The recent disclosure of the so-called “Panama Papers” has brought customer due diligence of nominee companies into renewed focus. Perhaps coincidentally, the disclosure of these papers comes as the Financial Crimes Enforcement Network (FinCEN) appears to be reaching the homestretch on finalizing its proposed rules that impose enhanced customer due diligence requirements on financial institutions. On April 13, FinCEN submitted a final version of the rule to the Office of Management and Budget (OMB) for review.

As discussed in our LawFlash FinCEN Proposes to Expand Financial Institution Customer Due Diligence Requirements, the proposed rule’s enhanced customer due diligence requirements would require covered financial institutions to (1) identify and verify the natural persons who are the principal beneficial owners of legal entity customers and (2) codify explicit customer due diligence requirements for covered financial institutions to (a) understand the nature and purpose of customer relationships and (b) conduct ongoing customer monitoring, both of which would become required elements of a core anti-money laundering (AML) program.

Interestingly, on April 8, FinCEN also submitted to OMB for review proposed rules to impose AML programs on banks that do not have a Federal functional regulator. The proposed rule would remove the AML program exemption for banks and similar financial institutions that lack a Federal functional regulator. Banks that could be captured by the proposed rule include private banks, non–federally insured credit unions, and certain trust companies. If eventually finalized, we would expect FinCEN to also impose customer identification program and enhanced due diligence requirements on these banking entities.