Proposed CDD Regulation: How much will it cost?

Posted By: Elwood P. Dowd

Proposed CDD Regulation: How much will it cost? - 12/30/15 01:53 PM

FinCEN recently published the Regulatory Impact Statement for FinCEN Notice of Proposed Rulemaking: “Customer Due Diligence Requirements for Financial Institutions." It prompted a couple people to contact me saying that the final regulation had been published. That’s not what this is.

This is the legally required estimate of the regulation’s financial impact. As noted in the ABA's comment letter of 15 months ago, this cost/benefit analysis was conspicuously absent when the NPRM was rolled out in August, 2014.

You have until January 25 to file a comment letter focused on the regulation’s implementation costs. As only 135 comment letters were filed in response to the original proposal, it is unlikely they are expecting a wealth of information. Be advised, it is even more unlikely they will pay any attention to any cost estimates offered anyway.

They seem hellbent to do this without regard to any feedback.

Before you read the new document, refresh your recollection of ECON 459 where you learned about market failures, negative spillovers, and positive spillovers. That stuff is apparently a whole lot more relevant to the real world than you thought it was at the time. They may have a lot to do with influenza and water pollution… (I only minored in economics, so I am not really sure.)

If you intend to take it seriously and craft something truly responsive, your mind will need to be free of all earthly constraints. In my opinion the most critical element of your preparation would be to go on one of those marijuana tours in Denver to buttress your mental flexibility.

Before you get to the point of analyzing the costs, you will need to accept the fact that the regulation will reduce criminal activity and that a concomitant dollar value can be assigned to that reduction. You will also need to accept the fact that your bank’s writing down what people say with no evidence whatsoever that it is true will help law enforcement investigations. (The fact that THC levels are astronomically higher than they were when I was in college should be helpful.) Then, you can just tell them what you think your bank’s out of pocket expenses might be without being distracted by the real world.

My opposition to the regulation does not hinge on its implementation costs. (Without taking 33 pages to demonstrate it, I have no more idea what it will cost than FinCEN does, but I would add a few million for the cost of using the information collected, something they did not consider.) My rejection of the proposal's mechanics is based on the fact that I know it has no redeeming value; it is the perpetration of a fraud that stops at the water’s edge in order to save face in the rest of the world.

If someone could prove it would cost $10.31 per U.S. bank to implement, I would still say it is a waste of money.
Posted By: Midwest BSA

Re: Proposed CDD Regulation: How much will it cost? - 12/30/15 02:28 PM

Don't hold back - tell us how you really feel! wink More importantly, do you have any idea what times they offer those tours in Denver...? Happy New Year!
Posted By: Elwood P. Dowd

Re: Proposed CDD Regulation: How much will it cost? - 01/14/16 12:45 PM

The American Bankers Association et al has requested an extension of the comment period. The Regulations.Gov website shows 134 comment letters filed as of today, but that includes the 129 that were filed in 2014.
Posted By: Elwood P. Dowd

Re: Proposed CDD Regulation: How much will it cost? - 02/04/16 08:40 PM

There are 163 comments posted. Subtract the 129 already there and that makes 34 new ones. If you want to read them, click the link above and scroll down the page then click "Comments." For some reason the new ones are interspersed among those filed in 2014 so it's a task to locate them.

The ABA's critiques both FinCEN's compliance with the regulatory process and its financial analysis.

Best guess: Regardless of how rabid some commenters might be, there have not been enough comments to require FinCEN to take notice. They will roll this thing out and then bankers and their representative groups who just stood by during this process will whine. Although it's purely unnecessary, they will grant a long implementation period as a sop to the whiners.

FATF isn't stupid; they are not going to buy this as "compliance" with their standards.