Crowell & Moring Partner Carlton Greene Delivers Congressional Testimony on FinCEN’s Customer Due Diligence Anti-Money Laundering Rule

Washington – April 27, 2018: Crowell & Moring LLP partner Carlton Greene, the former chief counsel for the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and a member of the firm's International Trade and White Collar & Regulatory Enforcement groups, today testified before the House Subcommittee on Financial Institutions and Consumer Credit. The hearing concerned FinCEN's customer due diligence rule, also known as the CDD Rule, which covered financial institutions are required to begin implementing on May 11.

In his testimony, Greene raised concerns about the new rule, stating: "This guidance has generated new questions that create new risks for covered financial institutions. The risks of misunderstanding or not being in a position to comply with the new guidance are heightened by the fact that the guidance was released so close to the rule's May 11, 2018, implementation date."

The CDD rule seeks to combat financial crime by requiring financial institutions to provide information useful to law enforcement in the detection and prevention of money laundering, terrorism financing, and other financial crimes. Financial institutions will be required to obtain identifying information about the beneficial owners of their accounts.

As part of his testimony, Greene raised a few outstanding issues for the subcommittee: how pooled investment vehicles operated by nonfinancial institutions will obtain beneficial ownership information; what information must be gathered to reasonably understand the "nature and purpose" of a customer's business; and when a covered institution will be deemed to have "knowledge of facts that would reasonably call into question the reliability" of customer-provided information.

Issued under the Bank Secrecy Act in May 2016, the CDD rule comes as financial institutions have been working to update anti-money laundering, or AML, procedures and implement methods for identifying and verifying underlying beneficial ownership information. It requires covered financial institutions, at the time a legal entity customer opens a new account, to obtain information on the beneficial owners of the entity, defined to include each person who owns more than 25% of the equity of the customer, as well as one person exercising significant control over it.

Greene also testified that the current relationship between FinCEN and the federal functional regulators poses risks to FinCEN's mission to detect and combat financial crime. "FinCEN has delegated examination authority to the federal regulators, which use their own independent authorities to examine for and enforce compliance with the BSA," he testified. "This has the potential to lead these regulators to create and enforce their own interpretations of, or additions to, BSA rules, or otherwise to emphasize enforcement in areas that diverge from FinCEN's priorities, potentially complicating FinCEN's ability to establish a coherent approach to anti-money laundering regulation." 

Greene's written testimony can be found here. A video excerpt of his testimony can be found here.

A video of the subcommittee hearing can be found here.

Greene, a partner in Crowell & Moring's Washington office, provides strategic advice to clients on U.S. economic sanctions, Bank Secrecy Act and AML laws and regulations, export controls, and anti-corruption/anti-bribery laws and regulations. Before joining FinCEN, the U.S. AML regulator responsible for administering the Bank Secrecy Act, he served as the assistant director for transnational threats with the Treasury Department's Office of Foreign Assets Control (OFAC), where he directed targeting and investigations for U.S. economic sanction programs, including those related to Iran and North Korea.

About Crowell & Moring's White Collar & Regulatory Enforcement Group
Crowell & Moring's White Collar & Regulatory Enforcement Group routinely represents clients in the most significant white collar cases in the United States and has successfully defended and counseled clients around the world regarding all manner of government investigations, criminal trials, regulatory enforcement actions, and internal investigations. The diverse team includes lifelong defense lawyers, including former assistant federal defenders, as well as former prosecutors and enforcement attorneys from the Justice Department, the Office of Independent Counsel, U.S. Attorney's Offices, and the Securities and Exchange Commission.

About Crowell & Moring's International Trade Group
Crowell & Moring's International Trade Group provides regulatory, dispute resolution, investigation, policy and litigation counsel on emerging trade issues worldwide. The group is recognized for its top international trade practices for export controls, sanctions, customs and trade litigation matters (including antidumping, countervailing duty and safeguards). Additionally, the group works closely with the firm's other core practices to provide a broad spectrum of client services and to publish their proprietary journal, This Month in International Trade.

About Crowell & Moring LLP
Crowell & Moring LLP is an international law firm with more than 500 lawyers representing clients in litigation and arbitration, regulatory, and transactional matters. The firm is internationally recognized for its representation of Fortune 500 companies in high-stakes litigation, as well as its ongoing commitment to pro bono service and diversity. The firm has offices in Washington, D.C., New York, Los Angeles, San Francisco, Orange County, London, and Brussels.