An interesting peek behind the curtain at the Financial Crimes Enforcement Network, or FinCEN. They're proposing beefing up the CDD rules to require beneficial owner identification for all new legal entities of every owner of 25% or more. Because the cost impact is significant (estimated to be $100 million per year to institutions), they not only had to issue a regulatory impact assessment, they also had to assess the need for some regulatory flexibility. On that second note, while many smaller institutions will be affected, the impact on each is not significant enough to warrant flexibility (i.e. Big number spread out over a lot of institutions ends up not being much cost per institution).
Now, the regulatory impact assessment is a lot meatier (33 pages). Mr. Watchlist will spend some of his vacation time looking at it a bit more but what he's seen so far is fascinating – there are estimates of how much reduction in “illicit activity” (most notably drug trafficking money laundering, it appears) is necessary to justify the rule change, and what the actual estimates are for the reduction.
It's nice to see that a cost-benefit analysis is part of the deal – sometimes, you wonder if, in the pursuit of greater compliance, the bottom line impact is even considered. It's nice to see that, at least in the AML world, that it is.
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