In a significant regulatory update, the Financial Crimes Enforcement Network (FinCEN) has announced a new order granting relief to financial institutions from the stringent requirements of verifying beneficial owners every time a legal entity opens a new account. This directive, effective Feb. 13, 2026, marks a shift toward streamlining compliance processes while maintaining robust anti-money laundering (AML) and countering the financing of terrorism (CFT) safeguards.[1]
This regulatory relaxation means that financial institutions now only need to verify the identities of beneficial owners under specific circumstances: when a legal entity customer opens its first account, when there are doubts about the reliability of previously obtained information, or based on risk-based procedures for ongoing due diligence. This change is in line with FinCEN’s risk-based framework and the treasury’s efforts to modernize the Bank Secrecy Act (BSA).[1]
The backdrop to this development is the 2016 Customer Due Diligence (CDD) Rule, which required financial institutions to verify beneficial owners each time a legal entity opened an account. While this rule aimed to enhance transparency and deter illicit financial activities, it was perceived as excessively burdensome by many in the financial industry. The latest move by FinCEN addresses these concerns while still ensuring that institutions remain vigilant against financial crimes.[1]
This order also aligns with mandates under the Corporate Transparency Act to revise existing regulations, offering a more practical compliance framework. Financial institutions can now rely on previously collected beneficial ownership data as long as it is validated by the customer as current. This adjustment is expected to ease operational burdens without compromising the institutions’ ability to monitor and report suspicious activities effectively.[1]
As the financial sector adapts to these regulatory updates, FinCEN continues to advocate for a balanced approach that allows institutions to allocate resources efficiently while upholding the integrity of the financial system against misuse.[1]
Sources
[1] https://www.fincen.gov/system/files/2026-02/FinCEN-Order-CCDExceptiveRelief.pdf
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