Fincen moves to rewrite banks' due diligence requirements

• Key insight: The Treasury Department's Financial Crimes Enforcement Network, known as Fincen, is preparing to revise banks' customer due diligence requirements as part of the Corporate Transparency Act. 

• Supporting data: The proposed rule was submitted to the Office of Management and Budget's Office of Information and Regulatory Affairs on Sept. 17, but the notice does not disclose what changes the proposal would entail.

• Forward look: The rule comes after the administration scrapped a beneficial ownership database that was expected to complement banks' due diligence obligations. 
  

The Financial Crimes Enforcement Network is preparing to propose a rule rewriting banks' customer due diligence requirements, as required by a 2021 bipartisan anti-money-laundering law. 
The Office of Management and Budget's Office of Information and Regulatory Affairs published the notice that it had received the proposed rule on Sept. 17. 

What shape those customer due diligence requirements take has become less clear after the administration eliminated most beneficial ownership reporting requirements for U.S. companies in March 2025, dismantling a database that was intended to complement banks' CDD obligations and potentially reduce some of their compliance burden.

The Corporate Transparency Act was enacted in 2021 as part of the National Defense Authorization Act, after Congress overrode a veto by President Donald Trump in the waning days of his first term. The law called for the creation of a national beneficial ownership information database containing basic identifying information, such as the names, birthdays and addresses of beneficial owners, as a tool to combat money laundering. The rule defined beneficial owners as people who control at least 25% of, or have substantial control over, a company.

Proponents of the law's reporting regime have called it the most significant advancement in U.S. anti-money-laundering efforts in a generation, saying that exposing hidden ownership structures would deter corrupt officials and criminals from exploiting the U.S. financial system. 

Former Treasury Secretary Janet Yellen previously acknowledged the beneficial ownership reporting rule as a critical step toward closing loopholes that otherwise allow shell companies to conduct illicit finance and prevent the U.S. from being a haven for dirty money.

Despite its potential benefits, the rule faced pushback from some Republican lawmakers and business groups. The critics said the reporting requirements are overly complex and burdensome for small businesses. 

The Trump administration's August decision to permanently exempt domestic companies and U.S. persons from beneficial ownership reporting requirements may have pleased interest groups, but removed a tool banks had expected to use in satisfying their customer due diligence obligations, while leaving financial institutions with their existing legal obligations to identify and verify beneficial owners. Fincen's upcoming rulemaking could provide more clarity on how those obligations will work in the absence of a federal beneficial ownership database. 

While Fincen's final rule leaves foreign businesses on the hook for disclosing information about their foreign owners, foreign companies will not have to report, update or correct U.S. company applicants and U.S. persons who previously obtained Fincen identifiers. Fincen said it will delete previously submitted information that it reasonably believes belongs to U.S. persons.

Politics and policy

Beneficial ownership regime's demise removes tool for banks

August 12, 2026 4:08 PM

By Ebrima Santos Sanneh

The resulting status quo leaves financial institutions to conduct their own anti-money laundering checks without a centralized federal database of beneficial ownership information for banks and law enforcement. What remains unclear is whether Fincen's forthcoming CDD rule will reduce the burden on financial institutions to reflect the loss of that database, and if so, how.

"There's an open question now as to how or whether the Treasury will amend the CDD rule in a way that helps financial institutions effectively combat financial crime," former Fincen Director Him Das said to American Banker following the August final rule.

Financial regulatory agencies have also been making changes to customer-related anti-money-laundering standards. Earlier this month, the Federal Reserve, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Office of the Comptroller of the Currency issued a joint statement clarifying their stance that banks may communicate with customers whose accounts are involved in suspicious activity, as long as they do not inform the customer explicitly of the existence of a suspicious activity report.