Bank Secrecy Act

CourtNational Credit Union Administration
Citation86 FR 6586
Published date22 January 2021
SectionProposed rules
Record Number2021-00048
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]
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                NATIONAL CREDIT UNION ADMINISTRATION
                12 CFR Part 748
                RIN 3133-AF25
                Bank Secrecy Act
                AGENCY: National Credit Union Administration (NCUA).
                ACTION: Proposed rule.
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                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\
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                 \1\ See 50 FR 53294-01 (Dec. 31, 1985).
                 \2\ 58 FR 5663 (Jan. 22, 1993).
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                 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.
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                 \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).
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                 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\
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                 \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).
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                 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\
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                 \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).
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                 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\
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                 \10\ 12 CFR 748.1(c) (NCUA); 12 CFR 208.62 (FRB); 12 CFR 390.355
                (FDIC); 12 CFR 21.11, 163.80 (OCC).
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                 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\
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                 \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).
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                 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.
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                 \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.
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                 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\
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                 \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.
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                 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.
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                 \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).
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                 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
                

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