CUNA warns FinCEN customer due diligence costs could outweigh benefits

October 3, 2014

WASHINGTON (10/6/14)--In response to the U.S. Treasury Financial Crimes Enforcement Network's (FinCEN) proposed changes to due diligence rules, to improve tracking of illegal activities, the Credit Union National Association sent a letter to FinCEN with concerns that the changes would increase the regulatory burden faced by credit unions.

Under FinCEN's proposed rule, the key elements for customer due diligence would include:

  • Identifying and verifying the identity of customers;
  • Identifying and verifying the identity of "beneficial owners" of "legal entity" customers (i.e., natural persons who own or control "legal entities");
  • Understanding the nature and purpose of customer relationships; and
  • Conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.

While CUNA supports the objective of improving the tracking of money laundering and terrorist financing, it remains concerned that the rule will impose additional compliance costs on credit unions.

"Such costs are likely to outweigh the purported benefits to FinCEN," CUNA Assistant General Counsel Dennis Tsang wrote. "We are especially concerned about the proposed expansion of the 'beneficial ownership' requirements that would result in procedures taking up to 30 minutes or more for each 'legal entity' account opening."

CUNA instead encourages FinCEN to work with federal financial regulators and address specific problem areas and clarify certain Bank Secrecy Act/anti-money laundering (AML) rules.

CUNA also urged FinCEN to:

  • Provide a delayed effective date that is more than 18 months from the issuance of the final rule, which will allow credit unions to prepare for potential staff and training resource increases and make other compliance, software and system changes;

  • trengthen BSA/AML rules for other types of institutions that are not financial institutions; and

  • Coordinate with the National Credit Union Administration and other federal regulators to reduce regulatory burden, and coordinate legislative changes regarding the tracking of beneficial ownership.

Use the resource link below to access the full letter.

CUNA comment letters