WASHINGTON, D.C. ― Wednesday, U.S. Rep. Pearce, Chairman of the Financial Services Committee Subcommittee on Terrorism and Illicit Finance, chaired a hearing on the implementation of the Financial Crime Enforcement Network’s (FinCEN) Customer Due Diligence (CDD) rule.
The CDD rules places increased requirements on financial institutions of all sizes to verify ownership information of the companies and entities who want to do business with a financial institution. Beneficial ownership, as it is known, is essential information needed by US law enforcement to counter and combat money laundering and illicit financing. Questions remain about the impact this will have on community financial institutions already facing increased regulatory burden and hurdles.
“Last week the Customer Due Diligence rule went into effect, capping a 6-year effort by FinCEN to address shortcomings in our nation’s anti-money laundering and countering terrorist financing efforts,” Pearce said. “I have heard testimony from a variety of experts in the field of detecting and pursuing criminals in the financial system, and many agree that a critical component of success in these investigations is law enforcement’s timely access to beneficial ownership information. However, there are legitimate concerns about the application of this rule and the impact it could have on financial institutions already struggling with BSA compliance. Adding additional requirements will likely lead to the de-risking of legitimate business accounts because of increased regulatory burdens. It is important for our federal regulators to strike the appropriate balance between ensuring safety as well as access to the financial system.”