WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) last week released a Regulatory Impact Assessment that estimates compliance with its proposed customer due diligence rule will cost financial institutions from $700 million to $1.5 billion over a 10-year period.
Based on the Assessment, one small credit union estimated its IT compliance costs alone would be between $50,000 and $70,000, NAFCU reported.
The proposal, originally issued in July 2014, would amend the agency’s existing rules to include explicit customer due diligence requirements, including a requirement for customers opening bank or credit union accounts for a “legal entity” to provide information on the beneficial owners of the account.
NAFCU has voiced its opposition to the proposal because of the cost and burden it would impose on credit unions for minimal benefits.
“NAFCU opposes the proposed rule based on the additional cost and burden required of credit unions while providing minimal economic or other benefits,” the trade association wrote in its comment to FinCEN. “For credit unions, the BSA and implementing regulations already impose a significant amount of burden and cost. Allocating the resources necessary to comply with the already large amount of regulations continue to cost credit unions and their members a significant amount of funds that would be better used to further member services.”
FinCEN’s assessment report says Treasury is “confident that the proposed rule would yield a positive net benefit to society,” and it notes that such a benefit would be derived even from just a 0.57% decrease in annual real illicit proceeds in the U.S.
The report also notes that an estimate placed the IT costs for the proposal at $20 million for a large bank and at between $3 million and $5 million for a mid-sized bank.
The agency estimated that that determining beneficial ownership identification would take 20 minutes; it also estimated that training costs for a small financial institution with 125 employees would be between $1,250 and $2,500 during the rule’s first year.