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The CDD Rule: Better or Worse Than Expected

Updated: Apr 15, 2019

Panel (from left to right):

Paul Khareyn - SVP, AML Policy Office, HSBC

Vasilios Chrisos - Principal, PwC (Moderator) 

Elena Hughes - ED, Head of AML, Institutional Securities Group, Morgan Stanley 

Thomas Aspinwall - VP, Anti-Financial Crimes, Americas, Deutsche Bank 

On Thursday, March 7, 2019, the ACAMS New York Chapter held a panel discussion, sponsored by PwC, on the impacts felt by financial institutions as a result of FinCEN’s CDD Rule.  The event, titled “The CDD Rule: Better or Worse Than Expected”, was an opportunity for attendees to hear from AML compliance executives at large financial institutions regarding the progress made, challenges experienced, and work that remains to implement the rule requirements. 

May 11th, 2019 will mark the one-year anniversary of the effective date for the CDD Rule, which added a “fifth pillar” to BSA/AML compliance programs.    The key elements of this fifth pillar are: identification and verification of beneficial owners of legal entity customers, nature and purpose of accounts, and ongoing monitoring.  Given the wide array of organizational changes required to adhere to the requirements of the rule – from policy decisions to review cycles - the ACAMS New York Chapter, along with our event sponsor, organized this discussion to understand implementation challenges and approaches taken.

The discussion began with an overview of the CDD Rule (“Rule) and the components of each key element.  This included the definition and delineation of ownership versus control for the beneficial ownership requirements; the types of accounts and products to be used as well as the expected activity in terms of volume and geography for the nature and purpose component; and how these tie into the ongoing monitoring element, including trigger event based reviews as well as regular refresh cycles. 

Following the overview of the Rule and its various requirements, the panel discussed some of the key questions each of their respective organizations faced, and the approaches utilized to bolster processes.  In particular, they addressed policy decisions with operational impacts, such as implementing a risk-based beneficial ownership threshold rather than strictly applying the 25% threshold stipulated in the Rule (e.g., applying a 10% ownership threshold for higher-risk customers); the challenges of determining how to define an account in the context of the Rule, and risk-based decisions related to uplifting pre-existing accounts to the Rule’s requirements.

The panel was closed out with some key takeaways for the audience, including: the importance of teams from across lines of business, functional areas, and lines of defense working in concert to help achieve compliance; establishing consistency in approach to aid in achieving a single view of the customer and allowing for seamless information flow; and ensuring that previously opened accounts are updated on an event-driven or periodic review basis that is consistent with the bank’s risk profile.

A networking reception with refreshments provided by the event sponsor followed the panel discussion.

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