FinCEN continues deregulatory efforts with exceptive relief for Customer Due Diligence Rule

The US Financial Crimes Enforcement Network (FinCEN) has issued an order granting exceptive relief (Order) limiting the circumstances in which financial institutions are required to identify and verify beneficial owners as required by the 2016 Customer Due Diligence (CDD) Requirements for Financial Institutions (CDD Rule). The Order is FinCEN’s latest effort to “streamline regulatory requirements and reduce industry compliance burdens” by modernizing the Bank Secrecy Act (BSA) and its implementing regulations.¹ Despite these changes, however, financial institutions should carefully consider the implications of the Order and exercise caution before revising their anti-money laundering (AML) compliance programs.

2016 CDD Rule

In 2016, FinCEN issued the CDD Rule, which generally requires covered financial institutions, including federally regulated or insured banks, credit unions, mutual funds, brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities, to, among other things, establish and maintain written procedures for identifying and verifying the beneficial owner of legal entity customers each time a new account is opened. More specifically, the CDD Rule requires these financial institutions to collect the name, date of birth, address, and government identification number (e.g., Social Security number) for individuals with a 25% or greater ownership interest in any customer that is a legal entity, as well as any individual with significant responsibility to control, manage, or direct any such customer.

2026 Exceptive Relief Order

On February 13, 2026, FinCEN issued the Order, which limits when a covered financial institution is required to identify and verify beneficial ownership information. Whereas the 2016 CDD Rule generally requires covered financial institutions to identify and verify beneficial ownership information each time a new account is opened, under the Order, covered financial institutions are now only required to do so in three scenarios:

1. When a legal entity customer opens its first account with the covered financial institution (as opposed to whenever any new account is opened).
2. Any time the covered financial institution has knowledge of facts that would reasonably call into question the reliability of beneficial ownership information previously obtained about the customer. Notably, as written, this suggests that the covered financial institution should refresh diligence when it has actual knowledge of facts that may call into question previously obtained information and does not include language applying to situations where a covered financial institution should know such facts. This standard differs from the suspicious activity reporting standard, which requires a covered financial institution to report activity when it knows, suspects, or reasonably should suspect that such activity is reportable. 
3. As needed based on the covered financial institution’s risk-based procedures for conducting ongoing customer due diligence. In such a situation, the Order provides that a covered financial institution may rely on previously obtained information, provided the customer provides a certification or confirmation, verbally or in writing, that such previous information is up-to-date and accurate. In that case, the covered financial institution must maintain a record of such certification or confirmation.

Ongoing Deregulatory Efforts

This move by FinCEN is part of a broader effort by the Trump Administration to reduce regulatory burdens on American individuals and businesses. Indeed, in issuing the Order, FinCEN notes that it is consistent with President Trump’s January 31, 2025 Executive Order, Unleashing Prosperity through Deregulation (E.O. 14192). The Order acknowledges that some industry participants have, since the issuance of the CDD Rule, criticized it for requiring the collection of beneficial ownership information for all new account openings regardless of how long it had been since the information was previously collected, thereby imposing a burden on covered financial institutions that is not always accompanied by any AML-related benefits. In issuing the Order, FinCEN notes that the CDD Rule is “increasingly inconsistent with FinCEN’s risk-based approach” and aims to mitigate any outsized burdens on covered financial institutions to collect information to identify and verify a legal entity customers’ beneficial ownership.

This is not FinCEN’s first foray into deregulation under the current administration.² For example, on July 21, 2025, FinCEN announced it was delaying the implementation of AML rules for certain investment advisers and that it would revisit the scope of those rules. And on October 9, 2025, FinCEN issued guidance to clarify regulatory requirements related to suspicious activity reports (SARs) with the goal of assisting covered financial institutions in focusing their efforts on filing SARs with the greatest value to law enforcement agencies and allowing them to devote compliance resources to other high-risk areas. 

What Does This Mean for Financial Institutions?

The Order provides some breathing room for covered financial institutions with legal entity customers that frequently open new accounts. That said, covered financial institutions should carefully consider the implications of the Order and exercise caution before making changes to their CDD procedures for several reasons: 

• Financial institutions subject to the BSA are still required to implement “[a]ppropriate risk-based procedures for conducting ongoing customer due diligence,” including conducting ongoing monitoring to identify and report suspicious activity and maintain updated customer information.³ As a general matter, covered financial institutions must have procedures in place to file a SAR where it knows, suspects, or has reason to suspect that a transaction is intended to facilitate money laundering or other illicit activities. This standard, which is broader than the Order’s knowledge standard for determining when it must obtain updated beneficial ownership information, may depend on a financial institution’s maintenance of accurate and up-to-date beneficial ownership information. Accordingly, any efforts to relax procedures designed to ensure such maintenance may impair a financial institution’s ability to comply with its SAR obligations.
• Obtaining and maintaining accurate and up-to-date beneficial ownership information can also be critical for ensuring that a financial institution does not run afoul of sanctions laws. US economic sanctions programs, violations of which are strict liability offenses, generally apply not only to entities designated by the Office of Foreign Assets Control as specially designated nationals but also to any entities in which specially designated nationals hold, directly or indirectly, a 50% or greater ownership interest. Accordingly, any efforts to relax CDD procedures related to the collection of beneficial ownership information may also impair an institution’s ability to comply with US sanctions laws.
• Importantly, the Order does not mandate that covered financial institutions only verify beneficial ownership information in the three scenarios identified therein. Indeed the Order expressly states that FinCEN “does not discourage financial institutions from exceeding minimum compliance requirements should doing so align with their risk profile and tolerance.” The potential cost and resource savings of obtaining beneficial ownership information less frequently may be outweighed by the corresponding increased reputational and legal risks. 
• FinCEN can change course at any time. As expressly acknowledged in the Order, “[e]xceptions may be revoked at FinCEN’s discretion.” A change in presidential administration or any other event could prompt FinCEN to revert to the status quo with little notice, causing covered financial institutions to scramble to readjust. The cost savings associated with implementing revised CDD procedures in response to this Order may be outweighed by the potential cost of reassessing, revising, and approving such procedures in the event the Order is revoked. 

In sum, the Order reinforces FinCEN’s ongoing efforts to reduce regulatory burdens—but for many financial institutions, any actual relief from the Order as a practical matter will likely be limited. Prior to implementing any changes to CDD procedures, best practice warrants a careful cost-benefit analysis, weighing the potential increased reputational and legal risks inherent in adoption of the standard articulated in the Order against the gains in onboarding efficiency and cost savings. 

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.

_{1 FINCEN, Statement by FinCEN Director Andrea M. Gacki before the House Committee on Financial Services, Subcommittee on National Security, Illicit Finance, and International Financial Institutions (Sept. 9, 2025), available at https://www.fincen.gov/news/testimony/statement-fincen-director-andrea-m-gacki-house-committee-financial-services.}

_{2 For a broader assessment of the Trump Administration’s deregulation efforts in relation to the BSA and AML more generally, see Gordon, A. et al., What’s Next for BSA/AML Under Trump 2.0, New York Law Journal (Jan. 14, 2026), https://www.law.com/newyorklawjournal/2026/01/14/whats-next-for-bsaaml-compliance-under-trump-20/.}

_{3 See, e.g., 31 C.F.R. § 1020.210(a)(2)(v) (AML requirements for banks).}