FinCEN Eases Beneficial Ownership Verification Requirements: What Financial Institutions Need to Know

Overview

On February 13, 2026, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued an exceptive relief order that significantly reduces customer due diligence (CDD) requirements for financial institutions. The order exempts covered financial institutions from the longstanding requirement to identify and verify beneficial owners of legal entity customers each time those customers open a new account — a change the banking industry has advocated for since the 2016 CDD Rule took effect.

The Rule Change

Under FinCEN's 2016 CDD Rule, financial institutions were required to identify and verify the beneficial owners of legal entity customers—including corporations, LLCs, and similar entities—at every new account opening. This applied regardless of how recently the institution had verified the same information or whether there was any reason to believe ownership had changed.

Under the new exceptive relief order, financial institutions are now required to identify and verify beneficial owners only under the following circumstances:

1. When a legal entity customer first opens an account with the institution;
2. When the institution has knowledge of facts that reasonably call into question the reliability of previously obtained beneficial ownership information; and
3. As otherwise required based on the institution's risk-based procedures for ongoing customer due diligence.

For the third scenario, financial institutions may rely on previously submitted beneficial ownership information so long as the customer certifies or confirms—verbally or in writing—that the information remains accurate. The institution must maintain a record of such certification or confirmation.

What Remains Unchanged

Financial institutions must continue to comply with all other anti-money laundering and countering the financing of terrorism (AML/CFT) requirements under the Bank Secrecy Act, including:

• Ongoing monitoring to identify and report suspicious transactions;
• Maintaining and updating customer information on a risk basis; and
• All applicable program, recordkeeping, and reporting requirements.

Financial institutions are still required to establish and maintain written procedures that are reasonably designed to identify and verify beneficial owners of legal entity customers and to include such procedures in their anti-money laundering compliance program.

Importantly, if a customer is unable to certify or confirm that previously obtained beneficial ownership information is accurate, or if the institution has knowledge of facts calling that information into question, the institution must obtain and verify beneficial ownership information in accordance with the full CDD Rule requirements.

Practical Implications

This relief represents a meaningful reduction in compliance burden for financial institutions. The American Bankers Association noted that U.S. banks open between 140 and 160 million new accounts every year. By shifting CDD obligations to a customer's initial onboarding—rather than requiring verification at every subsequent account opening—FinCEN has streamlined a process that institutions and trade groups have long criticized as duplicative.

Financial institutions that choose to take advantage of this relief should consider the following steps:

• Update policies, procedures, and internal controls governing beneficial ownership reviews;
• Revise CDD and Customer Identification Program (CIP) systems to accommodate the streamlined account opening process;
• Establish protocols for obtaining and documenting customer certifications or confirmations of existing beneficial ownership information; and
• Conduct a risk-based assessment to determine whether reliance on customer certification, rather than full beneficial ownership review, aligns with the institution's risk profile.

The relief is optional—financial institutions may continue their current beneficial ownership verification practices if doing so better aligns with their risk tolerance, but this change should allow for more efficient risk-based procedures. Regardless of which approach financial institutions choose, they should review their policies and procedures to ensure consistency with that approach.

Looking Ahead

We expect that more changes intended to reduce the compliance burdens on financial institutions are on the horizon, as FinCEN indicated that this exceptive relief is part of its broader obligations under the Corporate Transparency Act to revise the 2016 CDD Rule. FinCEN anticipates pursuing additional changes through the formal rulemaking process, and this order will help inform those efforts. We will continue to monitor FinCEN's regulatory agenda for further developments that may affect customer due diligence requirements.

The order also reflects the Trump Administration's broader deregulatory agenda under Executive Order 14192, "Unleashing Prosperity Through Deregulation," which directed agencies to reduce unnecessary regulatory burdens on American businesses.

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For questions about how this exceptive relief order may affect your institution's compliance program or account opening procedures, please contact the author.


 

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