Removing Barriers Blog

CUNA Questions FinCEN’s Regulatory Impact Assessment for its CDD Proposal
Posted January 22, 2016 by CUNA Advocacy

In August 2014, the Financial Crimes Enforcement Network (FinCEN) issued a proposed rule to amend existing Bank Secrecy Act (BSA) regulations regarding customer due diligence requirements for credit unions, banks, and related entities. The CDD Proposal would also impose a new requirement under the BSA to identify the beneficial owners of legal entity customers, subject to certain exemptions. In a letter filed today, we reiterate concerns with the CDD Proposal that we shared with FinCEN in October 2014.  

In December 2015, FinCEN made available a Regulatory Impact Assessment (RIA) related to the CDD Proposal. Today’s letter also addresses issues with the RIA. Specifically, we question aspects of the RIA, including its conclusion. Our primary concern with the RIA is that FinCEN has taken the position that for the betterment of society as a whole, financial institutions must absorb the additional regulatory costs associated with the CDD Proposal.

As described in the RIA, “Although limitations prevent us from fully quantifying all costs and benefits attributable to the CDD rule, the U.S. Department of the Treasury is confident that the proposed rule would yield a positive net benefit to society.”

FinCEN has concluded that the benefit to all of society outweighs the cost to financial institutions. However, this is a flawed approach to a cost-benefit comparison, since the costs of these requirements are essentially taxes on financial institutions. Since credit unions are already paying for compliance costs related to prudential and consumer protection regulations, additional costs from this third regulatory regime are particularly burdensome.