The American Bankers Association (ABA) and BAFT issued a joint comment letter calling FinCEN’s recent proposal to clarify and strengthen customer due diligence (CDD), too costly for banks and too burdensome for business customers. The proposal requires financial institutions to identify any individual who owns more than 25 percent of, or who otherwise controls a legal entity. It also requires a universal data collection requirement for small and medium size businesses. The commenters said these requirements create a new level of government-imposed financial surveillance through executive fiat.
The letter made several suggestions to reduce the burden on smaller businesses, including reducing the number of legal entities, subject to beneficial ownership data collection, to risky entities only streamlining data collection and retention requirements. While the letter recognized FinCEN’s good faith efforts, it suggested that FinCEN withdraw the proposal until it reduces the gaps between the proposal and its effective implementation.
The letter raises serious issues in addition to those raised by others. It is noteworthy that while FinCEN asserted that its CDD rule “merely clarifies existing expectations”, and would not add costs, the ABA/BAFT letter stated that FinCEN’s cost estimates were “woefully inaccurate and significantly understate the costs”.
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