Financial Crimes Enforcement Network 

Board of Governors of the Federal Reserve System 

Federal Deposit Insurance Corporation 

Joint Release National Credit Union Administration 

Office of the Comptroller of the Currency 

Office of Thrift Supervision 

Securities and Exchange Commission

Guidance on Obtaining and Retaining Beneficial Ownership Information 

The Financial Crimes Enforcement Network (FinCEN), along with the Board of 

Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the 

National Credit Union Administration, the Office of the Comptroller of the Currency, the 

Office of Thrift Supervision, and the Securities and Exchange Commission, are issuing 

this guidance, in consultation with staff of the Commodity Futures Trading Commission, 

to clarify and consolidate existing regulatory expectations for obtaining beneficial 

ownership information for certain accounts and customer relationships. Information on 

beneficial ownership in account relationships provides another tool for financial 

institutions to better understand and address money laundering and terrorist financing 

risks, protect themselves from criminal activity, and assist law enforcement with 

investigations and prosecutions. 

Background

The cornerstone of a strong Bank Secrecy Act/Anti-Money Laundering (BSA/AML) 

compliance program is the adoption and implementation of internal controls, which 

include comprehensive customer due diligence (CDD) policies, procedures, and 

processes for all customers, particularly those that present a high risk for money 

laundering or terrorist financing.1

 The requirement that a financial institution know its 

customers, and the risks presented by its customers, is basic and fundamental to the 

development and implementation of an effective BSA/AML compliance program. 

Specifically, conducting appropriate CDD assists an institution in identifying, detecting, 

and evaluating unusual or suspicious activity. 

In general, a financial institution’s CDD processes should be commensurate with its 

BSA/AML risk, with particular focus on high risk customers. CDD processes should be 

developed to identify customers who pose heightened money laundering or terrorist 

financing risks, and should be enhanced in accordance with the institution’s assessment 

of those risks. 

 

1

 This guidance does not alter or supersede previously issued regulations, rulings, or guidance related to 

Customer Identification Program (CIP) requirements. 

1
Heightened risks can arise with respect to beneficial owners of accounts because nominal 

account holders can enable individuals and business entities to conceal the identity of the 

true owner of assets or property derived from or associated with criminal activity. 

Moreover, criminals, money launderers, tax evaders, and terrorists may exploit the 

privacy and confidentiality surrounding some business entities, including shell companies 

and other vehicles designed to conceal the nature and purpose of illicit transactions and 

the identities of the persons associated with them. Consequently, identifying the 

beneficial owner(s) of some legal entities may be challenging, as the characteristics of 

these entities often effectively shield the legal identity of the owner. However, such 

identification may be important in detecting suspicious activity and in providing useful 

information to law enforcement. 

A financial institution may consider implementing these policies and procedures on an 

enterprise-wide basis. This may include sharing or obtaining beneficial ownership 

information across business lines, separate legal entities within an enterprise, and 

affiliated support units. To encourage cost effectiveness, enhance efficiency, and 

increase availability of potentially relevant information, AML staff may find it useful to 

cross-check for beneficial ownership information in data systems maintained within the 

financial institution for other purposes, such as credit underwriting, marketing, or fraud 

detection. 

Customer Due Diligence

As part of an institution’s BSA/AML compliance program, a financial institution should 

establish and maintain CDD procedures that are reasonably designed to identify and 

verify the identity of beneficial owners2

 of an account, as appropriate, based on the 

institution’s evaluation of risk pertaining to an account.3 

For example, CDD procedures may include the following: 

 Determining whether the customer is acting as an agent for or on behalf of 

another, and if so, obtaining information regarding the capacity in which and on 

whose behalf the customer is acting. 

 

2

 The definition of a “beneficial owner” under FinCEN’s regulations specific to due diligence programs for 

private banking accounts and for correspondent accounts for foreign financial institutions is the 

individual(s) who have a level of control over, or entitlement to, the funds or assets in the account that, as a 

practical matter, enables the individual(s), directly or indirectly, to control, manage, or direct the account. 

The ability to fund the account or the entitlement to the funds of the account alone, however, without any 

corresponding authority to control, manage, or direct the account (such as in the case of a minor child 

beneficiary), does not cause the individual to be a beneficial owner. This definition may be useful for 

purposes of this guidance. See, e.g., 31 CFR 103.175(b). 3

 The final rules implementing Section 326 of the USA PATRIOT Act similarly provide that, based on a 

financial institution’s risk assessment of a new account opened by a customer that is not an individual, a 

financial institution may need to take additional steps to verify the identity of the customer by seeking 

information about individuals with ownership or control over the account, including signatories. See, e.g.,

31 CFR 103.121(b)(2)(ii)(C). In addition, a financial institution may need to look through the account in 

connection with customer due diligence procedures required under other provisions of its BSA compliance 

program. 

2
 Where the customer is a legal entity that is not publicly traded in the United 

States, such as an unincorporated association, a private investment company 

(PIC), trust or foundation, obtaining information about the structure or ownership 

of the entity so as to allow the institution to determine whether the account poses 

heightened risk. 

 Where the customer is a trustee, obtaining information about the trust structure to 

allow the institution to establish a reasonable understanding of the trust structure 

and to determine the provider of funds and any persons or entities that have 

control over the funds or have the power to remove the trustees. 

With respect to accounts that have been identified by an institution’s CDD procedures as 

posing a heightened risk, these accounts should be subjected to enhanced due diligence 

(EDD) that is reasonably designed to enable compliance with the requirements of the 

BSA. This may include steps, in accordance with the level of risk presented, to identify 

and verify beneficial owners, to reasonably understand the sources and uses of funds in 

the account, and to reasonably understand the relationship between the customer and the 

beneficial owner. 

Certain trusts, corporate entities, shell entities,4

 and PICs are examples of customers that 

may pose heightened risk. In addition, FinCEN rules establish particular due diligence 

requirements concerning beneficial owners in the areas of private banking and foreign 

correspondent accounts. 

In addition, CDD and EDD information should be used for monitoring purposes and to 

determine whether there are discrepancies between information obtained regarding the 

account’s intended purpose and expected account activity and the actual sources of funds 

and uses of the account. 

Private Banking5

Under FinCEN’s regulations, a “covered financial institution”6

 must establish and 

maintain a due diligence program that includes policies, procedures, and controls 

reasonably designed to detect and report known or suspected money laundering or 

suspicious activity conducted through or involving private banking accounts. This 

requirement applies to private banking accounts established, maintained, administered, or 

 

4

 http://www.fincen.gov/statutes_regs/guidance/pdf/AdvisoryOnShells_FINAL.pdf 5

 A “private banking account” is defined in 31 CFR 103.175(o), as an account (or any combination of 

accounts) maintained at a covered financial institution that: (1) requires a minimum aggregate deposit of 

funds or other assets of not less than $1,000,000; (2) is established on behalf of or for the benefit of one or 

more non-U.S. persons who are direct or beneficial owners of the account; and (3) is assigned to, or is 

administered or managed by, in whole or in part, an officer, employee, or agent of a covered financial 

institution acting as a liaison between the covered financial institution and the direct or beneficial owner of 

the account. Private banking accounts that do not fit within this definition should be subject to the general 

CDD procedures, including, as appropriate, EDD procedures discussed above. 

6

 31 CFR 103.175(f)(1). 

3
managed in the United States.7

 The regulation currently covers private banking accounts 

at depository institutions, securities broker-dealers, futures commission merchants and 

introducing brokers in commodities, and mutual funds. 

Among other actions, as part of their due diligence program, institutions that offer private 

banking services must take reasonable steps to ascertain the source(s) of the customer’s 

wealth and the anticipated activity of the account, as well as potentially take into account 

the geographic location, the customer’s corporate structure, and public information.8 

Moreover, reasonable steps must be taken to identify nominal and beneficial owners of 

private banking accounts.9 Obtaining beneficial ownership information concerning the 

types of accounts listed above may require the application of EDD procedures. 

Special rules apply for senior foreign political figures.

10 A review of private banking 

account relationships is required in part to determine whether the nominal or beneficial 

owners are senior foreign political figures. Covered financial institutions should establish 

policies, procedures, and controls that include reasonable steps to ascertain the status of a 

nominal or beneficial owner as a senior foreign political figure. This may include 

obtaining information on employment status and sources of income, as well as consulting 

news sources and checking references where appropriate.11 Accounts for senior foreign 

political figures require, in all instances, EDD that is reasonably designed to detect and 

report transactions that may involve the proceeds of foreign corruption.12

 

With regard to private banking accounts, a covered financial institution’s failure to take 

reasonable steps to identify the nominal and beneficial owners of an account generally 

would be viewed as a violation of the requirements of 31 CFR 103.178. 

Foreign Correspondent Accounts 

FinCEN’s regulations also require covered financial institutions13 to establish a due 

diligence program that includes appropriate, specific, risk-based, and, where necessary, 

enhanced policies, procedures and controls that are reasonably designed to detect and 

report, on an ongoing basis, any known or suspected money laundering activity 

 

7 See, generally, 31 CFR 103.178. 8 See, 31 CFR 103.178 (b)(3) and (b)(4). See also, Federal Financial Institutions Examination Council 

(FFIEC) Exam Manual, Private Banking - Overview. Although the FFIEC Exam Manual is issued by the 

federal banking regulators regarding AML requirements applicable to banks, it contains guidance that may 

be of interest to securities and futures firms. 

9

 31 CFR 103.178(b)(1). 

10 A senior foreign political figure is a current or former senior official in the executive, legislative, 

administrative, military, or judicial branches of a foreign government (whether elected or not), senior 

official of a major foreign political party or a senior executive of a foreign government-owned commercial 

enterprise, a corporation or other entity formed by or for the benefit of such individuals, or any immediate 

family member or widely and publically known close associate to such individuals. 31 CFR 103.175(r). 

11 See, e.g., FFIEC Exam Manual, Private Banking Due Diligence Program (Non-U.S. Persons). 12 31 CFR 103.178 (b)(2) and (c). 

13 31 CFR 103.175(f)(1). The definition of covered financial institution discussed above applies to both the 

private banking and correspondent account regulations. 

4
conducted through or involving any correspondent account14 established, maintained, 

administered, or managed in the United States for a foreign financial institution.

15 Under 

these regulations, enhanced due diligence is required for correspondent accounts16

established, maintained, administered, or managed in the United States, for foreign banks

that operate under: (1) an offshore banking license; (2) a banking license issued by a 

country that has been designated as non-cooperative with international anti-money 

laundering principles or procedures; or (3) a banking license issued by a country 

designated by the Secretary of the Treasury (under delegation to the Director of FinCEN, 

and in consultation with the Federal banking agencies, the Securities and Exchange 

Commission, and the Commodity Futures Trading Commission) as warranting special 

measures due to money laundering concerns.17 Enhanced due diligence is designed to be 

risk-based, with flexibility in its implementation to allow covered financial institutions to 

obtain and retain this information based on risk. 

With respect to correspondent accounts for such foreign banks, a covered financial 

institution’s risk-based EDD should obtain information, as appropriate, from the foreign 

bank about the identity of any person with authority to direct transactions through any 

correspondent account that is a payable-through account, as well as the source and 

beneficial owner of funds or other assets in a payable-through account. A payablethrough account is a correspondent account maintained by a covered financial institution 

for a foreign bank by means of which the foreign bank permits its customers to engage, 

either directly or through a subaccount, in banking activities usual in connection with the 

business of banking in the United States.18 Covered financial institutions may elect to 

use a questionnaire or conduct a review of the transaction history for the respondent bank 

in collecting the information required.19

Additionally, covered financial institutions20 are prohibited from opening and 

maintaining correspondent accounts21 for foreign shell banks.22 Covered financial 

 

14 31 CFR 103.175(d). Generally, a “correspondent account” is defined as an account established for a 

foreign financial institution to receive deposits from, or to make payments or other disbursements on behalf 

of, the foreign financial institution, or to handle other financial transactions related to such foreign financial 

institution. 31 CFR 103.175(d)(1). 

15 31 CFR 103.176(a). 

16 For purposes of the enhanced due diligence requirements for certain foreign banks and the foreign shell 

bank prohibitions discussed herein, a “correspondent account” is defined as an account established for a 

foreign bank to receive deposits from, or to make payments or other disbursements on behalf of, the foreign 

bank, or to handle other financial transactions related to such foreign bank. 31 CFR 103.175(d)(1)(ii). 

17See 31 CFR 103.176(b) and(c) for the full text of this provision. Special Due Diligence Programs for 

Certain Foreign Accounts, 72 FR 44768-44775 (August 9, 2007). 

18 See, 31 CFR 103.176(b)(1)(iii)(B). 

19 “An Assessment of the Final Rule Implementing Enhanced Due Diligence Provisions for Accounts for 

Certain Foreign Banks, p. 4. (March 2009). 

http://www.fincen.gov/news_room/rp/files/Special_Due_Diligence_Program.pdf 20 For purposes of the shell bank prohibitions, a covered institution generally includes: U.S. banks, savings 

associations, credit unions, private bankers, and trust companies; branches and agencies of foreign banks; 

Edge Act corporations; and securities broker-dealers. 31 CFR 103.175(f)(2). 

21 For purposes of the foreign shell bank prohibitions, a “correspondent account” is defined as an account 

established for a foreign bank to receive deposits from, or to make payments or other disbursements on 

5
6

 

institutions that offer foreign correspondent accounts must take reasonable steps to ensure 

the account is not being used to indirectly provide banking services to foreign shell 

banks.23 The covered financial institution must identify the owners24 of foreign banks 

whose shares are not publicly traded and record the name and address of a person in the 

United States that is authorized to be an agent to accept service of legal process.25 

With regard to foreign correspondent accounts, a covered financial institution’s failure to 

maintain records identifying the owners of non-publicly traded foreign banks could be 

viewed as a violation of the requirements of 31 CFR 103.177. 

For questions about this guidance, please contact FinCEN’s Regulatory Helpline at (800) 

949-2732 or your appropriate regulatory agency. 

behalf of, the foreign bank, or to handle other financial transactions related to such foreign bank. 31 CFR 

103.175(d)(1)(ii). 

22 See, 31 CFR 103.177. 23 31 CFR 103.177(a)(1)(ii). 

24 For purposes of 31 CFR 103.177, “owner” is defined at 31 CFR 103.175(l). Similarly, under the 

enhanced due diligence provisions of the correspondent account rule, the covered financial institution may 

need to identify the owners of foreign banks whose shares are not publicly-traded. See, 31 CFR 

103.176(b)(3). An “owner” is defined for this purpose to include any person who directly or indirectly 

owns, controls, or has the power to vote 10 percent or more of any class of securities. See, 31 CFR 

103.176(b)(3)(ii). 

25 See 31 CFR 103.177(a)(2).