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FinCEN should withdraw due diligence proposal CUNA
WASHINGTON (5/7/12)--The Credit Union National Association (CUNA) said that while it supports the objective to improve the tracking of money laundering and terrorist financing, the Financial Crimes Enforcement Network (FinCEN) should not propose new customer due diligence regulations, as the increased regulatory burdens and costs on credit unions would far outweigh the purported benefits to FinCEN.

FinCEN recently released an Advanced Notice of Proposed Rulemaking (ANPR) proposing to codify, clarify, consolidate, and strengthen current consumer due diligence (CDD) rules. The proposed CDD rule would apply to financial institutions, brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities, and would require these entities to establish and maintain policies for monitoring the accounts they hold. A key part of the FinCEN ANPR addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account that is held at an institution to assess the likelihood of suspicious activity.

FinCEN last week announced it would extend the comment deadline for this ANPR for another thirty days. The comment period was originally set to expire on May 4.

The proposed FinCEN regulations would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crimes.

Credit unions would have to attempt to obtain additional documentation and agreements related to all applicable members if "beneficial ownership" requirements were expanded, as proposed by the ANPR, CUNA Regulatory Counsel Dennis Tsang said. CUNA is especially concerned about this potential expansion, noting that it can be difficult for some credit unions to obtain such information from their members. Reviewing accounts to determine if they meet "beneficial ownership" standards can be time consuming, and the requirements can conflict or interfere with member confidentiality standards and can create fiduciary or legal issues, CUNA added. Credit unions and other financial institutions would also need to increase staffing and training resources, and make software and system changes to implement and maintain the potential "beneficial ownership" requirements, CUNA said.

FinCEN should abandon the due diligence ANPR and, instead, work with federal financial regulators to further clarify current Bank Secrecy Act and anti- money laundering rules, and develop more specific guidance to address related problem areas, the letter said. CUNA also suggested FinCEN work with the National Credit Union Administration, other federal and state financial institution regulators, and law enforcement authorities to address BSA, AML, and due diligence issues.

For the full comment letter, use the resource link.


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