WASHINGTON (1/25/16)--The Credit Union National Association (CUNA) is concerned with the U.S. Treasury’s Financial Crimes Enforcement Network’s (FinCEN) position that financial institutions must absorb the regulatory costs associated with its customer due diligence (CDD) proposal. In a letter filed to FinCEN Friday, CUNA questions aspects of FinCEN’s regulatory impact assessment (RIA) and initial regulatory lexibility analysis.
“Rather than weigh the cost to a financial institution of complying with the rule against the benefit of reduced criminal activity to that financial institution and its customers, FinCEN is applying the benefit not to a single institution and its customers but instead to the entire society,” the letter reads. “This is a flawed approach to examining the costs and benefits of a rulemaking.
“Such an approach characterizes the compliance costs of the rule as a tax on covered entities that are required to comply,” the letter adds. “Thus, we question the validity of the RIA’s conclusion that the rulemaking is economically justified.”
FinCEN proposed CDD changes in August 2014, and since the proposal’s compliance related costs are estimated to be above $100 million, the RIA was required. The IFRA is intended to evaluate the economic impact of the proposal on entities with assets of $550 million or less.
According to the IFRA, FinCEN believes that the proposed rule will apply to a number of small entities, it would not have a “significant impact on these entities,” a conclusion CUNA disputes.
“Specifically, in the IRFA FinCEN states that exempting small entities from the beneficial ownership requirement would put those entities at greater risk of abuse by money launderers and other financial criminals, as criminals would seek out institutions without this requirement,” CUNA’s letter reads. “We believe appropriate exemptions would not result in illegal consumer activities, particularly at a credit union where membership is limited.”
CUNA also raised several points regarding the CDD proposal itself, including: