As we blogged about in May, the Bank Secrecy Act (“BSA”), which requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering, applies to entities that we may not traditionally think of as “financial institutions,” including securities broker or dealers. Compliance with the BSA is no easy task. And if a recent notice of new proposed rule by the U.S. Treasury’s Financial Crimes Enforcement Network (also known as FinCEN) becomes law, it’s not about to get any easier.
FinCEN’s stated intent with the proposed rule is to clarify and strengthen customer due diligence requirements for banks, brokers or dealers in securities, mutual funds and futures commission merchants and introducing brokers in commodities. Under current regulations, each of these institutions must establish, document and maintain a Customer Identification Program (or “CIP”) appropriate for its size and business that meets certain minimum requirements, including, among others, the adoption of certain identity verification procedures, and the collection of certain customer information and the maintenance of certain records. The proposed rule adds two (2) new elements to the CIP requirements.