Ongoing Customer Due Diligence

Deregulation Meets Persistent Risk

The topic of ongoing customer due diligence sits at the heart of anti-money laundering (AML) frameworks under the US Bank Secrecy Act. It requires financial institutions to continuously monitor customer relationships, understand transaction patterns, and update risk profiles to detect and report suspicious activity.

In mid-February 2026, the Financial Crimes Enforcement Network (FinCEN) granted exceptive relief from a particularly burdensome aspect of the 2016 Customer Due Diligence Rule. Previously, banks and similar institutions had to collect and verify beneficial ownership information—details on the natural persons who own or control legal entity customers—each time such a customer opened a new account. This often duplicated effort for long-standing clients.

The new order restricts this requirement to three scenarios: when a legal entity opens its first account with the institution, when specific high-risk conditions arise, or as dictated by the institution's own risk-based ongoing due diligence procedures. The relief is optional, and core obligations persist, including regular monitoring for red flags and updating records as needed.

This move forms part of a wider deregulatory shift under the current administration, aimed at reducing private-sector compliance costs without compromising national security or financial integrity. It also ties into implementation of the Corporate Transparency Act, which has shifted some beneficial ownership reporting burdens to companies themselves via FinCEN filings.

The real-world stakes are substantial. Financial institutions face millions in annual compliance expenses; easing redundant collections could free resources for more targeted risk management. However, lax monitoring risks allowing money laundering or sanctions evasion to slip through, potentially leading to hefty fines—past AML violations have cost banks billions—or reputational damage. Smaller institutions, like credit unions, gain flexibility but must carefully weigh whether to adopt the relief or stick with existing processes.

Non-obvious tensions emerge here. While the change promotes efficiency, it relies heavily on institutions' internal risk assessments to trigger deeper checks. Critics might argue this shifts too much discretion to banks, potentially creating inconsistencies across the sector. Supporters see it as a pragmatic update, especially as beneficial ownership data becomes more accessible through other channels.

Globally, similar debates play out: the EU is consulting on harmonised customer due diligence standards under its new AML package, emphasising risk-based and digital approaches, while the US prioritises burden reduction.