Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of the Bank Secrecy Act Reports by Financial Institutions of Suspicious Transactions at 31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, and 1029.320, and FinCEN Report 111-Suspicious Activity Report
| Published date | 26 May 2020 |
| Citation | 85 FR 31598 |
| Record Number | 2020-11247 |
| Section | Notices |
| Court | Financial Crimes Enforcement Network,Treasury Department |
Federal Register, Volume 85 Issue 101 (Tuesday, May 26, 2020)
[Federal Register Volume 85, Number 101 (Tuesday, May 26, 2020)]
[Notices]
[Pages 31598-31613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11247]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
Agency Information Collection Activities; Proposed Renewal;
Comment Request; Renewal Without Change of the Bank Secrecy Act Reports
by Financial Institutions of Suspicious Transactions at 31 CFR
1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320,
and 1029.320, and FinCEN Report 111--Suspicious Activity Report
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice and request for comments.
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SUMMARY: As part of its continuing effort to reduce paperwork and
respondent burden, FinCEN invites comments on the proposed renewal,
without change, of currently approved information collections relating
to reports of suspicious transactions. Under the Bank Secrecy Act
regulations, financial institutions are required to report suspicious
transactions using FinCEN Report 111 (the suspicious activity report,
or SAR). Although no changes are proposed to the information
collections themselves, this request for comments covers a proposed
updated burden estimate for the information collections. This request
for comments is made pursuant to the Paperwork Reduction Act of 1995.
DATES: Written comments are welcome, and must be received on or before
July 27, 2020.
ADDRESSES: Comments may be submitted by any of the following methods:
Federal E-rulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. Refer to Docket Number
FINCEN-2020-0004 and the specific Office of Management and Budget (OMB)
control numbers 1506-0001, 1506-0006, 1506-0015, 1506-0019, 1506-0029,
1506-0061, and 1506-0065.
Mail: Policy Division, Financial Crimes Enforcement
Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-
2020-0004 and OMB control numbers 1506-0001, 1506-0006, 1506-0015,
1506-0019, 1506-0029, 1506-0061, and 1506-0065.
Please submit comments by one method only. Comments will also be
incorporated into FinCEN's review of existing regulations, as provided
by Treasury's 2011 Plan for Retrospective Analysis of Existing Rules.
All comments submitted in response to this notice will become a matter
of public record. Therefore, you should submit only information that
you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section
at 1-800-767-2825 or electronically at [email protected].
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Provisions
The legislative framework generally referred to as the Bank Secrecy
Act (BSA) consists of the Currency and Financial Transactions Reporting
Act of 1970, as amended by the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act) (Pub. L. 107-56) and other
legislation. The BSA is codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-
1959, 31 U.S.C. 5311-5314 and 5316-5332, and notes thereto, with
implementing regulations at 31 CFR Chapter X.
The BSA authorizes the Secretary of the Treasury, inter alia, to
require financial institutions to keep records and file reports that
are determined to have a high degree of usefulness in criminal, tax,
and regulatory matters, or in the conduct of intelligence or counter-
intelligence activities, to protect against international terrorism,
and to implement counter-money laundering programs and compliance
procedures.\1\ Regulations implementing Title II of the BSA appear at
31 CFR Chapter X. The authority of the Secretary to administer the BSA
has been delegated to the Director of FinCEN.\2\
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\1\ Section 358 of the USA PATRIOT Act added language expanding
the scope of the BSA to intelligence or counter-intelligence
activities to protect against international terrorism.
\2\ Treasury Order 180-01 (re-affirmed January 14, 2020).
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Under 31 U.S.C. 5318(g), the Secretary of the Treasury is
authorized to require financial institutions to report any suspicious
transaction relevant to a possible violation of law or regulation.
Regulations implementing 31 U.S.C. 5318(g) are found at 31 CFR
1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320,
1029.320, and 1030.320. The information collected under these
requirements are made available to appropriate agencies and
organizations as disclosed in FinCEN's Privacy Act System of Records
Notice relating to BSA Reports.\3\
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\3\ FinCEN's System of Records Notice for the BSA Reports System
was most recently published at 79 FR 20969 (April 14, 2014).
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II. Paperwork Reduction Act (PRA) \4\
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\4\ Public Law 104-13, 44 U.S.C. 3506(c)(2)(A).
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Title: Reports by Financial Institutions of Suspicious Transactions
(31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320,
1026.320, and 1029.320).
OMB Control Numbers: 1506-0001, 1506-0006, 1506-0015, 1506-0019,
1506-0029, 1506-0061, and 1506-0065.\5\
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\5\ The SAR regulatory reporting requirements are currently
covered under the following OMB control numbers: 1506-0001 (31 CFR
1020.320--Reports by banks of suspicious transactions); 1506-0006
(31 CFR 1021.320--Reports by casinos of suspicious transactions);
1506-0015 (31 CFR 1022.320--Reports by money services businesses of
suspicious transactions); 1506-0019 (31 CFR 1023.320--Reports by
brokers or dealers in securities of suspicious transactions, 31 CFR
1024.320--Reports by mutual funds of suspicious transactions, and 31
CFR 1026.320--Reports by futures commission merchants and
introducing brokers in commodities of suspicious transactions);
1506-0029 (31 CFR 1025.320--Reports by insurance companies of
suspicious transactions); and 1506-0061 (31 CFR 1029.320--Reports by
loan or finance companies of suspicious transactions). The PRA does
not apply to reports by one government entity to another government
entity. For that reason, there is no OMB control number associated
with 31 CFR 1030.320--Reports of suspicious transactions by housing
government sponsored enterprises. OMB control number 1506-0065
applies to FinCEN Report 111--SAR.
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[[Page 31599]]
Report Number: FinCEN Report 111--Suspicious Activity Report (SAR).
Abstract: FinCEN is issuing this notice to renew the OMB control
numbers for the SAR regulations and the SAR report.
Type of Review: Renewal without change of currently approved
information collections.
Affected Public: Businesses or other for-profit institutions, and
non-profit institutions.
SAR Regulations
Estimated Burden: An administrative burden of one hour is assigned
to each of the SAR regulation OMB control numbers in order to maintain
the requirements in force.\6\ The reporting and recordkeeping burden is
reflected in FinCEN Report 111--SAR, under OMB control number 1506-
0065. The rationale for assigning one burden hour to each of the SAR
regulation OMB control numbers is that the annual burden hours would be
double counted if FinCEN estimated burden in the industry SAR
regulation OMB control numbers and in the FinCEN Report 111--SAR OMB
control number.
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\6\ One hour of burden is estimated under each of the following
OMB control numbers: 1506-0001, 1506-0006, 1506-0015, 1506-0019,
1506-0029, and 1506-0061.
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FinCEN Report 111--SAR
Type of Review:
Propose for review and comment a re-calculation of the
portion of the PRA burden that has been subject to notice and comment
in the past (the ``traditional annual PRA burden'').
Propose for review and comment a method to estimate the
portion of the PRA burden that FinCEN previously had not included (the
``supplemental annual PRA burden'').
Frequency: As required.
Estimated Number of Respondents: 12,148 financial institutions.\7\
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\7\ See Table 1 below for a breakdown of the types of financial
institutions that filed SARs in 2019. Note that all banks, casinos
and card clubs, money services businesses, brokers or dealers in
securities, mutual funds, providers of covered insurance products,
futures commission merchants and introducing brokers in commodities,
loan or finance companies, and housing government sponsored
enterprises are required to comply with the SAR regulatory
requirements; however, not all financial institutions identify
suspicious activity that would warrant a SAR filing. See 31 CFR
1020.320 (banks), 31 CFR 1021.320 (casinos and card clubs), 31 CFR
1022.320 (money services businesses), 31 CFR 1023.320 (brokers or
dealers in securities), 31 CFR 1024.320 (mutual funds), 31 CFR
1025.320 (insurance companies), 31 CFR 1026.320 (futures commission
merchants and introducing brokers in commodities), 31 CFR 1029.320
(loan or finance companies), and 31 CFR 1030.320 (housing government
sponsored enterprises).
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Estimated Reporting and Recordkeeping Burden:
In this notice, FinCEN introduces two substantial modifications to
the scope and the methodology we previously used to estimate the annual
PRA burden associated with the SAR. First, with respect to the scope of
the estimate, FinCEN's traditional annual PRA burden estimate
associated with the SAR included only the filer's annual operational
burden and cost associated with (a) producing and filing the report,
and (b) storing a copy of the filed report. Starting with this notice,
FinCEN intends to add a supplemental annual PRA burden estimate that
reflects the annual costs involved in (a) determining whether alerts
that were elevated for further review merit filing a SAR, and (b)
documenting the decision not to file a SAR when a case does not merit
it.\8\ Second, with respect to the methodology underlying the PRA
burden and cost estimates, rather than continuing to allocate a single
PRA burden and cost to the completion, submission, and storage of any
type of SAR, FinCEN proposes to estimate the individual PRA burden and
cost of different categories of SARs, grouped by the SARs' estimated
degree of complexity. Because there is no direct way to measure the
complexity and related effort and cost of producing each SAR, FinCEN
uses key features of SARs filed in 2019 to categorize them based on
similar combinations of those key features, under the assumption that
such combinations of key features reflect similar levels of effort and
cost necessary to produce the SARs.
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\8\ Despite the expanded scope, FinCEN has not presented in this
notice an estimate of the entire burden that is associated with SAR
filings because, as described further in Part 2, FinCEN lacks the
granular data to estimate the costs of certain steps in that
process.
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Part 1 below sets out the breakdown of the SARs filed during 2019
according to the key features that are used to group SARs into
categories subject to similar PRA burden and cost. Part 1 also contains
the analysis of how some combinations of key features worked or failed
to work as proxies for a SAR's complexity and, therefore, burden and
cost.
Part 2 uses the results of the analysis in Part 1 to estimate the
individual and total annual PRA burden and cost of each category of
SARs. The methodology described in Part 2 covers both the traditional
and the supplemental annual PRA burden estimate.
Part 1. Breakdown of the 2019 SAR Filings
In 2019, 12,148 financial institutions (the ``filing population'')
submitted 2,751,694 SARs (the 2019 SAR submissions).\9\ The
distribution of the 2019 SAR submissions, by type of filing (original
or continuing),\10\ type of financial institution,\11\ number of
reports per filer per year, and method of filing (batch or
discrete),\12\ is presented in Table 1 below:
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\9\ Numbers are based on actual 2019 filings as reported to the
BSA E-Filing System, as of 12/31/2019. Assumptions and estimates are
also based on actual 2019 SAR filings.
\10\ An original (or initial) report is the first SAR filed on
suspicious activity no later than 30 days after the date of initial
detection by the filer. (See e.g., 31 CFR 1020.320(a)(3)). A
continuing SAR must be filed on suspicious activity that continues
after an initial SAR is filed. Continuing reports must be filed on
successive 90-day review periods until the suspicious activity
ceases, but may be filed more frequently if circumstances warrant.
For more information on continuing reports, see page 142 of the
FinCEN Suspicious Activity Report (FinCEN SAR) Electronic Filing
Requirements--XML Schema 2.0. https://bsaefiling.fincen.treas.gov/docs/XMLUserGuide_FinCENSAR.pdf.
\11\ In Table 1, the category ``Securities/Futures'' includes
brokers or dealers in securities, mutual funds, futures commission
merchants, and introducing brokers in commodities. The category
``Undetermined'' includes filers with missing, incomplete, or
contradictory information about the type of financial institution to
which they belong.
\12\ In batch filing, a filer submits a single electronic file
containing several reports. In discrete filing, the filer fills in
an electronic report individually, using a data entry screen that
FinCEN provides. While exceptions apply, batch filing is generally
used by large-volume filers that have automated the filing process,
while discrete filing is generally employed by filers that submit
fewer reports per year and rely more on manual data entry methods.
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[[Page 31600]]
[GRAPHIC] [TIFF OMITTED] TN26MY20.005
Table 1 shows that banks submitted slightly over half of the total
number of SARs filed in 2019. Money services businesses (MSBs) and
credit unions contributed 32.9% and 7.3% of the total, respectively.
Approximately 85% of the filings from all financial institutions
consisted of original reports. In addition, approximately 85% of the
reports were batch filed.
To determine the concentration of 2019 SAR submissions among the
filing population, FinCEN grouped filers in tranches according to the
number of SARs filed during the year. Table 2 sets out the number of
reports per tranche,\13\ and Table 3 sets out (i) each tranche as a
percentage of the total filer population, and (ii) each tranche's
reports as a percentage of the 2019 SAR submissions.\14\
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\13\ The category ``Other'' in Table 2 includes securities and
futures, housing government sponsored enterprises, providers of
covered insurance products, and filers for which the type of
financial institution was still being determined at the moment of
publication of this notice, as defined above. We adopt the same
criteria for the rest of the tables contained in the notice, such as
in Tables 4A, 4B, and 5 below.
\14\ The percentage of filers contained in each tranche, and the
percentage of reports submitted by those filers, are contained in
the fields ``pct_filers'' and ``pct_forms'', respectively. The
cumulative percentage of filers contained in all tranches up to and
including the current one, and the cumulative percentage of reports
submitted by such filers, are shown in the fields
``cumm_pct_filers'' and ``cumm_pct_forms'', respectively.
[GRAPHIC] [TIFF OMITTED] TN26MY20.006
[[Page 31601]]
[GRAPHIC] [TIFF OMITTED] TN26MY20.007
Ten filers (six banks and four MSBs) made up the first tranche
(00_LARGEST FILERS). As set out in Table 3, these ten filers accounted
for nearly half of the 2019 SAR submissions. Slightly less than 2% of
the filing population (Tranches 00 to 03) submitted 81% of all the
reports. Additionally, out of the filing population, 81% contributed
slightly less than 4% of the filings, while 56% submitted fewer than 10
reports per year.
Unlike currency transaction reports, for example, which are more
easily categorized because they are filed based on objective criteria
(i.e., transaction type and threshold), each SAR may require a widely
disparate level of effort depending largely on the amount of research
and subjective analysis required to determine: (a) Whether to file a
report; (b) how to attribute the suspicious behavior to money
laundering, financing of terrorism, or fraud typologies; (c) who the
main persons involved in the activity are; and (d) how to explain in
concise terms the rationale that led the filer to decide to file a SAR.
As FinCEN has no direct way to gauge the amount of work involved in the
production of each SAR, FinCEN broke down the 2019 SAR submissions by
additional key features, so that, individually or in combination, these
additional key features could serve as a proxy to group SARs with
similar levels of estimated complexity, and therefore, with similar
estimated PRA burden.
The additional key features in the SARs that FinCEN has
concentrated its analysis on are: (a) The number of persons identified
as subjects; (b) the number of distinct suspicious activities selected;
\15\ (c) the length of the narrative section; and (d) whether or not
the report contains an attachment.\16\ Once FinCEN identifies the
combination of key features that are common to the largest number of
reports submitted by a given type of filer (the ``standard content''
for that type of filer), FinCEN may take such combination as a proxy
for the content and estimated complexity of a ``standard'' SAR for that
filer type. Reports submitted by filers of the same type that contain
different features (more subjects, more suspicious activities, a longer
narrative) may represent SARs with ``extended content'' that are more
complex, and therefore carry a larger PRA burden and cost for that
filer type. Based on the data available, FinCEN is considering only two
levels of SAR complexity.
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\15\ FinCEN Report 111--SAR contains checkboxes that allow
filers to identify a variety of suspicious activities, such as
structuring, terrorist financing, fraud, money laundering, and a
cyber-event. FinCEN Report 111--SAR has 18 categories of suspicious
activities.
\16\ Some filers attach a supplemental file to the report that
in general contains a list of individual transactions that raised
the alert about a potential suspicious transaction. The length of
the narrative is sometimes impacted by whether the filer submits an
attachment to the report listing these transactions, or uses the
narrative section of the report to include such a list.
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Table 4A shows a breakdown of the 2019 SAR submissions by type of
financial institution and narrative length. Table 4B shows the
percentage of reports with and without attachments, by type of
financial institution, and narrative length.
[[Page 31602]]
[GRAPHIC] [TIFF OMITTED] TN26MY20.008
Table 5 breaks down the 2019 SAR submissions by type of financial
institution and number of suspicious activities identified in each
report.\17\
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\17\ The number of suspicious activities identified in each
report represents the number of check boxes selected by the filer.
[GRAPHIC] [TIFF OMITTED] TN26MY20.009
Approximately 44% of the SARs submitted by all filers have
narratives not exceeding 2,000 characters (half a page), and another
39% have narratives above half a page but not exceeding one page. Most
SARs (60%) identify up to two suspicious activities, while another 38%
list between three and five.
[[Page 31603]]
FinCEN analyzed key features of the 2019 SAR submissions described
in Tables 1 through 5 to generate a tractable segmentation of the SAR
universe into different levels of burden. FinCEN based this
segmentation on the following observations:
FinCEN was not able to limit the criteria for selecting
categories of SAR burden to the type of financial institution or the
tranche of a filer alone because of large variations in the combination
of features within each type of financial institution or tranche. It
was possible, however, to arrive at a small number of complexity
categories by combining key features that highlight significant
differences between depository institution filers (banks and credit
unions), MSBs, and other types of financial institution filers (non-
depository institutions).
Based on the analyzed complexity features as well as
FinCEN's extensive use of SARs in its work, in general and on
average,\18\ the content of SARs shows the following general features:
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\18\ By ``in general, '' FinCEN is speaking without regard to
outliers (e.g., reports exhibiting features that are uncommonly
higher or lower than those of the population at large), or that
apply to a very narrow type of filer or type of transaction. By ``on
average,'' FinCEN means the mean of the distribution of each subset
of the population (althoughFinCEN uses median labor cost data to
calculate weighted hourly worker compensation allocated to each PRA
burden hour in Table 6 below).
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(a) There appears to be a positive correlation between the number
and complexity of a financial institution's main business lines, and
the value registered by some of the key features selected: The higher
the number and complexity of the filer's business lines, the higher the
number of suspicious transactions identified and the longer the
narrative.
(b) In general, non-depository institutions with a single primary
business line (i.e., loan and finance companies or casinos) file
reports that (a) list up to two suspicious transactions involving one
subject and a single transaction or a small number of transactions over
a short period of time, and (b) use relatively short narratives of up
to half a page to explain the basis for their suspicion.
(c) Some SARs filed by non-depository institutions have features
indicating complexity, particularly longer narratives, despite the SARs
not being complex. A sample of the SARs filed by two of the largest
non-depository institutions showed that in 94% of the SARs with longer
narratives, the increased length was due to listing transactions the
filer appeared to have tracked automatically. Six percent of those SARs
appeared to have required greater analytical effort. To estimate the
number of SARs with extended content filed by non-depository
institutions in 2019, FinCEN therefore applied the six percent
threshold to the total number of SARs with narratives over one page
filed by non-depository institutions.
(d) Nearly three quarters of original SARs filed by depository
institutions report only up to two subjects involved in up to five
suspicious activities, described in a narrative that does not exceed
one page, and on their face do not appear complex. Many SARs filed by
depository institutions, however, have features indicating complexity.
This may reflect any combination of the factors laid out in the tables
above--number of subjects per SAR, number of suspicious transactions
listed per SAR, length of the narrative, and presence of an attachment.
However, some SARs that appear complex based on these features often
are not in reality. Depository institutions, which in general tend to
offer many business lines mostly to established customers, sometimes
include in SARs a comparison of other information they maintain. This
can increase the apparent complexity of SARs analyzed against the
complexity factors FinCEN identified without necessarily being
indicative of a SAR requiring extensive research. FinCEN controlled for
this by removing from the complex category SARs that had a high ratio
of digits to non-digit text in the SAR narrative, because a high ratio
of digits often indicates the algorithmic inclusion of transaction data
in the SAR narrative.
For all financial institutions, FinCEN estimates that the
review of cases documenting the need to file continuing SARs, and the
filing of the continuing SARs themselves, will require substantially
less effort than the review of cases leading to the filing of original
SARs, and the actual filing of such original SARs.
Lastly, FinCEN assumes that financial institutions that
batch file SARs have a degree of automation they can employ to the
partial filling of the report. Batch filers will also store electronic
files that may contain several reports per file. Based on these
assumptions, FinCEN allocates a lower PRA burden per report to these
filers. This burden consists of the actual time of submission per
report (which may be close to instantaneous), and the administrative
and supervisory tasks involved in this stage.
As noted, reflecting the observations above, FinCEN identified five
categories of SARs to generate a tractable segmentation of complexity
for analyzing estimated PRA burden: (a) Continuing SARs; (b) original
SARs with standard content filed by non-depository institutions; (c)
original SARs with extended content filed by non-depository
institutions; (d) original SARs with standard content filed by
depository institutions; and (e) original SARs with extended content
filed by depository institutions.
Part 2. PRA Burden and Cost Estimates
Based on industry input, including input obtained over the past
year in a project assessing how to improve the effectiveness of BSA
data and measure its value for each stakeholder group, FinCEN
understands that the SAR filing process comes at the end of a larger
process that varies in complexity depending on the type and size of the
financial institution: \19\
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\19\ FinCEN acknowledges that the description of the SAR
production process in this notice seems to imply that the process is
always linear, with each stage following the previous one. While
this situation may reflect a large proportion of the cases reviewed
and SARs filed, certain situations will require the filer to return
to an earlier stage (such as requiring additional information from
the case managers, or drafting several versions of a narrative). The
breakdown of the SAR production process in a discrete number of
linear stages is intended as a conceptual framework to guide
FinCEN's estimates of the different levels of PRA burden. Such
framework does not involve or imply any modification to, or new
interpretation of the actual rule text of BSA regulations. The
details provided in each stage of the framework serve only as a list
of the features FinCEN did or did not consider when estimating the
PRA burden of such stage. While FinCEN believes the tasks described
in the framework represent the work generally required to produce a
SAR, there is no obligation for a financial institution to adopt
either formally or informally a process such as the one presented by
the framework.
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Stage 1--Maintaining a Monitoring System: Commensurate with the
size of the filer and the complexity of its operations, each filer will
run, update, and upgrade a monitoring system that reflects its
assessment of risk. This monitoring system will vary in complexity from
a manual review process to a fully automated one.\20\
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\20\ FinCEN recognizes that filers may use the monitoring system
to comply with additional BSA and non-BSA regulatory requirements,
as well as for other business purposes such as protecting against
reputational risks of money laundering and fraud against the filer
or the filer's customers.
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Stage 2--Reviewing Alerts: When the monitoring system issues an
alert, the filer will have to determine whether the alert reveals a
true potential risk event, or is a false positive.
Stage 3--Transforming Alerts into Cases: If, based on the filer's
analysis, the alert points to a true potential risk event, the filer
will gather additional information to present the case to the reviewing
level that will eventually
[[Page 31604]]
decide whether the event merits the filing of a SAR.
Stage 4--Case Review: The appropriate level will review the case to
determine whether or not the event constitutes a suspicious activity
that must be reported.
Stage 5--Documentation of Determination: This notice takes into
account that filers document decisions they make as part of Stage 4
that lead them to conclude that an event does not warrant the filing of
a SAR.
Stage 6--SAR Filing Process: If an event warrants the filing of a
SAR, the filer will follow its SAR filing process, including: (a)
Selecting supporting documentation; (b) completing the report,
including drafting the narrative; (c) filing the report through batch
or discrete filing; and (d) storing the filed report and supporting
documentation in physical or electronic form.
Each stage requires the filer's use of human and technological
resources, which combination will vary according to the sophistication
of the filer. Previously, FinCEN limited its annual SAR PRA burden
estimate to Stage 6 mentioned above, the SAR filing process (the
``traditional annual PRA burden''). In this notice, FinCEN expands its
PRA burden estimate to include Stages 4 and 5 listed above (the
``supplemental annual PRA burden'').
FinCEN is not addressing the burden associated with Stages 1 to 3
above due to the lack of the necessary granular information. Notably,
FinCEN would need information regarding: (i) The levels of burden and
cost attributed to differing monitoring systems; (ii) varying levels of
complexity in determining whether alerts represent true alerts; and
(iii) the amount of research involved in assembling cases to determine
whether true alerts warrant the filing of a SAR. Furthermore, FinCEN
would need additional information to identify the proportion of these
costs that are strictly connected to the filing of a SAR relative to
the same costs associated with a filer's other regulatory or business
requirements. FinCEN intends to address the information required for
the estimate of the burden and cost of Stages 1 to 3 in a future
notice. FinCEN acknowledges that each stage of the SAR production
contributes to the next (including those stages of the process not
included in this notice). FinCEN assesses, however, that the
information provided by this notice, though not a complete estimate of
the SAR PRA burden, improves the estimate and creates a foundation for
a future estimate of the costs of all six stages.
FinCEN recognizes that SAR cases that are more complex may take a
longer time to review at multiple stages, such as the case
investigation point in Stage 4 and the SAR filing point in Stage 6.
However, for ease of presentation, FinCEN calculated the extra burden
of handling complex cases in our burden estimate for Stage 6, and
attributed a burden that represents our estimate of the standard
administrative work connected to continuing and original SARs to Stages
4 and 5. Therefore, the total estimate proposed in this notice will be
the aggregate of the following estimates of the PRA burden related to:
Evaluating cases for potential SAR filing (Stage 4). This
will be part of the supplemental annual PRA burden calculation.
Recordkeeping of cases not converted into SARs (Stage 5).
This will be part of the supplemental annual PRA burden calculation.
The SAR filing process (Stage 6). This will be part of the
traditional annual PRA burden calculation and will include the PRA
burden associated with the filing of (i) continuing SARs, (ii) original
SARs filed by non-depository financial institutions, and (iii) original
SARs filed by depository financial institutions.
FinCEN identified four staff positions and corresponding roles
involved in the SAR process in order to estimate the hourly costs
associated with the burden hour estimates calculated in this part.
Those are: (i) General supervision (providing process oversight); (ii)
direct supervision (reviewing operational-level work and cross-checking
all or a sample of the filings against their supporting documentation);
(iii) clerical work (engaging in case evaluation to support the
determination of whether a SAR must be filed); and (iv) clerical work
(engaging in producing, filing, and storing SARs and supporting
documentation).
FinCEN calculated the fully loaded hourly wage for each of these
four roles by taking the median wage as estimated by the U.S. Bureau of
Labor Statistics (BLS), and computing an additional benefits cost as
follows: \21\
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\21\ See U.S. Bureau of Labor Statistics, Occupational
Employment Statistics-National, May 2019, available at https://www.bls.gov/oes/tables.htm. The most recent data from the BLS
corresponds to May 2019. For the benefits component of total
compensation, see U.S. Bureau of Labor Statistics, Employer's Cost
per Employee Compensation as of December 2019, available at https://www.bls.gov/news.release/ecec.nr0.htm. The ratio between benefits
and wages for financial activities, credit intermediation and
related activities is $15.80 (hourly benefits)/$31.45 (hourly wages)
= 0.502. The benefit factor is 1 plus the benefit/wages ratio, or
1.502. Multiplying each hourly wage by the benefit factor produces
the fully-loaded hourly wage per position.
[GRAPHIC] [TIFF OMITTED] TN26MY20.010
[[Page 31605]]
FinCEN estimates that, in general and on average, each role would
spend different amounts of time on each stage of the process covered by
this notice, as described in the specific estimates below.
1. Estimate of the Burden and Cost of Evaluating Cases for Potential
SAR Filing
To estimate the PRA burden involved in evaluating each case
generated by one or more alerts, FinCEN starts with the number of cases
that, after review, resulted in the filing of 2,751,694 SARs in 2019.
As set out in Table 1 above, of that total number of filings, 2,335,559
reports were original SARs, and 416,135 were continuing SARs.
In the case of continuing SARs, FinCEN assumes that the filer will
be monitoring the specific transactions of the previously identified
subject, and filing a continuing SAR every ninety days (if the subject
did not discontinue the activity), and noting the cumulative monetary
amount involved in the suspicious activity. FinCEN therefore assesses
that the number of continuing suspicious activity cases will equal the
number of continuing SARs.
In the case of original SARs, however, a filer may need to review a
large number of cases to determine which cases justify the filing of a
report. A paper issued by the Bank Policy Institute in 2018 (the ``BPI
Paper'') \22\ contains the estimates of 13 large, midsize, and small
banks (with assets under management of more than $500 billion, between
$200 to $500 billion, and between $50 and $200 billion, respectively)
about their average conversion rate \23\ of cases to SARs. The BPI
Paper states that, on average, banks filed SARs on 42% of alerts turned
into cases (i.e., alerts that are not considered false positives).\24\
In the absence of similar data for other types of financial
institutions, FinCEN adopts the bank average conversion rate from cases
to SARs set out in the BPI Paper (42%) to approximate the number of
cases that could have generated the number of original SARs filed in
2019. If 42% of cases result in the filing of a SAR, the total filing
population would have had to review approximately 5,560,854 cases \25\
to report the 2,335,559 original SARs submitted in 2019.\26\
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\22\ `Getting to Effectiveness--Report on U.S. Financial
Institution Resources Devoted to BSA/AML and Sanctions Compliance',
Bank Policy Institute, October 29, 2018, available at https://bpi.com/wp-content/uploads/2018/10/BPI_AML_Sanctions_Study_vF.pdf.
See pages 5-7.
\23\ The average conversion rate represents the percentage of
the total number of cases that, after receiving further review and
consideration, warranted the filing of a SAR.
\24\ Ibid. The BPI Paper identifies several provisos regarding
the correlation among the different metrics (such as the number of
alerts related to AML issues only, while the number of SARs filed
included both fraud and AML-related transactions). FinCEN considers
that these qualifications do not affect the rationale of applying
the bank conversion rate of cases into SARs to the full filer
population.
\25\ The number of original SARs submitted in 2019 (2,335,559)
divided by the 42% conversion rate.
\26\ FinCEN acknowledges that this estimate simplifies the
conversion, stipulating that one case will generate or fail to
generate one SAR, when in practice several cases may be reported in
a single SAR. It is also possible, while not very probable, that a
single case may require the filing of more than one simultaneous
SAR.
---------------------------------------------------------------------------
FinCEN estimates that the average burden involved in considering
whether a case merits filing an original SAR, for all types of
financial institutions and for any type of suspicious transactions,
would be 20 minutes per case. FinCEN estimates that the average burden
involved in reviewing cases involving continuing SARs will be much
lower, at 3 minutes per case.
FinCEN assumes that the review of cases will involve the
participation of three of the roles described above, as follows:\27\
---------------------------------------------------------------------------
\27\ FinCEN's assumption is that the clerical work involved in
the case review stage would include general administrative and
coordination responsibilities, such as the maintaining of agendas,
documentation of minutes, assembly of files to be presented to the
appropriate authority (for example, a filer's SAR Committee), and
the summarization of the reasons not to file.
[GRAPHIC] [TIFF OMITTED] TN26MY20.011
The total annual PRA burden of this stage involving cases related
to both continuing and original SARs would be 1,874,424 hours, at a
total cost of $91,846,776, as described in Tables 8A and 8B below.
[[Page 31606]]
[GRAPHIC] [TIFF OMITTED] TN26MY20.012
2. Estimate of the Burden and Cost of Documenting Cases Not Converted
Into SARs
With 2,335,559 cases resulting in SAR filings and an estimated
conversion rate of 42%, out of the estimated 5,560,854 cases, 3,225,295
would be cases involving a decision not to file. FinCEN estimates that
the average burden hours of documenting the rationale as to why a case
does not merit filing a SAR, for all types of financial institutions
and in the context of any type of suspicious transactions, would be 25
minutes per report.
FinCEN assumes that documenting the rationale for not filing a SAR
and the storage of the case documents will involve the participation of
three of the roles described above, as follows:
[GRAPHIC] [TIFF OMITTED] TN26MY20.013
The total annual PRA burden of this stage would be 1,343,872 hours,
at a total cost of $38,972,288, as described in Table 10 below:
[GRAPHIC] [TIFF OMITTED] TN26MY20.014
[[Page 31607]]
3. Estimate of the Burden of the SAR Filing Process
FinCEN's prior estimate of the traditional average burden hours
associated with the SAR filing process \28\ was based on a 2010
assessment of the manual effort involved in the drafting, writing,
filing, and storing of a paper-based SAR with a standard narrative of
4,000 characters (i.e., one page), and the storing or segregation of
paper-based supporting documentation. Since 2011, financial
institutions have been able to (a) file SARs electronically either in
batch or discrete format, and (b) include with their SARs an attachment
containing tabular data such as transaction data providing additional
suspicious activity information not suitable for inclusion in the
narrative. This attachment must be an MS Excel-compatible comma
separated value (CSV) file with a maximum size of 1 megabyte. These new
features contribute to a substantial decrease in the hourly burden of
the mechanical aspects of the filing and storage of SARs and supporting
documentation.
---------------------------------------------------------------------------
\28\ FinCEN's estimate of the traditional average burden hours
involved in the SAR filing process was 2 hours for SARs filed
individually (60 minutes attributed to reporting, and 60 minutes
attributed to recordkeeping), and 2.5 hours per SAR for joint
filings (90 minutes attributed to reporting, and 60 minutes
attributed to recordkeeping). Joint filings are a single SAR filed
by two or more separate financial institutions. This type of filing
constitutes less than 1% of total filings.
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As set out in the estimates above, the review of approximately
5,560,854 cases would result in the closing out of 3,225,295 cases, and
the filing of 2,335,559 original and 416,135 continuing SARs. In the
previous part, FinCEN identified a tractable segmentation of SAR
complexity: (a) Continuing SARs; (b) original SARs with standard
content filed by non-depository institutions; (c) original SARs with
extended content filed by non-depository institutions; (d) original
SARs with standard content filed by depository institutions; and (e)
original SARs with extended content filed by depository institutions.
In all cases, the estimate represents the administrative burden
involved in producing and reviewing a SAR, overseeing the process of
filing a SAR, and the actual filing of a SAR, and not just the
mechanical process of generating, submitting, and storing the SAR
(which might be very small for fully-automated filers using the batch-
filing method).
FinCEN assumes that the SAR filing process involves the following
four roles described in Table 6, in varying proportions depending on
whether the burden accounts for the reporting or the recordkeeping
stage of the process:
[GRAPHIC] [TIFF OMITTED] TN26MY20.015
3.1. Continuing SARs
In the case of a suspicious transaction that continues over time,
filers must submit continuing SARs every ninety days. Financial
institutions filed 416,135 continuing SARs as part of the 2019 SAR
submissions. FinCEN estimates that, on average, the burden involved in
filing a continuing SAR will be relatively low, and will be
substantially the same among all types of financial institutions. The
estimated hourly burden and its cost for continuing SARs are as
follows:
[[Page 31608]]
[GRAPHIC] [TIFF OMITTED] TN26MY20.016
3.2. Original SARs Filed by Non-Depository Institutions
Based on the application of the percentage described in Part 1 to
SARs with narratives over one page filed by non-depository institution,
FinCEN identified 988,377 reports with standard content and 6,897 with
extended content.
Original SARs Filed by Non-Depository Institutions (Standard Content)
For the purpose of calculating the burden of original SARs with
standard content filed by non-depository institutions, FinCEN estimates
that the average burden involved in the filing of original SARs will be
higher than that of continuing SARs. Specifically, FinCEN uses an
estimate of 40 minutes per batch-filed report and 60 minutes per
discrete-filed report for drafting, writing, and submitting the SARs,
and 5 minutes per batch-filed reports and 15 minutes per discrete-filed
report for storing filed reports and supporting documentation. The
estimated hourly burden and its cost for this subset of SARs are
therefore as follows:
[GRAPHIC] [TIFF OMITTED] TN26MY20.017
[[Page 31609]]
Original SARs Filed by Non-Depository Institutions (Extended Content)
For the purpose of calculating the burden of original SARs with
extended content filed by non-depository institutions, FinCEN estimates
that the average burden will be several times higher than that of
standard content SARs, and the related cost will include a larger
proportion of the levels of the organization with higher fully-loaded
hourly wages (those representing indirect and direct supervision). The
estimated hourly burden and its cost for this subset of SARs are
therefore as follows:
[GRAPHIC] [TIFF OMITTED] TN26MY20.018
3.3. Original SARs Filed by Depository Institutions
Based on the segmentation described in Part 1 of depository
institution SARs into standard content and extended content, FinCEN
identified 1,313,774 reports with standard content, and 26,513 that
included extended content.
The estimate of the reporting and recordkeeping burden of these two
SAR subsets is as follows, using the per-SAR burden estimates included
in the tables:
Original SARs Filed by Depository Institutions (Standard Content)
[GRAPHIC] [TIFF OMITTED] TN26MY20.019
[[Page 31610]]
Original SARs Filed by Depository Institutions (Extended Content)
[GRAPHIC] [TIFF OMITTED] TN26MY20.020
[GRAPHIC] [TIFF OMITTED] TN26MY20.021
Estimated Reporting and Recordkeeping Burden: The estimated
reporting and recordkeeping burden by type of process and report is as
follows:
[[Page 31611]]
[GRAPHIC] [TIFF OMITTED] TN26MY20.022
Estimated Total Annual Reporting and Recordkeeping Burden: The
total estimated reporting and recordkeeping burden and cost per type of
process and type of report are as follows:
As detailed in Table 22 below, the total estimated recordkeeping
and reporting annual PRA burden for the case review and SAR filing
process of the seven OMB control numbers covered by this notice is
5,462,026 hours, for a total cost of $206,422,989.
[GRAPHIC] [TIFF OMITTED] TN26MY20.023
[[Page 31612]]
The distribution of the total estimated annual PRA burden and cost,
by type of financial institution and SAR (original or continuing), and
by SAR production process stage is as follows: \29\
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\29\ FinCEN obtained the breakdown by applying the percentages
of continuing and original SARs by type of financial institution
listed in Table 1, to the burden and cost estimates contained in
Tables 8A, 8B, 10, and 13 to 20. Financial institutions the type of
which is ``undetermined'' are included in the ``Other non-
depository'' category in Tables 23 and 24.
[GRAPHIC] [TIFF OMITTED] TN26MY20.024
[GRAPHIC] [TIFF OMITTED] TN26MY20.025
FinCEN acknowledges that some of the partial estimates may over- or
under-state the burden and cost of some the stages of the SAR
production process covered by this notice, due to generalization and
lack of more detailed information. FinCEN wishes to emphasize that the
total burden presented in Table 22 is spread across a number of
different SAR reporting requirements involving different types of
financial institutions. Indeed, in the case of depository institutions,
both FinCEN and the Federal banking agencies have regulations requiring
SAR reporting.\30\ However, only one SAR form is filed in satisfaction
of the rules of both FinCEN and the Federal banking agencies. FinCEN
has historically never attempted to allocate the burden between
agencies for SARs required by the rules of more than one agency.
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\30\ See 12 CFR 208.62, 211.5(k), 211.24(f), and 225.4(f)
(Federal Reserve Board); 12 CFR 353.3 (Federal Deposit Insurance
Corporation); 12 CFR 748.1(c) (National Credit Union
Administration); 12 CFR 21.11 and 12 CFR 163.180 (Office of the
Comptroller of Currency); and 31 CFR Chapter X (FinCEN).
---------------------------------------------------------------------------
FinCEN intends to conduct more granular studies of the filing
population in the near future, to arrive at more realistic estimates
that take into consideration a more specific breakdown of the SAR
production process, including estimating the burden to financial
institutions of Stages 1 to 3, which may include the inter-agency
burden allocation referred to above. The data obtained in these studies
may result in a significant variation of the estimated total annual PRA
burden.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid OMB control number. Records required to be
retained under the BSA must be retained for five years.
Part 3. Request for Comments
a. Specific Requests for Comments:
Comments submitted in response to this notice will be summarized
and/or included in the request for OMB approval. All comments will
become a matter of public record. Comments are invited on the
calculation of the total PRA burden of filing the SAR, under the
current regulatory requirements. Specifically, comments are invited on
the following issues:
1. FinCEN has based the estimates contained in this notice on the
actual SARs filed in 2019. We have restricted the analysis to features
we could measure and statements we were able to support with data
extracted from the 2019 filers and submissions, using limited external
data for estimates of parameters such as labor costs and conversion
rates for alerts into filed SARs. FinCEN is not able to factor in its
estimate of the PRA burden the burden of portions of the process for
which FinCEN lacks information in filed reports or reliable existing
studies. All requests for comments ask the public to suggest other
factors that may affect the burden and cost of SAR reporting. Suggested
factors that FinCEN could
[[Page 31613]]
quantify by analyzing the contents of the BSA database, or by referring
to statistical information publicly available, and without conducting a
formal survey of the reporting financial institutions would be
especially appreciated.
2. FinCEN proposes to expand the annual PRA burden estimate to
cover three stages of the SAR production process: (a) The review of
cases based on monitoring alerts considered true positives; (b) the
documentation of the decision not to turn a case into a SAR; and (c)
the SAR filing process. A sample conversion rate of cases that lead to
SARs for depository institutions was used to calculate how many total
cases at all financial institutions would have to be evaluated to
produce the total number of original SARs filed in 2019. FinCEN invites
comments on the characterization of these three stages, the general
case conversion rate utilized, and the existence of other generally
available research documents that may show different case conversion
rates for different financial institution types.
3. FinCEN estimates that, in general, the cost of labor involved in
the three stages of the SAR production process covered by this notice
will depend on the level of involvement in each stage of at least four
different types of labor within the organization (general supervision,
direct supervision, clerical work for evaluation, and clerical work for
recordkeeping). Is this a reasonable identification of the roles
involved in the SAR process? Has FinCEN calculated labor costs
reasonably? Within the calculations of PRA burden, has FinCEN
reasonably estimated the involvement of the different kinds of labor
identified?
4. FinCEN arrived at estimates for (i) the hour burden of the
review of all cases based on true positive alerts, and (ii) the
decision not to file SARs based on the proportion of the cases that
were not converted into original SARs. In general and on average, are
these estimates reasonable?
5. FinCEN segmented the universe of SAR filings into several
different categories for purposes of estimating SAR complexity: (a)
Continuing SARs; (b) original SARs with standard content filed by non-
depository institutions; (c) original SARs with extended content filed
by non-depository institutions; (d) original SARs with standard content
filed by depository institutions; and (e) original SARs with extended
content filed by depository institutions. For each of these categories,
FinCEN adjusted the estimated SAR filing burden depending on the filing
method (batch or discrete). Is this segmentation reasonable? Are there
other categories of SARs which FinCEN could quantify by analyzing the
contents of the BSA database and without conducting a formal survey of
the reporting financial institutions?
6. Are the other assumptions FinCEN made to calculate the burden
associated with filing the different categories of SARs reasonable,
such as the number of minutes required for each category of report?
b. General Request for Comments
Comments submitted in response to this notice will be summarized
and/or included in the request for OMB approval. All comments will
become a matter of public record. Comments are invited on: (1) Whether
the collection of information is necessary for the proper performance
of the functions of the agency, including whether the information shall
have practical utility; (2) the accuracy of the agency's estimate of
the burden of the collection of information; (3) ways to enhance the
quality, utility, and clarity of the information to be collected; (4)
ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology; and (5) estimates
of capital or start-up costs and costs of operation, maintenance, and
purchase of services to provide information.
Dated: May 20, 2020.
Derek Baldry,
Deputy Chief of Staff, Financial Crimes Enforcement Network.
[FR Doc. 2020-11247 Filed 5-22-20; 8:45 am]
BILLING CODE 4810-02-P
