Regulatory risk and the Treasury Department's new customer due diligence rule

Financial institutions have been facing ever-increasing regulatory risk related to anti-money-laundering compliance over the past several years. Regulators have significantly turned up the heat on AML regulations and have heightened expectations for financial institutions’ compliance with the Bank Secrecy Act.1

There have been several multimillion-dollar enforcement actions against financial institutions, primarily based on alleged deficiencies in surveillance and suspicious activity reporting.

Although this trend is expected to continue, regulators are likely to shift their primary focus to financial institutions’ compliance with customer due diligence requirements because of a new rule that takes effect May 11. This article discusses the new rule, some possible implementation pitfalls and suggested actions for mitigating risk.