New Beneficial Ownership Rules Around the Corner – Are Broker Dealers Ready?


October 17 2017

Starting May 11, 2018, compliance officers at broker dealers will have one more responsibility to add to their checklists. On that day, a new Financial Crimes Enforcement Network (FinCEN) rule goes into effect that requires broker dealers (and certain other financial institutions) to identify and verify the identity of beneficial owners of legal entity customers at the time of account opening. With the new beneficial ownership rules right around the corner, now is the time for broker dealers to incorporate the new requirements into their existing AML compliance policies and procedures.

FinCEN, part of the U.S. Treasury, along with the Securities and Exchange Commission (SEC) and FINRA, administers the anti-money laundering (AML) rules for broker dealers and other financial institutions under the Bank Secrecy Act (BSA). Among other obligations, the BSA requires broker dealers to implement Customer Identification Programs (CIPs) and perform Customer Due Diligence (CDD) (colloquially, “Know Your Customer” or KYC).