CBA Letter re Terrorism and Illicit Finance Subcommittee Hearing on FinCEN CDD Rule

May 15, 2018



The Honorable Steve Pearce                             


Subcommittee on Terrorism and Illicit Finance

Committee on Financial Services

U.S. House of Representatives                                  

2432 Rayburn House Office Building

Washington, D.C. 20515

The Honorable Ed Perlmutter

Ranking Member

Subcommittee on Terrorism and Illicit Finance

Committee on Financial Services

U.S. House of Representatives                                  

1410 Longworth House Office Building

Washington, D.C. 20515



Dear Chairman Pearce and Ranking Member Perlmutter:


The Consumer Bankers Association (CBA) appreciates the Subcommittee holding a hearing entitled, “Implementation of FinCEN’s Customer Due Diligence Rule – Regulator Perspective.” CBA is the voice of the retail banking industry whose products and services provide access to credit to millions of consumers and small businesses.  Our members operate in all 50 states, serve more than 150 million Americans and collectively hold two-thirds of the country’s total depository assets. 


CBA’s member institutions support the Financial Crimes Enforcement Network (FinCEN) and its mission to safeguard the financial system from illicit use, combat money laundering, and promote national security.  Recently, on May 11, 2018, FinCEN made effective its customer due diligence rule (CDD rule), which is meant to allow financial institutions to better identify their client populations and help create better financial transparency, while at the same time, reducing the number of illegal transactions.  Specifically, the highly complex CDD rule requires covered financial institutions to establish procedures to identify and verify the identity of the “beneficial owners” of legal entity customers that open new accounts and ensure their anti-money laundering compliance programs include appropriate risk-based procedures, including developing customer risk profiles and periodically updating the beneficial ownership information of existing customers. 


CBA members understand the need for a CDD rule and appreciate the time banks were given to implement such a complex data collection rule.  Unfortunately, covered financial institutions have experienced unexpected delays by unforeseen challenges which will require more time for systems and processes to be fully operational and compliant.  Due to the complexity of the rule, we encourage Congress to work with the federal banking regulators to provide greater flexibility during the implementation and examination process of the new CDD rule.


Specifically, financial institutions need sufficient time to interpret and seek clarification on federal guidance related to the CDD rule to ensure compliance.  Recently, on April 3, 2018, FinCEN issued long-awaited frequently asked questions (FAQs) regarding the final CDD rule, which covered a wide range of topics, including beneficial ownership threshold issues, specific identification, and verification scenarios, along with various exemptions and exclusions.  In July 2016, FinCEN published a first set of FAQs, and the agency says it may issue additional FAQs and guidance, or grant exceptive relief as appropriate, further adding to the complexity of compliance and uncertainty for many covered institutions. 


Additionally, the Federal Financial Institutions Examination Council’s (FFIEC) exam manual incorporating the new CDD rule was not released until the day the CDD rule became effective, May 11, 2018.  Given the complexities of the CDD rule, it appears the two-year timeline did not give the FFIEC adequate time to complete the exam manual and incorporate the rule prior to its effective date.  Full knowledge of the exam manual is critical to understanding how examiners will examine banks for compliance with the CDD rule, and covered financial institutions will need additional time to complete their preparations to ensure compliance.


CBA encourages Congress to support greater regulatory flexibility for the implementation of the CDD rule for covered financial institutions as it will ensure appropriate compliance to achieve critical national security goals.  Thank you for holding this important hearing and we appreciate the opportunity to submit this statement for the record.





Richard Hunt

President and CEO

Consumer Bankers Association