Bank Secrecy Act
| Published date | 22 January 2021 |
| Citation | 86 FR 6586 |
| Record Number | 2021-00048 |
| Section | Proposed rules |
| Court | National Credit Union Administration |
Federal Register, Volume 86 Issue 13 (Friday, January 22, 2021)
[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Proposed Rules]
[Pages 6586-6589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00048]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 748
RIN 3133-AF25
Bank Secrecy Act
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is inviting comment on a proposed rule
that would modify the requirements for federally insured credit unions
(FICUs) to file Suspicious Activity Reports (SARs). The proposed rule
would amend the NCUA's SARs regulation to allow the Board to issue
exemptions from the requirements of that regulation in order to grant
relief to FICUs that develop innovative solutions to meet the
requirements of the Bank Secrecy Act (BSA).
DATES: Comments must be received by February 22, 2021.
ADDRESSES: You may submit written comments, identified by RIN 3133-
AF25, by any of the following methods (Please send comments by one
method only):
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Fax: (703) 518-6319. Include ``[Your Name]--Comments on
Proposed Rule: Bank Secrecy Act'' in the transmittal.
Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public Inspection: You may view all public comments on the Federal
eRulemaking Portal at http://www.regulations.gov as submitted, except
for those we cannot post for technical reasons. The NCUA will not edit
or remove any identifying or contact information from the public
comments submitted. Due to social distancing measures in effect, the
usual opportunity to inspect paper copies of comments in the NCUA's law
library is not currently available. After social distancing measures
are relaxed, visitors may make an appointment to review paper copies by
calling (703) 518-6540 or emailing [email protected].
FOR FURTHER INFORMATION CONTACT: Policy and Analysis: Timothy Segerson,
Deputy Director, Office of Examination and Insurance, (703) 518-6397;
Legal:Justin Anderson, Senior Staff Attorney, Damon P. Frank, Staff
Attorney, and Chrisanthy J. Loizos, Senior Staff Attorney, Office of
General Counsel, (703) 518-6540; or by mail at National Credit Union
Administration, 1775 Duke Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
Requirements related to SARs are codified in 12 CFR 748.1(c). This
section of the NCUA's regulations requires FICUs to file SARs under
certain conditions. In addition, this section provides for: (i) Board
of director or other committee notification; (ii) filing exceptions;
(iii) SAR confidentiality; (iv) recordkeeping requirements; (v)
supporting documentation requirements; and (vi) limitations on
liability. The proposed rule would allow the NCUA to issue exemptions
from the regulation's SAR requirements.
II. Background
The NCUA's original SARs regulation required FICUs to report
potential violations of law arising from transactions that flow through
those institutions.\1\ As discussed in more detail later in this
document, this regulation has been amended and updated since its
inception. The NCUA's purpose for the regulation has, however, remained
unchanged because fraud, abusive insider transactions, check-kiting
schemes, money laundering, and other financial crimes can pose serious
threats to a financial institution's continued viability and, if
unchecked, can undermine the public confidence in the nation's
financial services industry generally.\2\
---------------------------------------------------------------------------
\1\ See 50 FR 53294-01 (Dec. 31, 1985).
\2\ 58 FR 5663 (Jan. 22, 1993).
---------------------------------------------------------------------------
In 1992, Congress passed the Annunzio-Wylie Anti-Money Laundering
Act (the Anti-Money Laundering Act), which redesigned the criminal
referral process applicable to credit unions and made the reporting of
certain suspicious transactions a requirement of the BSA.\3\ The Anti-
Money Laundering Act permitted the Department of the Treasury to
require financial institutions, including credit unions, to ``report
any suspicious transaction relevant to a possible violation of law or
regulation.'' \4\
[[Page 6587]]
Thereafter, the Department of the Treasury, in consultation with the
NCUA, the other federal banking agencies,\5\ and law enforcement
developed the modern SAR form and reporting process, which standardized
the reporting forms and created a centralized database that could be
accessed by multiple law enforcement and regulatory agencies.
---------------------------------------------------------------------------
\3\ Public Law 102-550, 106 Stat. 3672, 4059 (1992).
\4\ 31 U.S.C. 5318(g)(1). The quoted text is from section 1517
of the Annunzio-Wylie Anti-Money Laundering Act, which was
originally codified at 31 U.S.C. 5314(g). The text was moved as part
of the Violent Crime Control and Law Enforcement Act of 1994.
\5\ For purposes of this rulemaking, the other federal banking
agencies are defined as the Board of Governors of the Federal
Reserve (FRB), the Federal Deposit Insurance Corporation (FDIC), and
the Office of the Comptroller of the Currency (OCC).
---------------------------------------------------------------------------
To implement this new reporting system, in 1996, the Financial
Crimes Enforcement Network of the Department of the Treasury (FinCEN)
issued its implementing SAR regulations for financial institutions
subject to the requirements of the BSA to, among other things,
specifically address the reporting of money laundering transactions and
transactions designed to evade the reporting requirements of the
BSA.\6\ To further implement this new reporting process and reduce
unnecessary reporting burdens, the NCUA and the other federal banking
agencies contemporaneously amended their criminal referral form
regulations to incorporate the new SAR form and reporting database,
align their regulatory reporting requirements with FinCEN's BSA
reporting requirements, and further refine the reporting processes.\7\
---------------------------------------------------------------------------
\6\ 61 FR 4326 (Feb. 5, 1996) (FinCEN). The NCUA's current
regulation is codified at 12 CFR 748.1(c)(1)(iv)(B). It should be
noted that prior to the adoption of FinCEN's SAR regulation in 1996
and the accompanying revisions to the NCUA's regulation, the NCUA's
criminal referral regulation did not have a specific provision that
required the reporting of money laundering transactions. However,
the required criminal referral form broadly encompassed money
laundering and structuring transactions.
\7\ 61 FR 11526 (Mar. 21, 1996) (NCUA); 61 FR 4326 (Feb. 5,
1996) (FinCEN).
---------------------------------------------------------------------------
As a result of this redesign and FinCEN's implementing regulations,
FICUs are currently required to file SARs under both NCUA and FinCEN
regulations. These regulations are not identical but are substantially
similar with regard to the specified BSA reporting obligations required
by FinCEN. Both the NCUA's and FinCEN's SAR regulations, among other
things, require FICUs to file SARs relating to money laundering and
transactions that are designed to evade the reporting requirements of
the BSA \8\ Furthermore, with respect to the SAR confidentiality
requirements in the BSA, both the NCUA's and FinCEN's SAR regulations
require FICUs to maintain the confidentiality of a SAR, and any
information that would reveal the existence of the SAR, outside of
certain circumstances.\9\
---------------------------------------------------------------------------
\8\ 12 CFR 748.1(c)(1)(iv)(B) (NCUA); 31 CFR 1020.320(a)(2)
(FinCEN).
\9\ 12 CFR 748.1(c)(5) (NCUA); 31 CFR 1020.320(e)(1) (FinCEN).
---------------------------------------------------------------------------
However, the NCUA's and the other federal banking agencies'
regulations cover a slightly broader range of transactions (e.g.,
insider abuse at any dollar amount).\10\
---------------------------------------------------------------------------
\10\ 12 CFR 748.1(c) (NCUA); 12 CFR 208.62 (FRB); 12 CFR 390.355
(FDIC); 12 CFR 21.11, 163.80 (OCC).
---------------------------------------------------------------------------
The NCUA and FinCEN SAR regulations also provide: (i) That SARs are
not required for a robbery or burglary committed or attempted that is
reported to appropriate law enforcement authorities; (ii) that SARs are
confidential and shall not be disclosed except as authorized; (iii)
recordkeeping requirements for SARs and supporting documentation; (iv)
that supporting documentation shall be deemed to have been filed with
the SAR; and (v) that supporting documentation shall be made available
to appropriate law enforcement agencies upon request. The NCUA and
FinCEN SAR regulations also provide a safe harbor from liability to any
FICU and any of its officials, employees, or agents that make a
voluntary disclosure of any possible violation of law or regulation to
a government agency or file a SAR pursuant to the regulations or any
other authority. The NCUA's regulation also contains a provision
requiring that FICUs promptly notify their board of directors or
committee designated by the board of directors to receive such
notifications when a SAR has been filed.
FinCEN has general authority to grant exemptions from the
requirements of the BSA, which includes granting exemptions under its
SAR reporting regulations.\11\ FinCEN's regulation provides that
``[t]he Secretary [of Treasury], in his sole discretion, may by written
order or authorization make exceptions to or grant exemptions from the
requirements of [the BSA]. Such exemptions may be conditional or
unconditional, may apply to particular persons or to classes of
persons, and may apply to transactions or classes of transactions.''
The Secretary has delegated this exemption authority to FinCEN.\12\
---------------------------------------------------------------------------
\11\ See 31 U.S.C. 5318(a)(7), with implementing regulations at
31 CFR 1010.970.
\12\ Treas. Order 180-01, (re-affirmed Jan. 14, 2020).
---------------------------------------------------------------------------
As financial technology and innovation continue to develop in the
area of monitoring and reporting financial crime and terrorist
financing, the NCUA will need the express regulatory flexibility to
grant exemptive relief when appropriate in this area on a consistent
basis. In 2018, the NCUA, FinCEN, and the other federal banking
agencies issued a statement encouraging financial institutions to take
innovative approaches to meet their BSA/anti-money laundering (BSA/AML)
compliance obligations.\13\ That statement explained that financial
institutions are encouraged to consider, evaluate, and where
appropriate, responsibly implement innovative approaches in this area.
Today, innovative approaches and technological developments in the
areas of SAR monitoring, investigation and filings may involve, among
other things: (i) Automated form population using natural language
processing, transaction data, and customer due diligence information;
(ii) automated or limited investigation processes depending on the
complexity and risk of a particular transaction and appropriate
safeguards; and (iii) enhanced monitoring processes using more and
better data, optical scanning, artificial intelligence, or machine
learning capabilities. Requests for exemptive relief pertaining to
innovation or other matters may involve, among other things, expanded
investigations and SAR timing issues, SAR disclosures and sharing,
continued SAR filings for ongoing activity, SAR outsourcing of
responsibilities and practices, the role of agents of FICUs, the use of
shared utilities and shared data, and the use and sharing of de-
identified data. The NCUA expects that new technologies will continue
to prompt additional innovative approaches related to SAR filing and
monitoring.
---------------------------------------------------------------------------
\13\ Joint Statement on Innovative Efforts to Combat Money
Laundering and Terrorist Financing (Dec. 3, 2018), available at
https://www.ncua.gov/newsroom/press-release/2018/agencies-issue-joint-statement-encourage-innovative-approaches-bsaaml-compliance.
---------------------------------------------------------------------------
It is important to recognize that any NCUA-issued exemptions from
its SAR regulation would not relieve the FICU from independent
obligation to comply with FinCEN's SAR regulations, if applicable. To
the extent an exemption request from a FICU involves both the NCUA's
SAR regulation and FinCEN's SAR regulation, the FICU would need an
exemption from both the NCUA and FinCEN. The NCUA expects to coordinate
with FinCEN when handling parallel exemptions. As explained above,
however, the NCUA's SAR regulation imposes additional requirements not
included in FinCEN's SAR regulation. To the extent an exemption request
is subject to a requirement imposed by the NCUA's SAR regulation alone
(and not a parallel
[[Page 6588]]
FinCEN requirement), the proposed rule would allow the NCUA to exempt a
FICU from that requirement.
III. The Proposal
This proposed rule would allow the NCUA to issue exemptions from
the requirements of its SAR regulation. Specifically, the proposed rule
would add a provision to 12 CFR 748.1 that would provide that the NCUA
may exempt a FICU from the requirements of that section. Under the
proposed rule, the NCUA would determine whether the exemption is
consistent with the purposes of the BSA, if applicable, and with safe
and sound practices, and may consider other appropriate factors. The
NCUA would also seek FinCEN's determination on whether the exemption
would be consistent with the purposes of the BSA. The exemptions may be
conditional or unconditional, may apply to particular persons or to
classes of persons, and may apply to transactions or classes of
transactions.
In addition, this proposal would require the NCUA to seek FinCEN's
concurrence regarding any exemption requests that involve an exemption
from the requirement to file a SAR required by FinCEN regulations
implementing the BSA. The proposal would also permit the NCUA to
consult with FinCEN regarding other exemption requests. The NCUA may
also consult with the other state and federal banking agencies before
granting any exemption.
Finally, the proposed rule provides that the NCUA may grant an
exemption for a specified time period. Under the proposed rule, the
NCUA could also revoke previously granted exemptions if circumstances
change related to the factors set out above (consistency with the BSA
and safety and soundness) or any imposed conditions.
If the NCUA adopts this proposed rule and uses it to grant
exemptions, such exemptions would not relieve a FICU from the
obligation to comply with FinCEN's SAR regulation, if applicable. To
the extent a FICU is subject to requirements imposed by both the NCUA's
SAR regulation and FinCEN's SAR regulation, the FICU would need to seek
an exemption from both the NCUA and FinCEN. As explained above,
however, the NCUA's SAR regulation imposes additional requirements not
included in FinCEN's regulation. To the extent a FICU is subject to a
requirement imposed by the NCUA's SAR regulation alone (and not a
parallel FinCEN requirement), the proposed rule would allow the NCUA to
exempt a FICU from that requirement.
The Board is providing for a 30-day comment period instead of a 60-
day comment period because the proposed rule is limited in scope, and
the Board believes that 30 days will provide the public adequate time
to review and comment on it.\14\
---------------------------------------------------------------------------
\14\ See NCUA Interpretive Ruling and Policy Statement (IRPS)
87-2, as amended by IRPS 03-2 and IRPS 15-1. 80 FR 57512 (Sept. 24,
2015), available at https://www.ncua.gov/files/publications/irps/IRPS1987-2.pdf.
---------------------------------------------------------------------------
The Board invites comments on the proposed rule, including whether
any additional detail relating to the procedures that would be followed
in considering, granting or revoking exemptions is necessary. The Board
is also specifically requesting comments on whether additional or
different factors or standards should be applied in the determination
whether to grant an exemption request, as well as the form and manner
of the Board's response to an exemption request.
IV. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a notice of proposed rulemaking, an agency prepare and
make available for public comment an initial regulatory flexibility
analysis that describes the impact of a proposed rule on small entities
(defined for purposes of the RFA to include credit unions with assets
less than $100 million).\15\ A regulatory flexibility analysis is not
required, however, if the agency certifies that the rule will not have
a significant economic impact on a substantial number of small entities
and publishes its certification and a short, explanatory statement in
the Federal Register together with the rule.
---------------------------------------------------------------------------
\15\ See NCUA Interpretive Ruling and Policy Statement 87-2, as
amended by IRPS 03-2 and IRPS 15-1, 80 FR 57512 (Sept. 24, 2015).
---------------------------------------------------------------------------
The proposed rule would allow FICUs to request exemptions from
certain regulatory requirements if they choose to do so. As a result,
it would not cause any increased burden or impose any new requirements
on FICUs. Accordingly, the NCUA certifies that the proposed rule would
not have a significant economic impact on a substantial number of small
credit unions.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to information
collection requirements in which an agency creates a new paperwork
burden on regulated entities or modifies an existing burden. For
purposes of the PRA, a paperwork burden may take the form of a
reporting, recordkeeping, or third-party disclosure requirement, each
referred to as an information collection. The NCUA may not conduct or
sponsor, and the respondent is not required to respond to, an
information collection unless it displays a currently valid Office of
Management and Budget (OMB) control number.
This proposed rule adds a provision to Sec. 748.1(c) that would
allow FICUs to submit a written request to NCUA if it wishes to seek an
exemption from the requirements of this section. There are 2,932 FICUs
that currently file SARs annually. It is estimated that 50 of these
FICUs would file for an exemption under the proposed new Sec.
748.1(c)(7); taking 2 hours per response, for a total increase of 100
burden hours. This proposed rule would revise the information
collection requirement currently approved under OMB number 3133-0094,
as follows:
Title of Information Collection: Suspicious Activity Report by
Depository Institutions.
OMB Control Number: 3133-0094.
Estimated Number of Respondents: 2,932.
Estimated Annual Frequency of Response: 65.
Estimated Total Annual Reponses: 191,069.
Estimated Hours per Response: 1.
Estimated Total Annual Burden Hours: 191,119.
Affected Public: Private Sector: Not-for-profit institutions.
The NCUA invites comments on: (a) Whether the collections of
information are necessary for the proper performance of the agencies'
functions, including whether the information has practical utility; (b)
the accuracy of the estimates of the burden of the information
collections, including the validity of the methodology and assumptions
used; (c) ways to enhance the quality, utility, and clarity of the
information to be collected; (d) ways to minimize the burden of the
information collections on respondents, including through the use of
automated collection techniques or other forms of information
technology; and (e) estimates of capital or start-up costs and costs of
operation, maintenance, and purchase of services to provide
information.
All comments are a matter of public record. Due to the limited in-
house staff, email comments are preferred. Comments regarding the
information collection requirements of this rule should be (1) emailed
to: [email protected] with ``OMB No. 3133-0094'' in the subject
line; faxed to 703-837-2406, or mailed to Mackie Malaka, NCUA PRA
Clearance Officer, National Credit Union Administration, 1775 Duke
Street, Suite
[[Page 6589]]
5080, Alexandria, Virginia 22314 and to the (2) Office of Information
and Regulatory Affairs, Office of Management and Budget, at
www.reginfo.gov/public/do/PRAMain. Select ``Currently under 30-day
Review--Open for Public Comments'' or by using the search function.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the principles of the executive order. This
rulemaking will not have a substantial direct effect on the states, on
the connection between the national government and the states, or on
the distribution of power and responsibilities among the various levels
of government. The NCUA has determined that this proposal does not
constitute a policy that has federalism implications for purposes of
the executive order.
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this proposed rule will not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 748
Security program, report of suspected crimes, suspicious
transactions, catastrophic acts and Bank Secrecy Act compliance.
By the National Credit Union Administration Board on December
17, 2020.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed in the preamble, the Board proposes to
amend 12 CFR part 748, as follows:
PART 748--SECURITY PROGRAM, REPORT OF SUSPECTED CRIMES, SUSPICIOUS
TRANSACTIONS, CATASTROPHIC ACTS AND BANK SECRECY ACT COMPLIANCE
0
1. The authority citation for part 748 continues to read as follows:
Authority: 12 U.S.C. 1766(a), 1786(q); 15 U.S.C. 6801-6809; 31
U.S.C. 5311 and 5318.
0
2. Amend Sec. 748.1 by adding new paragraph (c)(7) to read as follows:
Sec. 748.1 Filing of reports.
* * * * *
(c) Suspicious Activity Report. * * *
(7) Exemptions.
(i) The NCUA may exempt any federally insured credit union from the
requirements of paragraph (c) of this section. Upon receiving a written
request from a federally insured credit union, the NCUA will determine
whether the exemption is consistent with safe and sound practices, and
may consider other appropriate factors. The NCUA will also seek
FinCEN's determination whether the exemption is consistent with the
purposes of the BSA, if applicable. The exemption shall be applicable
only as expressly stated in the exemption, may be conditional or
unconditional, may apply to particular persons or to classes of
persons, and may apply to transactions or classes of transactions. The
NCUA will seek FinCEN's concurrence with regard to any exemption
request that would also require an exemption from the requirements of
FinCEN's SAR regulations, and may consult with FinCEN regarding other
exemption requests. The NCUA also may consult with the other state and
federal banking agencies and consider comments before granting any
exemption.
(ii) The NCUA will provide a written response to the federally
insured credit union that submitted the exemption request after
considering whether the exemption is consistent with safe and sound
banking, consulting with the appropriate agencies, and seeking
concurrence when appropriate. A federally insured credit union that has
received an exemption under paragraph (i) of this section may rely on
the exemption for a period of time to be communicated by the NCUA in
its granting of the exemption, which may indefinite. The NCUA may
extend the period of time or may revoke an exemption granted under
paragraph (i) of this section. Exemptions may be revoked at the sole
discretion of the NCUA. The NCUA will provide written notice to the
federally insured credit union of the NCUA's intention to revoke an
exemption. Such notice will include the basis for the revocation and
will provide an opportunity for the federally insured credit union to
submit a response to the NCUA. The NCUA will consider the credit
union's response prior to deciding whether to revoke an exemption and
will notify the federally insured credit union of the NCUA's decision
to revoke an exemption in writing.
[FR Doc. 2021-00048 Filed 1-21-21; 8:45 am]
BILLING CODE 7535-01-P
