More is Not Always Better: FinCEN Grants Risk-Based Relief from Repeat Beneficial Ownership Verification Requirements

On February 13, 2026, the Financial Crimes Enforcement Network (“FinCEN”) issued an order granting exceptive relief to “covered financial institutions” from the requirement in 31 C.F.R. § 1010.230(b) to identify and verify the beneficial owners of legal entity customers at each new account opening.¹

Under the order, covered financial institutions may limit their identification and verification of beneficial owners to (1) the initial account opening; (2) subsequent points where the institution has knowledge of facts reasonably calling into question the reliability of previously obtained beneficial ownership information; and (3) additional instances as needed under the institution’s risk‑based ongoing customer due diligence (“CDD”) procedures.

Covered financial institutions remain subject to all other applicable Bank Secrecy Act (“BSA”) and anti‑money laundering/countering the financing of terrorism (“AML/CFT”) program, recordkeeping, and reporting requirements. The order is intended to reduce the compliance burden associated with duplicative beneficial ownership data collection while remaining consistent with the BSA’s risk‑based framework and FinCEN’s ongoing efforts to modernize customer due diligence requirements.

This Legal Update provides background on the existing CDD rule, summarizes FinCEN’s rationale for the relief, and outlines the key elements of the exceptive relief and its practical implications for covered financial institutions.

Background

In 2016, FinCEN adopted customer due diligence requirements for covered financial institutions (the “CDD Rule”), which require covered financial institutions to identify and verify the beneficial owners of each legal entity customer, with such identification and verification being performed in a manner consistent with the requirements under financial institutions’ Customer Identification Program (“CIP”) rules.

Under the CDD Rule, a covered financial institution is required to identify the beneficial owners of a legal entity customer “at the time a new account is opened,” subject to limited exceptions. In turn, the CDD Rule defines “new account” as “each account opened at a covered financial institution by a legal entity customer” following the date the CDD Rule became applicable. Read together, the CDD Rule has required covered financial institutions to identify and verify beneficial owners every time a legal entity customer opens a new account, regardless of how little time passes between openings and regardless of whether the institution has any reason to doubt the accuracy of previously obtained information.

In order to address the compliance burden imposed by this broad rule, FinCEN had previously provided targeted relief and guidance on compliance, including:

• 2018 CDD Rule FAQs: In April 2018, FinCEN published FAQs clarifying that institutions could rely on beneficial ownership information previously collected to open earlier accounts if the customer certified or confirmed that the information remained accurate and that the institution had no knowledge of facts calling its reliability into question. Institutions were required to maintain records of such confirmations.
• 2018 Exceptive Relief for Certain Account Events: In September 2018, FinCEN granted exceptive relief from § 1010.230(b) for specific situations where a “new account” might arise, including certain rollovers, modifications, renewals, and extensions of accounts and similar financial products.
• COVID‑19 PPP Flexibility: During the COVID‑19 pandemic, FinCEN announced that federally insured depository institutions and federally insured credit unions generally would not be required to re‑verify beneficial ownership information for existing customers receiving Paycheck Protection Program loans.

The 2026 Order

Despite FinCEN’s prior measures to reduce compliance burden, industry participants continued to advocate for a more pragmatic approach to beneficial ownership obligations, arguing that account‑by‑account triggers are duplicative and not aligned with the risk‑based principles underpinning the AML/CFT compliance regime.

In providing the new relief, FinCEN takes the view that, once a financial institution has identified and verified beneficial owners at initial account opening, the incremental risk management value of repeating that process automatically for every subsequent account is limited, particularly when balanced against the compliance burdens. FinCEN also notes that automatic repetition is increasingly inconsistent with a modernized, risk‑based approach to BSA compliance.

Importantly, FinCEN states that the relief does not discourage institutions from going beyond minimum requirements where warranted by their own risk profile and tolerance. Institutions may therefore continue to collect and verify beneficial ownership information at each new account opening if they choose. The extent to which an institution relies on the relief to alter its CDD practices is left to its discretion.

Scope of Relief

Pursuant to the order, issued under FinCEN’s statutory and regulatory authority to issue exceptive relief, covered financial institutions are no longer required, as a matter of regulation, to identify and verify the beneficial owners of a legal entity customer every time that customer opens a new account. Instead, the institution may limit its identification and verification obligations under § 1010.230 to the following three scenarios:

1. Initial Account Opening

• When a legal entity customer first opens an account with a covered financial institution, the institution must identify and verify the identities of the beneficial owner(s) in accordance with § 1010.230(b).

2. Reliability Concerns

• At any time after initial account opening, if the covered financial institution has knowledge of facts that would reasonably call into question the reliability of previously obtained beneficial ownership information, it must identify and verify the beneficial owners in accordance with § 1010.230.

3. Risk‑Based Ongoing Customer Due Diligence

• As needed based on the institution’s own risk‑based procedures for conducting ongoing customer due diligence, the institution must identify and verify beneficial owners. In these risk‑based scenarios, the institution may rely on beneficial ownership information previously obtained under § 1010.230(b)(1), provided that (i) the customer certifies or confirms—verbally or in writing—that the information remains up to date and accurate and (ii) the institution maintains a record of the customer’s certification or confirmation, including for verbal confirmations.

If a customer cannot certify or confirm that previously obtained beneficial ownership information is current and accurate, or if the institution knows of facts reasonably calling into question the reliability of prior information, the institution must re‑identify and re‑verify the beneficial owners consistent with the CDD Rule requirements.

This relief notwithstanding, covered financial institutions must continue to comply with all other applicable AML/CFT and BSA requirements, including program, recordkeeping, and reporting obligations.

Key Takeaways

FinCEN’s order marks a significant shift in the operational expectations surrounding beneficial ownership collection and verification for legal entity customers, with several practical implications for covered financial institutions. The order moves away from an automatic, account‑triggered requirement toward one that is anchored in initial customer onboarding and subsequent risk‑based triggers. Institutions may realign their policies and procedures to focus on key events (e.g., risk profile changes, new adverse information) rather than simply the opening of each new account. As a result, institutions that routinely open multiple accounts for the same legal entity customer may be able to reduce repetitive beneficial ownership certifications and verifications, lowering the compliance and operational burden for both the institution and its customers, provided they maintain robust risk‑based monitoring and updating procedures.

Covered financial institutions should review and, as appropriate, update their written AML and CDD policies and procedures, as well as customer onboarding and account opening workflows in light of this relief, and continue to monitor FinCEN developments related to the modernization of the CDD Rule.

 

---

 

¹ Exceptive Relief from Requirement to Identify and Verify Beneficial Owners at Each Account Opening  (FIN‑2026‑R001), FinCEN, Feb. 13, 2026. Under § 1010.230, “covered financial institutions” include banks, broker-dealers, futures commission merchants or introducing brokers and mutual funds.