ABA Challenges Cost-Benefit Analysis of Customer Due Diligence Proposal

In a comment letter yesterday, ABA criticized the Financial Crimes Enforcement Network’s recent cost-benefit analysis of its proposed customer due diligence rule, claiming that the analysis relies on unsubstantiated and overly optimistic assumptions about the potential benefits of the heightened requirements and fails to adequately identify and weigh the burden imposed on financial institutions.

The proposed rule would require banks to identify the beneficial owners of legal entity customers who hold a 25 percent or greater ownership stake in the legal entity, as well as the individual who controls the entity.

ABA pointed out that FinCEN’s analysis of the rule — which sampled only a small handful of banks and just three small institutions — failed to accurately assess the costs banks would incur for the staff time, training and system upgrades needed to come into compliance. Nor, the letter added, did it address the potential effects of derisking that could occur as banks face pressure to satisfy new regulatory requirements. ABA urged FinCEN not to proceed with a final rule until a proper cost-benefit analysis has been completed. For more information, contact ABA’s Rob Rowe.


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