On February 13, 2026, the Financial Crimes Enforcement Network (“FinCEN”) issued an order granting exceptive relief to “covered financial institutions” from the requirement in 31 C.F.R. § 1010.230(b) to identify and verify the beneficial owners of legal entity customers at each new account opening.1
Under the order, covered financial institutions may limit their identification and verification of beneficial owners to (1) the initial account opening; (2) subsequent points where the institution has knowledge of facts reasonably calling into question the reliability of previously obtained beneficial ownership information; and (3) additional instances as needed under the institution’s risk‑based ongoing customer due diligence (“CDD”) procedures.
Covered financial institutions remain subject to all other applicable Bank Secrecy Act (“BSA”) and anti‑money laundering/countering the financing of terrorism (“AML/CFT”) program, recordkeeping, and reporting requirements. The order is intended to reduce the compliance burden associated with duplicative beneficial ownership data collection while remaining consistent with the BSA’s risk‑based framework and FinCEN’s ongoing efforts to modernize customer due diligence requirements.
This Legal Update provides background on the existing CDD rule, summarizes FinCEN’s rationale for the relief, and outlines the key elements of the exceptive relief and its practical implications for covered financial institutions.
Background
In 2016, FinCEN adopted customer due diligence requirements for covered financial institutions (the “CDD Rule”), which require covered financial institutions to identify and verify the beneficial owners of each legal entity customer, with such identification and verification being performed in a manner consistent with the requirements under financial institutions’ Customer Identification Program (“CIP”) rules.
Under the CDD Rule, a covered financial institution is required to identify the beneficial owners of a legal entity customer “at the time a new account is opened,” subject to limited exceptions. In turn, the CDD Rule defines “new account” as “each account opened at a covered financial...