards.