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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF SUPERVISION 

AND REGULATION

SR 18-3

May 11, 2018

TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE 

SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE 

BANK AND BANKING ORGANIZATIONS SUPERVISED BY THE FEDERAL 

RESERVE

Applicability: This letter applies to banks supervised by the Federal Reserve, including those 

with $10 billion or less in consolidated assets, that are defined as covered institutions under the 

rule.

SUBJECT: Federal Financial Institutions Examination Council Examination Procedures

on Customer Due Diligence and Beneficial Ownership Rule

The Federal Financial Institutions Examination Council (FFIEC)1 recently issued 

examination procedures for the Financial Crimes Enforcement Network (FinCEN) rule, 

Customer Due Diligence Requirements for Financial Institutions, which was issued on 

May 11, 2016.2 The rule contains both formalized, explicit customer due diligence (CDD) 

program requirements and a new requirement to identify and verify the identity of individuals 

who own or control legal entity customers (otherwise referred to as beneficial owners), subject to 

certain exclusions and exemptions. FinCEN issued the final rule under the Bank Secrecy Act 

(BSA) with a compliance date for banks3 and other covered financial institutions of

May 11, 2018.

 1 The four federal banking agencies that are voting members of the FFIEC are the Board of Governors of the Federal 

Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the 

Comptroller of the Currency. The Consumer Financial Protection Bureau and State Liaison Committee are also 

voting members of the FFIEC.

2 81 Fed. Reg. 29397 (May 11, 2016).

3

 Banks that are covered financial institutions for the purposes of this rule are defined in 31 CFR 1010.100 (includes 

state member banks, Edge Act and agreement corporations, and U.S. branches, agencies, and other offices of foreign 

banks supervised by the Federal Reserve). 
 

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Under the CDD portion of the rule, banks must develop and implement appropriate riskbased policies, procedures, and processes for conducting ongoing CDD.4 For the beneficial 

ownership section of the rule, banks must establish and maintain written procedures that are 

reasonably designed to identify and verify beneficial owner(s) of legal entity customers and to 

include such procedures in their anti-money laundering compliance program.5

 The rule requires 

banks to collect beneficial ownership information at the 25 percent ownership threshold 

regardless of the customer’s risk profile. Refer to the FFIEC press release and materials linked 

below for additional detail about these requirements. 

These bank examination procedures replace the section in the 2014 FFIEC BSA/AML 

Manual (manual) entitled “Customer Due Diligence – Overview and Examination Procedures,”

pages 56 – 59, and add a new section entitled “Beneficial Ownership Requirements for Legal 

Entity Customers – Overview and Examination Procedures.” The FFIEC member agencies 

developed these examination procedures in collaboration with FinCEN and the U.S. Department 

of the Treasury. These procedures are consistent with the FinCEN regulation and corresponding 

FinCEN guidance and do not contain any additional requirements.

To foster consistency, the manual includes the bank examination procedures that will be 

used by each agency’s examiners, including the state banking agencies. The manual underscores 

the importance of banks effectively managing their BSA/AML risk (that is, the risk of abuse by 

money launderers or terrorist financiers) by developing BSA/AML compliance programs tailored 

to their organizations’ risk profiles. 

Federal Reserve examiners should begin using the examination procedures for 

BSA/AML examinations as soon as they are available on the FFIEC’s website. 

Reserve Banks are asked to distribute this SR letter to the domestic and foreign banking 

organizations supervised by the Federal Reserve in their districts, as well as to supervisory and 

examination staff. Questions concerning the guidance should be addressed to Koko Ives, 

Manager BSA/AML, at (202) 973-6163; Jennifer White, Senior Supervisory Financial Analyst, 

at (202) 452-3964; MaryBeth Evans, Senior Supervisory Financial Analyst, at (202) 973-7366;

or Jason Gonzalez, Special Counsel, at (202) 452-3275.

Michael S. Gibson

Director

Attachments:

• FFIEC Press Release

o Customer Due Diligence – Overview and Examination Procedures

 4 See 31 CFR 1020.210(b)(5)

5 See 31 CFR 1010.230
 

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o Beneficial Ownership for Legal Entity Customers – Overview and Examination

Procedures

Supersedes:

• SR letter 10-5, “Interagency Guidance on Obtaining and Retaining Beneficial Ownership 

Information”