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FinCEN warned of due diligence regs burdens
WASHINGTON (8/1/12)--Credit unions would face significant challenges and costs if expanded customer due diligence (CDD) regulations that were proposed by the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) are finalized, noted Credit Union National Association Regulatory Counsel Dennis Tsang following a Tuesday public hearing.

CUNA joined financial services groups, regulators and members of the law enforcement community at the hearing, which focused on a CDD advanced notice of proposed rulemaking (ANPR) issued this spring.

A key part of the FinCEN customer/member due diligence plan--issued in February--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.

The new regulations, if created, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion, FinCEN has said.

CUNA remains concerned regarding parts of the FinCEN ANPR that would expand "beneficial ownership" requirements. Credit unions would be required to obtain additional documentation and agreements related to all applicable members if these requirements were expanded.

CUNA has noted that reviewing accounts to determine if they meet "beneficial ownership" standards can be time consuming for credit unions, and the requirements can conflict or interfere with member confidentiality standards and can create fiduciary or legal issues

The information needed to review these accounts can also be difficult to obtain, and credit unions may need to increase their staff and make costly software changes to comply with the requirements, CUNA added.

Many hearing attendees shared CUNA's "beneficial ownership" concerns, and said the potential broad scope of the FinCEN CDD rules could create issues for financial services providers.

CUNA in a comment letter filed earlier this year suggested that FinCEN abandon the due diligence ANPR and, instead, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules.

FinCEN has said it will schedule additional public hearings on the CDD proposal, but those hearings have not been set yet.


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