Regulatory can be shaped and changed according to technological innovations and the geopolitical situation. Regulatory bodies aim to have an equal area of practice for everyone. It creates new rules by changing the existing laws to involve everyone in the game. In addition to being aware of these rules before, understanding these rules' content is essential in the harmonization process.
The Financial Crimes Enforcement Network (FinCEN) has performed the CDD Ultimate Rule published by the U.S. Department for financial institutions in May 2018. The CDD Final Rule includes a set of new Customer Due Diligence requirements.
What is Customer Due Diligence Final Rule?
The CDD Final Rule was by the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) to ensure that banks, brokers, insurance companies, real estate, and other compulsory financial institutions have usufruct benefits for their corporate clients.
To be more precise, the CDD Final Rule's application is necessary to determine which under the companies' control which financial institutions are affiliated and reveal their relationship with criminal activities such as money laundering and terrorist financing. CDD Final Rule is a solution to understanding the precision of forward-looking processes and systems. Other CDD Ultimate Rule objectives are to strengthen and clarify the CDD requirements of banks and expose money laundering risks and terrorist financing by ensuring that financial institutions cannot conduct a risk assessment for legal entities and institutions' dependents.
Principles of CDD Final Rule
According to Fincen, there are four significant factors for Customer Due Diligence
- Get to Know Your Customer and authenticate.
- Determine if your customer has the usufruct right.
- Identify your customer's risk profile with an accurate customer risk assessment.
- Comply with a risk-based process to ensure that your risk situations are continuously reported.
Ultimate Beneficial Owner(UBO) Practices
AML provides recommendations on how regulators should protect their Ultimate Beneficial Owner (UBO) information when formulating policies and procedures. Organizations need to be UBO compatible with professional businesses to access the source of information. The basic principles that AML professionals must follow when preparing procedures and collecting UBO information are as follows:
- Identification and verification of customer
- Make sure the business management of the vendors
- Making regular risk assessments and Taking measures against potential risk situations.
- Determine the usufruct rights of the customer.
The fact that businesses do not face money laundering risks and be instantly informed about the necessary aml regulations ensures that they protect their reputation. That's why accessing UBO information is of essential thing for professional organizations. With these steps, you can make your company's compliance program robust and scalable.