Exemptions to Suspicious Activity Report Requirements

CourtThe Comptroller Of The Currency Office
Citation87 FR 15323
Published date18 March 2022
Record Number2022-05521
Federal Register, Volume 87 Issue 53 (Friday, March 18, 2022)
[Federal Register Volume 87, Number 53 (Friday, March 18, 2022)]
                [Rules and Regulations]
                [Pages 15323-15332]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2022-05521]
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                DEPARTMENT OF THE TREASURY
                Office of the Comptroller of the Currency
                12 CFR Parts 21 and 163
                [Docket No. OCC-2020-0037]
                RIN 1557-AE77
                Exemptions to Suspicious Activity Report Requirements
                AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
                ACTION: Final rule.
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                SUMMARY: This final rule modifies the requirements for national banks
                and
                [[Page 15324]]
                Federal savings associations, including Federal branches and agencies
                of foreign banks licensed or chartered by the OCC, to file suspicious
                activity reports (SARs). It amends the OCC's SAR regulations to allow
                the OCC to issue exemptions from the requirements of those regulations
                upon request from a financial institution subject to those regulations.
                The rule harmonizes the OCC's legal authority with the preexisting
                exemption authority of the Financial Crimes Enforcement Network
                (FinCEN) of the U.S. Department of the Treasury. This rule will make it
                possible for the OCC to facilitate changes required by the Anti-Money
                Laundering Act of 2020. The final rule will also make it possible for
                the OCC to grant relief to national banks or Federal savings
                associations that develop innovative solutions intended to meet Bank
                Secrecy Act requirements more efficiently and effectively.
                DATES: This rule is effective on May 1, 2022.
                FOR FURTHER INFORMATION CONTACT: Jina Cheon, Counsel; Henry Barkhausen,
                Counsel; or Scott Burnett, Counsel, Chief Counsel's Office (202) 649-
                5490; Office of the Comptroller of the Currency, 400 7th Street SW,
                Washington, DC 20219.
                SUPPLEMENTARY INFORMATION:
                I. Introduction
                 OCC regulations require national banks and Federal savings
                associations to file suspicious activity reports (SARs) under certain
                conditions. These regulations also provide for (i) board of director
                notification; (ii) filing exceptions; (iii) SAR confidentiality; (iv)
                recordkeeping requirements; (v) supporting documentation requirements;
                and (vi) limitations on liability. Requirements related to SARs are
                codified at 12 CFR 21.11 for national banks and 12 CFR 163.180 for
                Federal savings associations. On January 22, 2021, the OCC, the Board
                of Governors of the Federal Reserve System (Board), the Federal Deposit
                Insurance Corporation (FDIC), and the National Credit Union
                Administration (NCUA) (collectively, the agencies or Federal banking
                agencies) published substantially similar proposed rules that would
                amend their respective SAR regulations to allow the agencies to issue
                exemptions from the requirements of those regulations.\1\ The OCC is
                adopting its proposed rule in final form.
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                 \1\ 86 FR 6572 (Jan. 22, 2021) (OCC); 86 FR 6576 (Jan. 22, 2021)
                (Board); 86 FR 6580 (Jan. 22, 2021) (FDIC); 86 FR 6586 (Jan. 22,
                2021) (NCUA).
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                II. Background
                 The OCC has long required its regulated institutions to report
                potential violations of law arising from transactions that flow through
                those institutions.\2\ The OCC required such reporting 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 system generally.\3\
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                 \2\ The OCC first codified this requirement in 1971 at 12 CFR
                7.5225, which required national banks to submit a report of ``any
                state of facts growing out of the affairs of the bank known or
                suspected to involve criminal violation of any other section of the
                United States Code'' to the OCC, the Federal Bureau of
                Investigations (FBI), the U.S. attorney for the bank's district, and
                the bank's bonding company. 36 FR 17000, 17012 (Aug. 26, 1971). In
                1986 the OCC repealed 12 CFR 7.5225 and adopted its criminal
                referral form regulation, 12 CFR 21.11, which required national
                banks to report specified suspicious transactions on a standardized
                criminal referral form. 51 FR 25866 (July 17, 1986). As explained
                below, the OCC revised 12 CFR 21.11 in the 1990s to conform to the
                new SAR reporting form and system.
                 \3\ 54 FR 25839 (June 20, 1989).
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                 In 1992 Congress passed the Annunzio-Wylie Anti-Money Laundering
                Act, which redesigned the criminal referral process applicable to
                financial institutions including OCC-supervised entities and made the
                reporting of certain suspicious transactions a requirement of the Bank
                Secrecy Act (BSA).\4\ The Act permitted the U.S. Department of the
                Treasury (Treasury) to require financial institutions, including
                national banks and Federal savings associations, to ``report any
                suspicious transaction relevant to a possible violation of law or
                regulation.'' \5\ As a result, the Treasury, in consultation with the
                Federal banking agencies 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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                 \4\ Public Law 102-550, 106 Stat. 3672 (1992).
                 \5\ 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.
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                 To implement this new reporting system, the Financial Crimes
                Enforcement Network of Treasury (FinCEN) issued its implementing SAR
                regulations in 1996 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 BSA's reporting requirements.\6\ To further
                implement this new reporting process and reduce unnecessary reporting
                burdens, the OCC 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). Before FinCEN's SAR regulation
                was adopted in 1996 and the accompanying revisions to the OCC's
                regulation, the OCC's criminal referral regulation did not have a
                specific provision that required the reporting of money laundering
                transactions. However, the criminal referral regulation broadly
                encompassed money laundering and structuring transactions as
                explained in the SUPPLEMENTARY INFORMATION section to the final rule
                enhancing the criminal referral process. 54 FR 25839, 25840 (June
                20, 1989). Congress authorized the Secretary of the Treasury to
                administer the BSA, and the Secretary has delegated to the Director
                of FinCEN the authority to implement, administer, and enforce
                compliance with the Act. Treasury Order 180-01 (Jan. 14, 2020).
                 \7\ 61 FR 4332 (Feb. 5, 1996) (OCC).
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                 As a result of this redesign and FinCEN's implementing regulations,
                national banks and Federal savings associations now must file SARs
                under both OCC and FinCEN regulations. The OCC's regulations are not
                identical but are substantially similar to the BSA reporting
                obligations required by FinCEN. Both the OCC's and FinCEN's SAR
                regulations require banks to file SARs relating to money laundering,
                transactions that are designed to evade the reporting requirements of
                the BSA, and transactions that have no business or apparent lawful
                purpose or are not the sort in which the particular customer would
                normally be expected to engage and the bank knows of no reasonable
                explanation for the transactions after examining the available facts,
                including the background and possible purpose of the transactions.\8\
                Furthermore, with respect to the SAR confidentiality requirements in
                the BSA, both the OCC's and FinCEN's SAR regulations require banks to
                maintain the confidentiality of a SAR and any information that would
                reveal the existence of the SAR unless an exception applies.\9\
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                 \8\ See 12 CFR 21.11(c)(4) and 163.180(d)(3)(i)-(iv) (OCC); 31
                CFR 1020.320(a)(2).
                 \9\ 12 CFR 21.11(k) and 163.180(d)(12) (OCC); 31 CFR 1020.320(e)
                (FinCEN).
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                 While the OCC and FinCEN regulations contain substantively similar
                requirements, including requiring reporting in certain common contexts
                and requiring institutions to maintain the confidentiality of SARs, the
                OCC and the other Federal banking
                [[Page 15325]]
                agencies require reporting in broader circumstances (e.g., insider
                abuse at any dollar amount).\10\ These violations and abuse situations
                can pose serious threats to financial institutions' continued viability
                and, if unchecked, can undermine the public confidence in the Nation's
                financial industry.
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                 \10\ See 12 CFR 21.11; 163.180 (OCC); 12 CFR 208.62 (Board); 12
                CFR 390.353 (FDIC); 12 CFR 748.1 (NCUA).
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                 The OCC and FinCEN SAR regulations 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) for
                SAR recordkeeping requirements 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.\11\ The regulations
                also provide a limitation on liability for any national bank, Federal
                savings association, or other financial institution and any director,
                officer, employee, or agent of a national bank, Federal savings
                association, or other financial institution that makes a voluntary
                disclosure of any possible violation of law or regulation to a
                government agency, or files a SAR pursuant to the regulations or
                pursuant to any other authority.\12\ The OCC's regulations contain a
                provision requiring that national banks and Federal savings
                associations promptly notify their board of directors when a SAR has
                been filed.\13\
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                 \11\ 12 CFR 21.11 and 163.180 (OCC); 31 CFR 1020.320 (FinCEN).
                 \12\ 12 CFR 21.11(l) and 163.180(d)(12)(iv) (OCC); 31 CFR
                1020.320(l) (FinCEN).
                 \13\ 12 CFR 21.11(h) and 163.180(d)(9).
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                 Although neither the OCC's SAR regulations nor FinCEN's SAR
                regulation expressly address exemptions, FinCEN has general authority
                to grant exemptions from the requirements of the BSA, which includes
                granting exemptions under its SAR reporting regulations.\14\ 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 exceptions or
                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.'' \15\ The Secretary delegated this exemption
                authority to FinCEN.\16\
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                 \14\ See 31 U.S.C. 5318(a)(7) with implementing regulations at
                31 CFR 1010.970.
                 \15\ 31 CFR 1010.970(a).
                 \16\ Treasury Order 180-01 (Jan. 14, 2020).
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                 The OCC's authority to issue SAR exemptions derives from its
                authority to require national banks and Federal savings associations to
                comply with OCC-imposed SAR requirements. The OCC has broad statutory
                authority to issue regulations for national banks and Federal savings
                associations. Among other relevant sources of authority, 12 U.S.C. 161
                provides that the Comptroller may call for ``special reports.'' Twelve
                U.S.C. 93a also provides that the Comptroller ``is authorized to
                prescribe rules and regulations to carry out the responsibilities of
                the office.'' \17\ The OCC has long viewed SAR requirements and their
                predecessor reporting requirements to be part of the OCC's mission of
                assuring safety and soundness.\18\ The OCC's legal authority to require
                reports necessarily includes the authority to modify those reporting
                requirements, including the authority, if necessary, to issue
                exemptions. However, the OCC's SAR regulations currently contain no
                express exemption provisions similar to FinCEN's general authority to
                grant exemptions from the requirements of the BSA.
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                 \17\ See also 12 U.S.C. 1463(a)(2).
                 \18\ 12 U.S.C. 1.
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                 This disparity in exemption authority makes it more difficult for
                the OCC to grant relief if a national bank or Federal savings
                association has a novel SAR-related proposal that does not squarely fit
                within the regulatory requirements but would be consistent with anti-
                money laundering regulatory and safety and soundness standards. As
                financial technology and innovation continue to develop in the area of
                monitoring and reporting financial crime and terrorist financing, the
                OCC has identified a need for regulatory flexibility to grant exemptive
                relief when appropriate. In 2018 FinCEN and the Federal banking
                agencies issued a statement encouraging banks to take innovative
                approaches to meet their BSA/anti-money laundering (BSA/AML) compliance
                obligations.\19\ That statement explained that banks are encouraged to
                consider, evaluate, and, when appropriate, responsibly implement
                innovative approaches for BSA/AML compliance. Today, innovative
                approaches and technological developments in 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. The OCC anticipates that 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,
                outsourcing of SAR processes, the role of agents of national banks and
                Federal savings associations, the use of shared utilities and data, and
                the use and sharing of de-identified data (commonly referred to as
                anonymized data).
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                 \19\ Joint Statement on Innovative Efforts to Combat Money
                Laundering and Terrorist Financing (Dec. 3, 2018), available at
                https://www.occ.gov/news-issuances/news-releases/2018/nr-occ-2018-130a.pdf.
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                 The OCC expects that new technologies will continue to prompt
                additional innovative approaches related to SAR filing and monitoring.
                Some of these approaches may not strictly comply with certain
                provisions of the OCC's SAR regulations. For example, certain
                approaches involving SAR-sharing across institutions may violate
                prohibitions against disclosures of SARs in 12 CFR 21.11(k) but would
                enable an institution to file more complete, useful SARs without
                substantively undermining the purposes of the SAR disclosure
                prohibition.
                 After the posting of the proposed rule on the OCC website, but
                before its publication in the Federal Register, Congress passed the
                Anti-Money Laundering Act of 2020 (AMLA of 2020).\20\ The AMLA of 2020
                included multiple provisions that will affect suspicious activity
                reporting. Section 6202 of the AMLA of 2020 provides that SARs ``filed
                under this subsection shall be guided by the compliance program of a
                covered financial institution with respect to the Bank Secrecy Act,
                including the risk assessment processes of the covered institution.''
                Section 6212 of the AMLA of 2020 directs Treasury to establish a pilot
                program on SAR sharing. Section 6204 of the AMLA Act of 2020 requires
                the Treasury Secretary, in consultation with various relevant
                stakeholders, to conduct a formal review of the financial institutions'
                Currency Transaction Report (CTR) and SAR reporting requirements,
                including processes for submission, regulations implementing the BSA,
                and any
                [[Page 15326]]
                proposed changes to those reports to reduce unnecessary burdens while
                ensuring that the reports continue to serve their intended purpose.
                Certain provisions of the AMLA of 2020 may require the OCC to apply SAR
                requirements in ways that may potentially conflict with the OCC's
                current SAR regulation. While FinCEN has authority to address conflicts
                between the AMLA of 2020 and FinCEN's regulations, either through
                FinCEN's preexisting exemption authority or through authority granted
                by the AMLA of 2020, the OCC's SAR regulations do not expressly permit
                parallel exemptions. For example, FinCEN's pilot program on SAR sharing
                might allow sharing of SARs in ways that would arguably be inconsistent
                with the OCC's requirements on SAR confidentiality.\21\ The OCC's
                adoption of exemption authority in its SAR regulation will remove any
                legal uncertainty related to national banks and Federal savings
                associations participation in such FinCEN programs.
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                 \20\ Public Law 116-283 (Jan. 1, 2021).
                 \21\ 12 CFR 21.11(k); 12 CFR 163.180(d)(12).
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                III. The Proposal and Final Rule
                 The proposed rule would have allowed the OCC to issue exemptions
                from the requirements of its SAR regulations. Specifically, the
                proposed rule would have added a provision to 12 CFR 21.11 and 12 CFR
                163.180 that would provide that the OCC may exempt a national bank or
                Federal savings association from requirements in those regulatory
                provisions. The OCC is finalizing the proposed rule with some
                modifications, which are described below.\22\
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                 \22\ This final rule, like the OCC's general SAR requirements,
                applies to Federal branches and agencies of foreign banks licensed
                or chartered by the OCC. See 12 CFR 21.11(a).
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                IV. Comments
                 The OCC received seven comments on its proposed rule.\23\ Some
                commenters supported the proposed rule while others opposed it. Some
                commenters noted that they support a regulatory framework that
                encourages innovation and that the proposed rule would foster
                responsible innovation and improve the quality of reporting over time.
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                 \23\ The other agencies that simultaneously published proposed
                rules received two additional comment letters that were not received
                by the OCC; however, the OCC has considered and addressed those
                comments in this SUPPLEMENTARY INFORMATION section. One comment
                suggested that the agencies extend the comment period. The OCC
                concluded that a longer comment period was not necessary, and an
                extension of the comment period is not legally required.
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                A. Comments Opposing the Proposed Rule
                 Commenters opposing the proposed rule asserted that the proposed
                rule provided no persuasive justification or authority to issue an
                exemption. These commenters also suggested that the history of money
                laundering and SAR deficiencies at major financial institutions is
                inconsistent with the OCC adopting exemptions to the SAR requirements.
                Commenters opposing the proposed rule also noted that criminals may
                seek out financial institutions that have been granted exemptions and
                that the proposed rule may jeopardize U.S. officials' access to a key
                investigative tool. Also, according to these commenters, the rule
                should address a significant Government Accountability Office (GAO)
                report on SARs and CTRs.\24\
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                 \24\ GAO, Anti-Money Laundering: Opportunities Exist to Increase
                Law Enforcement Use of Bank Secrecy Act Reports, and Banks' Costs to
                Comply with the Act Varied (Sept. 22, 2020), available at https://www.gao.gov/products/gao-20-574.
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                 The OCC has evaluated these concerns and does not believe the final
                rule will weaken reporting processes. The amendments in the final rule
                will conform the OCC's exemption authority to FinCEN's exemption
                authority. The OCC's SAR regulations and FinCEN's SAR regulation
                feature significant overlap. Many SARs are required to be filed by both
                FinCEN's SAR regulation and the OCC's SAR regulations. The final rule
                will only allow the OCC to issue exemptions from the requirements of
                the OCC's SAR regulations. Under the final rule, national banks and
                Federal savings associations will continue to be required to comply
                with FinCEN's SAR regulation. For requests requiring separate FinCEN
                and OCC approvals, the OCC intends to coordinate with FinCEN, and
                FinCEN would have to issue a parallel exemption. Currently, if FinCEN
                issues an exemption or uses other authority to modify the application
                of the requirements of its SAR regulations, the OCC may not be able to
                issue a parallel exemption.
                 The final rule will maintain national banks' and Federal savings
                associations' core reporting responsibilities. The final rule's
                exemption authority, like FinCEN's exemption authority, is drafted
                broadly and flexibly to handle unexpected situations. However, the OCC
                does not expect to use this exemption authority to issue sweeping
                exemptions that would undermine the value provided by SARs. The final
                rule includes factors the OCC will consider before granting an
                exemption, which will help ensure that any exemptions are appropriate.
                 While some commenters suggested that the OCC lacks legal authority
                to issue the final rule, as discussed above, the OCC has broad
                statutory authority to issue regulations for national banks and Federal
                savings associations. For example, 12 U.S.C. 161 provides that the
                Comptroller may call for ``special reports'' and 12 U.S.C. 93a provides
                that the Comptroller ``is authorized to prescribe rules and regulations
                to carry out the responsibilities of the office.'' \25\ The OCC has
                long viewed SAR requirements and their predecessor reporting
                requirements to be part of the OCC's mission of assuring safety and
                soundness.\26\ The OCC's legal authority to require reports includes
                the authority to modify reporting requirements and issue exemptions, if
                appropriate.
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                 \25\ See also 12 U.S.C. 1463(a)(2).
                 \26\ 12 U.S.C. 1.
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                 One commenter suggested that the OCC consider GAO's 2020 report on
                anti-money laundering compliance.\27\ The OCC considered this report,
                which recommended that FinCEN better support the use of SARs by law
                enforcement. This final rule will not affect the mechanisms that law
                enforcement agencies use to access SARs. Also, the OCC could approve
                exemptions that would result in additional SARs being filed, for
                example, through the use of automation.\28\ The OCC will consider
                whether any exemption request is consistent with the purposes of the
                BSA, and these purposes include requiring reports or records that are
                ``highly useful'' in ``criminal, tax, or regulatory investigations.''
                \29\ Accordingly, the OCC will consider the usefulness of potential
                SARs that would be affected by an exemption request. In determining
                whether an exemption request is consistent with the purposes of the
                Bank Secrecy Act, the OCC intends to consult with FinCEN, as
                appropriate.
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                 \27\ GAO, Anti-Money Laundering: Opportunities Exist to Increase
                Law Enforcement Use of Bank Secrecy Act Reports, and Banks' Costs to
                Comply with the Act Varied (Sept. 22, 2020), available at https://www.gao.gov/products/gao-20-574.
                 \28\ See OCC Interpretive Letter 1166 (Sept. 27, 2019)
                (recognizing automated SAR generation as consistent with SAR
                regulation).
                 \29\ 31 U.S.C. 5311; 12 U.S.C. 1818(s)(1) (``Each appropriate
                Federal banking agency shall prescribe regulations requiring insured
                depository institutions to establish and maintain procedures
                reasonably designed to assure and monitor the compliance of such
                depository institutions with the requirements of subchapter II of
                chapter 53 of Title 31.'').
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                 The exemption authority in the final rule is consistent with the
                OCC's support for the reallocation of bank
                [[Page 15327]]
                compliance resources to their most effective uses. The AMLA of 2020
                provided that compliance programs should ensure that ``more attention
                and resources of financial institutions should be directed toward
                higher-risk customers and activities, consistent with the risk profile
                of a financial institution, rather than toward lower risk customers and
                activities.'' \30\ Accordingly, it may be appropriate to allow national
                banks and Federal savings associations to tailor their monitoring for
                suspicious activity so banks might not file SARs in certain specified
                situations involving lower risk customers and activities. The agencies'
                SAR regulations already contemplate lower risk scenarios by having
                specific dollar thresholds below which financial institutions are not
                required to file SARs. Similarly, it is unlikely that criminals will
                target national banks and Federal savings associations that have
                received exemptions, as one commenter suggested, because the OCC does
                not expect to issue exemptions that would relieve national banks and
                Federal savings associations of their general obligation to monitor for
                suspicious activity or file appropriate SARs. The OCC will weigh any
                potential for criminals to target a national bank or Federal savings
                association in evaluating particular exemption requests. Should
                information come to light after the OCC approves an exemption that
                criminals are potentially targeting an institution because of its
                exemption, the final rule provides the OCC with authority, at its sole
                discretion, to revoke the exemption.
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                 \30\ Section 6101(b)(2)(B)(ii), codified at 31 U.S.C.
                5318(h)(2)(B)(iv)(II).
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                 Some commenters suggested that the proposal was not supported by
                adequate evidence and was therefore inconsistent with the requirements
                of the Administrative Procedure Act. One commenter argued that the
                proposed rule did not provide any data on costs or cost savings that
                might accrue at a financial institution if a SAR exemption were granted
                or on what financial institutions, if any, have requested SAR
                exemptions in the past. The commenter noted that the proposed rule
                estimates that only five financial institutions per year would request
                SAR exemptions but provided no basis in research or data for that
                prediction since it is possible that all financial institutions would
                want an exemption.
                 The OCC acknowledges that it is difficult to predict exactly how
                many or what type of exemptions might be requested or ultimately
                granted. That is why the exemption language in the final rule, like
                FinCEN's exemption language, is drafted broadly and flexibly. As
                discussed above, this rule is intended to make the limited changes
                necessary to match the exemption authority already possessed by FinCEN.
                The OCC is not committing to offer or grant any particular exemptions.
                The final rule only creates the authority to issue exemptions in the
                future. The proposed rule included an estimate of five exemption
                requests per year for purposes of the burden estimates required by the
                Paperwork Reduction Act. However, this estimate of future exemption
                requests is approximate and does not represent an estimate of exemption
                requests that the OCC expects to actually grant. The OCC will carefully
                examine any exemption requests received and may issue few or no
                exemptions if they do not satisfy the OCC's scrutiny.
                B. Process for Issuing Exemptions
                 The final rule contains some requirements that are not included in
                FinCEN's SAR regulation. Under the final rule, for exemption requests
                involving OCC-only SAR requirements, a national bank or Federal savings
                association will be required to seek an exemption only from the OCC.
                For exemption requests that will also require an exemption from
                FinCEN's SAR regulation (for example, exemption requests related to SAR
                filings required by 12 CFR 21.11(c)(4), related to SAR timing
                requirements in 12 CFR 21.11(d), or related to SAR confidentiality in
                12 CFR 21.11(k)), a national bank will need to seek and obtain an
                exemption from both the OCC and FinCEN to be afforded exemptive
                relief.\31\
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                 \31\ The final rule, like the proposed rule, uses the term
                ``exemption'' while FinCEN's exemption authority in 31 CFR 1010.970
                uses both the terms ``exemption'' and ``exception.'' The OCC does
                not believe there is a substantive distinction between exemptions
                and exceptions in this context.
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                 Commenters suggested that the OCC work together with the other
                Federal banking agencies and FinCEN to create one standard and one
                system for any institution to use when applying for an exemption.
                Similarly, commenters suggested that the OCC work together with the
                other Federal banking agencies and FinCEN to create a single-filing
                process whereby an OCC-supervised institution files solely with OCC and
                any need for a FinCEN approval involving the same application would be
                obtained by OCC. Commenters suggested that the agencies should
                streamline the application process so that it is only necessary to seek
                approval from a bank's prudential regulator. Commenters recommended
                that the agencies not require institutions to duplicate work when
                multiple agencies' approval is required.
                 One commenter suggested that the agencies use an interagency
                rulemaking to create a single, streamlined SAR regulation that includes
                a process for obtaining an exemption. According to this commenter, when
                a bank requests an exemption, it should only have to submit a single
                application to its primary prudential supervisor and not multiple
                agencies. Other commenters recommended that the agencies provide
                templates of application forms or similar tools to facilitate
                applications.
                 The OCC acknowledges the value of a simple, straightforward
                application process and the importance of coordination among the
                agencies administering SAR requirements. The agencies are currently
                coordinating and considering whether to provide specific forms or issue
                guidance describing application processes in more detail. However, the
                final rule only makes the limited textual changes to the OCC's SAR
                regulations necessary to provide exemption authority paralleling
                FinCEN's exemption authority. These limited changes do not preclude the
                OCC or other agencies from taking additional action later to streamline
                the process for requests for SAR exemptions.
                 Under the final rule, for exemption requests involving OCC-only SAR
                requirements, a national bank or Federal savings association only needs
                to seek an exemption from the OCC. For exemption requests that also
                require an exemption from FinCEN's SAR regulation, a national bank or
                Federal savings association will need to seek an exemption from both
                the OCC and FinCEN.
                 One commenter suggested that the agencies reconcile differences
                between their SAR exemption proposals. The proposed rule provided that
                a national bank or Federal savings association ``requesting an
                exemption that also requires an exemption from the requirements of
                FinCEN's SAR regulation must submit a request in writing to both the
                OCC and FinCEN for approval.'' The rules proposed by the Board, FDIC,
                and NCUA provided that those agencies would have sought FinCEN's
                concurrence for any exemption request that will also require an
                exemption from FinCEN's SAR regulations. The OCC's final rule, like the
                proposed rule, does not specifically provide for concurrence from
                FinCEN, but this difference should not functionally affect applications
                for exemptions. Under the proposed rules of any of the agencies,
                financial
                [[Page 15328]]
                institutions would have have been required to submit applications to
                both FinCEN and their functional regulator and receive approvals from
                both.
                 The OCC intends to coordinate with the other agencies to develop
                standardized procedures or forms for handling certain exemption
                requests. This is consistent with past practice where the agencies have
                developed such processes or forms after issuing underlying regulations.
                For example, certain OCC regulations require OCC ``prior approval''
                before national banks and Federal savings associations take particular
                actions, and the OCC has separately issued the licensing forms and
                procedures necessary to obtain this approval.\32\ The final rule only
                makes the limited changes to the OCC's SAR regulations necessary to
                clarify its authority to issue exemptions.
                ---------------------------------------------------------------------------
                 \32\ See, e.g., 12 CFR 5.45 and 5.46 (requiring prior approval
                for certain increases in capital). Separate licensing forms provide
                a mechanism for this approval, available at https://www.occ.gov/publications-and-resources/publications/comptrollers-licensing-manual/files/licensing-filing-forms.html.
                ---------------------------------------------------------------------------
                 Under the final rule, a national bank or Federal savings
                association requesting an exemption from the requirements of 12 CFR
                21.11 or 12 CFR 163.180 must submit a request in writing to the OCC.
                C. Standards for Issuing an Exemption
                 The proposed rule listed separate factors that the OCC would
                consider for exemptions involving OCC-only exemptions versus exemptions
                that would also require exemptions from FinCEN. The final rule,
                however, provides a single set of factors that the OCC will consider
                for all exemption requests. Specifically, upon receipt of any exemption
                request, the OCC will consider whether the exemption is consistent with
                the purposes of the BSA and with safe and sound banking, and may
                consider other appropriate factors.
                 Commenters raised a variety of concerns about these factors. One
                commenter stated that the proposed exemption authority contains no
                limitations or caveats and argued that the absence of additional
                standards, criteria, and procedures renders the proposed rule
                unworkable and susceptible to legal challenge. Similarly, this
                commenter stated that the proposed rule did not address how supervisory
                concerns related to BSA/AML deficiencies or a lower supervisory rating
                due to repeated deficiencies would affect the exemption process. The
                commenter also observed that the proposed rule provided no process for
                an internal supervisory review or audit of the SAR exemption decisions
                being made by the OCC, which raises concerns about consistent decision-
                making. Similarly, another commenter stated that the proposed rule is
                overly broad and could inadvertently permit the wholesale exemption of
                entire institutions or categories of institutions from SAR
                requirements. According to this commenter, the proposed rule does not
                provide concrete standards or a clear process, and the deficiencies
                could be exploited, running counter to the interests of financial
                transparency and anti-money laundering objectives.
                 Another commenter suggested that the agencies specify additional
                factors they may consider when evaluating exemption requests.
                Specifically, the commenter suggested that the agencies should consider
                whether the bank's exemption request would, if granted, improve law
                enforcement and other end users' use of SAR data (e.g., the request
                increases submission speed and enhances data consistency) or allow the
                requesting bank to reallocate resources to higher value monitoring and
                reporting processes. Another commenter suggested that, in reviewing a
                request, the agencies should consider whether the exemption would, if
                granted, enhance usefulness to law enforcement and whether the
                exemption would, if granted, enable the institution to redeploy
                resources in a manner suitable for the institution.
                 Another commenter expressed concern that the proposal's singular
                focus on high-tech solutions will disadvantage small and mid-sized
                institutions that cannot afford, build, or implement such novel,
                innovative solutions to meet their SAR requirements. According to this
                commenter, smaller institutions still struggle under manual SAR
                processes and lower-tier technology. Another commenter stated that it
                was unclear how the proposed rule would cover other institutions
                besides traditional national banks and Federal savings associations,
                including branches and agencies of foreign banks, trust companies, and
                service corporations.
                 Another commenter suggested that the agencies provide clear
                guidance governing how exemption requests will be evaluated and how the
                various considerations will be weighed, such as whether more weight
                will be given to broad machine learning applications and algorithms or
                whether the agencies will favor requests that focus on cost and time
                savings, regardless of technical sophistication. The commenter
                expressed concerns that requests submitted by small institutions may
                not be able to match the technology used by larger institutions.
                 The OCC acknowledges the concerns raised by these commenters and
                expects to consider various potential factors when evaluating requests.
                However, it is difficult to anticipate every possible exemption
                request, and, as a consequence, rigid or inflexible procedures could
                limit the OCC's future ability to consider, and deny or issue,
                exemptions. FinCEN's regulation authorizing exemptions does not contain
                a prescribed list of factors that will be considered before exemptions
                are issued.\33\ Nor does FinCEN's regulation describe the process
                FinCEN will use when evaluating an exemption request. It would create
                inconsistency and be potentially problematic for the OCC's regulation
                to include factors or processes that are not included in FinCEN's
                regulation. That would make the exemption provisions not truly parallel
                and could pose difficulties for financial institutions applying for
                exemptions. For example, financial institutions might have to submit
                different applications to the OCC and FinCEN to address different
                potential factors and processes. This would create an additional burden
                and would undermine the value of creating parallel exemption processes.
                ---------------------------------------------------------------------------
                 \33\ 31 CFR 1010.970(a).
                ---------------------------------------------------------------------------
                 The final rule contains a set of factors that the OCC will consider
                in reviewing all requests in addition to considering ``any other
                appropriate factor.'' Specifically, the OCC will consider whether the
                exemption is consistent with the purposes of the BSA and with safe and
                sound banking, and may consider other appropriate factors. Although
                FinCEN's general exemption provision, 31 CFR 1010.970(a), does not have
                these factors, these are the same factors that the OCC and FinCEN
                consider as part of exemption determinations involving customer
                identification program requirements.\34\ The OCC has determined that it
                is appropriate to commit to considering them in the context of
                suspicious activity reporting because they should be relevant to any
                request for an exemption. The OCC's commitment to considering these
                factors should not promote inconsistency with FinCEN since the OCC does
                not expect FinCEN to issue exemptions that would be inconsistent with
                these factors. Requiring consideration of these factors
                [[Page 15329]]
                will help ensure that any issued exemptions are appropriate. Although
                the OCC acknowledges the relevance of other factors raised by the
                commenters (such as the different technological resources of large
                versus small financial institutions), it is not appropriate or
                necessary to embed such factors into the regulation itself. Many of the
                additional factors suggested by commenters are already covered by the
                three factors in the final rule.
                ---------------------------------------------------------------------------
                 \34\ 31 CFR 1020.220(b) (``The Federal functional regulator and
                the Secretary shall consider whether the exemption is consistent
                with the purposes of the Bank Secrecy Act and with safe and sound
                banking, and may consider other appropriate factors.'').
                ---------------------------------------------------------------------------
                 The final rule provides that the OCC will consider ``any other
                appropriate factors,'' and the OCC expects to consider other factors
                that may be relevant to particular exemption requests. The OCC's SAR
                regulations apply to all national banks and Federal savings
                associations, and the new exemption language will similarly cover all
                national banks and Federal savings associations. Although it is
                possible that the terms of certain exemptions may be tailored to
                particular types of national banks or Federal savings associations (for
                example, trust banks), the OCC will not pre-judge how exemptions may be
                applied to different types of national banks and Federal savings
                association. FinCEN's exemption provision does not distinguish between
                different types of banking organizations, and it would be inconsistent
                for the OCC's exemption provision to do this. The final rule, like the
                OCC's SAR regulations, applies to Federal branches and agencies of
                foreign banks licensed or chartered by the OCC.
                 In the proposed rule, the list of factors that the OCC would
                consider for exemption requests that would not require an exemption
                from FinCEN did not include considering whether the exemption was
                consistent with the purposes of the BSA. (The proposal included this
                factor for requests that would also require an exemption from FinCEN.)
                The reporting requirements now contained in the OCC's SAR regulations
                predate the BSA and continue to be broader than FinCEN's SAR
                requirements in certain ways (i.e., requiring SARs in certain
                situations that would not require SARs under FinCEN's SAR regulation).
                However, the OCC agrees with the arguments made by certain commentators
                and has determined it is reasonable to consider whether any exemption
                request is consistent with the purposes of the BSA, regardless of
                whether the exemption request implicates FinCEN's SAR regulation. The
                proposed rule explained how the BSA and successive legislation has
                shaped reporting requirements and developed the current SAR regime.
                Also, it could be inconsistent and confusing to consider separate sets
                of factors for OCC-only SAR exemptions versus requests requiring
                exemptions from both the OCC and FinCEN. The proposed rule specified
                that the OCC would consider any ``appropriate factors,'' and the OCC is
                now specifying that whether a request is consistent with the purposes
                of the BSA is such an appropriate factor for all exemption requests.
                The proposed rule explained the background and history of the SAR
                requirements and detailed the interaction between the OCC's SAR
                requirements and the BSA, which establishes how the BSA is still
                relevant to OCC-only SAR requirements.
                 Some commenters recommended that the OCC consider additional
                factors as part of exemption determinations. However, the final rule
                already covers many of the factors identified by commenters. One
                commenter suggested that the agencies should consider whether an
                exemption request will improve law enforcement and other BSA end users'
                use of SAR data. However, the statutory purposes of the BSA include
                requiring reports that are ``highly useful'' to various users of SARs,
                including law enforcement. Another commenter suggested that the
                proposed rule did not explain how supervisory concerns related to BSA/
                AML deficiencies or a lower CAMELS rating \35\ due to repeated
                deficiencies would affect the exemption process. Those supervisory
                concerns would implicate all of the factors listed in the final rule.
                The OCC would not likely approve an exemption request when a national
                bank or Federal savings association previously failed to prevent money
                laundering or if granting the exemption could contribute to unsafe or
                unsound practices. ``[O]ther appropriate factors'' could also include
                outstanding supervisory concerns regarding BSA/AML compliance.
                ---------------------------------------------------------------------------
                 \35\ The Uniform Financial Institutions Rating System, commonly
                referred to as the CAMELS rating system.
                ---------------------------------------------------------------------------
                 The OCC and other agencies have already provided guidance on the
                principles relevant to responsible innovation that are applicable to
                innovative approaches for complying with SAR requirements.
                Specifically, the OCC has ``define[d] Responsible Innovation as the use
                of new or improved financial products, services and processes to meet
                the evolving needs of consumers, businesses, and communities in a
                manner that is consistent with sound risk management and is aligned
                with the bank's overall business strategy.'' \36\ Similarly, in 2018
                FinCEN and the Federal banking agencies issued a statement encouraging
                banks to take innovative approaches to meet their BSA/AML compliance
                obligations.\37\ That statement explained that banks are encouraged to
                consider, evaluate, and, when appropriate, responsibly implement
                innovative SAR compliance approaches.
                ---------------------------------------------------------------------------
                 \36\ https://www.occ.gov/topics/supervision-and-examination/responsible-innovation/index-responsible-innovation.html.
                 \37\ Joint Statement on Innovative Efforts to Combat Money
                Laundering and Terrorist Financing (Dec. 3, 2018), available at
                https://www.occ.gov/news-issuances/news-releases/2018/nr-occ-2018-130a.pdf.
                ---------------------------------------------------------------------------
                 Pursuant to the final rule, a national bank or Federal savings
                association requesting an exemption from the requirements of the OCC's
                SAR regulations will have to submit a request in writing to the OCC
                (and potentially also to FinCEN). Upon receiving a written request from
                a national bank or Federal savings association, the OCC will consider
                the request and provide a written response.
                 The OCC may notify the other Federal banking agencies or FinCEN and
                consider their comments before granting any exemption. The final rule
                provides that the OCC may grant an exemption for a specified time
                period. One commenter stated that the proposed rule's broad statement
                that it ``may be conditional or unconditional, may apply to particular
                persons or to classes of persons, and may apply to transactions or
                classes of transactions'' offered no guidance on the menu of available
                relief measures or which measures should be used in which
                circumstances. This language arises from the regulation that includes
                FinCEN's exemption authority.\38\ The OCC removed this language from
                the final rule to avoid any confusion and because the OCC has not used
                language like this in exemption provisions in other regulations.\39\
                The removal of this language should not have any substantive effect in
                the context of the OCC's SAR regulations or limit the OCC's ability to
                issue exemptions.
                ---------------------------------------------------------------------------
                 \38\ 31 CFR 1010.970.
                 \39\ See, e.g., 12 CFR 100.2 (``The Comptroller of the Currency
                may, for good cause and to the extent permitted by statute, waive
                the applicability of any provision of parts 1 through 197 of this
                chapter I, as applicable, with respect to Federal savings
                associations.''). Similarly, other FinCEN exemption provisions have
                not used language like this. See, e.g., 31 CFR 1020.220(b).
                ---------------------------------------------------------------------------
                D. Issuance of Exemptions, Publication, and Modifications
                 The proposed rule provided that the OCC would provide a written
                response to a national bank or Federal savings association that submits
                an exemption request. Commenters suggested that the OCC provide a clear
                timeline for responding to a request for an
                [[Page 15330]]
                exemption, for example 30 days or 45 days. Several commenters suggested
                that the OCC should publish approved exemption decisions so that other
                financial institutions are aware of the OCC's analysis regarding a
                particular process or new technology (and would not have to apply
                separately for exemptions). One commenter recommended that the agencies
                clarify how they will handle requests may contain trade secrets,
                proprietary information, and other sensitive business information.
                 The OCC recognizes the value of a timely, transparent review and
                decision process, and the OCC, in consultation with the other agencies,
                may develop standardized timelines for the consideration of requests or
                the publication of any exemptions. However, at present, including such
                procedures within the OCC's regulation would be inconsistent with
                FinCEN's exemption regulation. The OCC, in consultation with the other
                agencies, also is reviewing and potentially revising SAR requirements
                as part of changes made by the AMLA of 2020. The OCC, in consultation
                with the other agencies, may refine SAR requirements in ways that align
                with the commenters' concerns, but it is not possible to make these
                commitments while other potential SAR changes are still ongoing. This
                final rule only makes the limited and incremental changes necessary for
                the OCC's exemption authority to be consistent with FinCEN's rule. The
                OCC routinely handles sensitive or confidential information submitted
                by national banks and Federal savings associations, and the OCC expects
                to follow appropriate protocols in handling any such information
                submitted along with exemption requests.
                 The OCC acknowledges commenters' concerns about making approved
                exemptions public and transparent. The final rule does not resolve
                whether or not the OCC will publish approved exemptions or redacted
                versions of them. The OCC expects to determine whether publication is
                appropriate in the course of developing standardized procedures for
                handling exemptions and in coordination with FinCEN and the other
                Federal banking agencies. The OCC also notes that, to the extent that
                an exemption request involves a substantive legal interpretation or
                action, such determinations are regularly published by the OCC with
                appropriate redactions.
                 Several comments addressed the process for issuing an exemption,
                including recommending governance mechanisms to ensure the
                accountability of OCC officials making exemption decisions. The OCC
                takes such process concerns seriously but does not believe it is
                appropriate to address them in this regulation. The OCC has separate
                governance mechanisms to address the appropriate delegation of
                authority within its organizational structure. It would be anomalous to
                embed additional internal rules of agency procedure within the OCC's
                SAR regulations. Additionally, such process requirements would be
                inconsistent with FinCEN's exemption provision and would undermine the
                value of consistent exemption provisions.
                 One commenter recommended that the agencies should make it clear
                that banks are not required to run parallel systems by running both
                their existing process and the innovative process simultaneously.
                Although the OCC expects to resolve this issue in specific exemption
                requests, the OCC notes that the Interagency Statement on Innovative
                Efforts to Combat Money Laundering and Terrorist Financing states
                ``that pilot programs undertaken by banks, in conjunction with existing
                BSA/AML processes, are an important means of testing and validating the
                effectiveness of innovative approaches.'' \40\
                ---------------------------------------------------------------------------
                 \40\ See ``Joint Interagency Statement on Innovative Efforts to
                Combat Money Laundering and Terrorist Financing 2,'' (Dec. 3, 2018),
                available at https://www.occ.gov/news-issuances/news-releases/2018/nr-occ-2018-130a.pdf.
                ---------------------------------------------------------------------------
                 Under the proposed rule, the OCC also could have revoked previously
                granted exemptions. The proposed rule provided that the OCC would
                provide written notice to a national bank or Federal savings
                association of the OCC's intention to revoke an exemption. The notice
                would have included the basis for the revocation and would provide an
                opportunity for the national bank or Federal savings association to
                submit a response to the OCC. One commenter stated that the proposed
                rule offers no standards or criteria for determining when to extend or
                revoke a SAR exemption. Another commenter suggested that the OCC create
                an appeal process so an applicant may make changes and re-submit
                without having to completely re-apply for an exemption. One commenter
                recommended giving financial institutions a timeline for revocation so
                they have the opportunity to prepare and re-direct resources. Another
                commenter recommended that, before an exemption is revoked, the
                agencies should provide reasonable notice to allow the institution
                ample time to reinstitute and test their pre-existing SAR monitoring
                processes. Another commenter recommended that the rule's procedures
                should include an appeal mechanism or second review so that a denied
                application can be revised or amended to address any objections raised
                by an agency. Another commenter suggested that the agencies should
                provide a sufficient timeline before revoking an exemption.
                 The OCC is finalizing the revocation provisions as proposed.
                FinCEN's exemption provision provides that exemptions ``shall be
                revocable in the sole discretion of the Secretary.'' \41\ The OCC
                similarly believes it is appropriate to communicate in the final rule
                that exemptions are not permanent and may be revoked. Although the OCC
                recognizes the potential value of the additional procedures or checks
                suggested by the commenters (for example, an appeal mechanism), it is
                unnecessary to include such features and internal processes in the
                regulation. The final rule provides for an opportunity for notice and
                response before revocation, which would promote fairness and due
                process. In addition, additional procedures or checks would be
                inconsistent with FinCEN's regulation. To support a coordinated
                regulatory response, the OCC intends to cooperate with FinCEN when
                considering whether to revoke an exemption, to the extent possible.
                Although the OCC plans to carefully evaluate exemption requests so as
                to avoid where possible the need for revocation, it would be
                inappropriate to add other mandatory pre-revocation procedures because
                the procedures could interfere with the potential need for expedited
                revocation.
                ---------------------------------------------------------------------------
                 \41\ 31 CFR 1010.970(a).
                ---------------------------------------------------------------------------
                E. Other Comments
                 Several commenters raised issues not directly relevant to this
                rulemaking. One commenter supported a broader effort to review and
                harmonize supervisory expectations, perhaps even through a single
                rulemaking. Another commenter supported other efforts to improve SAR
                regulations, including a streamlined form, narrative improvements, and
                reporting thresholds. Another commenter recommended that the agencies
                recognize the new priorities in the AMLA of 2020, including the goal to
                update and modernize the overall AML system. One commenter suggested
                that the agencies change the focus in their proposed rules to recognize
                that the goal is providing useful information for law enforcement
                through the risk-based approach while also protecting the financial
                institution and confidence in the banking system.
                [[Page 15331]]
                 The OCC is undertaking reviews of, and potentially changes to,
                reporting requirements as part of implementing the AMLA of 2020. The
                OCC will evaluate these comments in the context of this broader review
                of SAR requirements and AML requirements generally. This final rule
                only makes the limited, incremental changes necessary to conform the
                OCC's SAR exemption authority to FinCEN's.
                V. Administrative Law Matters
                A. Congressional Review Act
                 For purposes of the Congressional Review Act, the Office of
                Management and Budget (OMB) makes a determination as to whether a final
                rule constitutes a ``major'' rule.\42\ If OMB deems a final rule is
                ``major,'' the Congressional Review Act generally provides that the
                rule may not take effect until at least 60 days following its
                publication.\43\ The Congressional Review Act defines a ``major rule''
                as any rule that the Administrator of the Office of Information and
                Regulatory Affairs of the OMB finds has resulted in or is likely to
                result in (1) an annual effect on the economy of $100 million or more;
                (2) a major increase in costs or prices for consumers, individual
                industries, Federal, state, or local government agencies or geographic
                regions, or (3) a significant adverse effects on competition,
                employment, investment, productivity, innovation, or on the ability of
                U.S.-based enterprises to compete with foreign-based enterprises in
                domestic and export markets.\44\ As required by the Congressional
                Review Act, the OCC will submit the final rule and other appropriate
                reports to Congress and the GAO for review.
                ---------------------------------------------------------------------------
                 \42\ 5 U.S.C. 801 et seq.
                 \43\ 5 U.S.C. 801(a)(3).
                 \44\ 5 U.S.C. 804(2).
                ---------------------------------------------------------------------------
                B. Solicitation of Comments and Use of Plain Language
                 Section 722 of the Gramm-Leach-Bliley Act \45\ requires the Federal
                banking agencies to use plain language in all proposed and final rules
                published after January 1, 2000. The agencies sought to present the
                final rule in a simple, straightforward manner and did not receive any
                comments on the use of plain language in the proposed rule.
                ---------------------------------------------------------------------------
                 \45\ Public Law 106-102, sec. 722, 113 Stat. 1338, 1471 (1999),
                codified at 12 U.S.C. 4809.
                ---------------------------------------------------------------------------
                C. Paperwork Reduction Act
                 Certain provisions of the final rule contain are a ``collection of
                information'' within the meaning of the Paperwork Reduction Act (PRA)
                of 1995 (44 U.S.C. 3501-3521). In accordance with the act's
                requirements, agencies may not conduct or sponsor, and a respondent is
                not required to respond to, an information collection unless it
                displays a currently valid OMB control number. The OCC reviewed the
                rule and determined that it revises information collection requirements
                previously approved by the OMB under OMB Control No. 1557-0180. The OCC
                submitted the revised information collection to the OMB for review
                under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and Sec. 1320.11
                of the OMB's implementing regulations (5 CFR 1320).
                 Current Actions. The rule revises 12 CFR 21.11 and 12 CFR 163.180
                to allow national banks and Federal savings associations to submit
                written requests for exemptions from the requirements of the OCC's SAR
                regulations. The burden estimates below are based on the estimated
                number of national banks and Federal savings associations that might
                request exemptions each year and the estimated number of hours required
                to submit a request.
                 Title of Information Collection: Minimum Security Devices and
                Procedures, Reports of Suspicious Activities, and Bank Secrecy Act
                Compliance Program.
                 Frequency: Event generated.
                 Affected public: Businesses or other for-profit.
                 Estimated number of respondents: 5.
                 Total estimated annual burden: 250 hours.
                D. Regulatory Flexibility Act
                 In general, the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
                seq.) requires an agency, in connection with a final rule, to prepare a
                final regulatory flexibility analysis describing the rule's impact on
                small entities (defined by the Small Business Administration for
                purposes of the RFA to include commercial banks and savings
                institutions with total assets of $600 million or less and trust
                companies with total assets of $41.5 million or less). However, under
                section 605(b) of the RFA, this analysis is not required if an 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 along with
                its rule.
                 The OCC currently supervises approximately 1,117 institutions
                (national banks, trust companies, Federal savings associations, and
                branches or agencies of foreign banks, collectively banks), of which
                669 are small entities.\46\ Because the final rule imposes no new
                mandates, it will have only de minimis costs to OCC-supervised small
                entities. Therefore, the OCC certifies that the final rule will not
                have a significant economic impact on a substantial number of small
                entities. Accordingly, a final regulatory flexibility analysis is not
                required.
                ---------------------------------------------------------------------------
                 \46\ Consistent with the General Principles of Affiliation 13
                CFR 121.103(a), the OCC counts the assets of affiliated financial
                institutions when determining whether it should classify an
                institution as a small entity. The OCC used December 31, 2020, to
                determine size because a ``financial institution's assets are
                determined by averaging the assets reported on its four quarterly
                financial statements for the preceding year.'' See footnote 8 of the
                U.S. Small Business Administration's Table of Size Standards.
                ---------------------------------------------------------------------------
                E. Riegle Community Development and Regulatory Improvement Act of 1994
                 Pursuant to section 302(a) of the Riegle Community Development and
                Regulatory Improvement Act (RCDRIA) of 1994 (12 U.S.C. 4802(a)) in
                determining the effective date and administrative compliance
                requirements for new regulations that impose additional reporting,
                disclosure, or other requirements on insured depository institutions,
                the OCC must consider, consistent with principles of safety and
                soundness and the public interest (1) any administrative burdens that
                the final rule would place on depository institutions, including small
                depository institutions and customers of depository institutions, and
                (2) the benefits of the final rule. In addition, section 302(b) of
                RCDRIA requires new regulations and amendments to regulations that
                impose additional reporting, disclosures, or other new requirements on
                insured depository institutions generally to take effect on the first
                day of a calendar quarter that begins on or after the date on which the
                regulations are published in final form.\47\ The OCC considered the
                changes made by this final rule and believes that the effective date of
                May 1, 2022, will provide OCC-regulated institutions with adequate time
                to comply with the rule. The final rule will not impose any new
                administrative compliance requirements, and the OCC believes that the
                burdens of preparing a request for exemption are justified by the
                agency's need to evaluate information and factors relevant to the
                exemption request and to promote consistency.
                ---------------------------------------------------------------------------
                 \47\ 12 U.S.C. 4802(b).
                ---------------------------------------------------------------------------
                F. OCC Unfunded Mandates Reform Act of 1995
                 The OCC analyzed the final rule under the factors in the Unfunded
                Mandates Reform Act (UMRA) of 1995
                [[Page 15332]]
                2 U.S.C. 1501 et seq. Under this analysis, the OCC considered whether
                the final rule includes a Federal mandate that may result in the
                expenditure by state, local, and tribal governments, in the aggregate,
                or by the private sector, of $100 million or more in any one year ($157
                million as adjusted annually for inflation). The UMRA does not apply to
                regulations that incorporate requirements specifically set forth in
                law.
                 The final rule will not impose new mandates on any national banks
                or Federal savings associations. Therefore, the OCC concludes that the
                final rule will not result in an expenditure of $157 million or more
                annually by state, local, and tribal governments, or by the private
                sector. As a result, the OCC finds that the final rule does not trigger
                the UMRA cost threshold. Accordingly, the OCC has not prepared the
                written statement described in section 202 of the UMRA.
                List of Subjects
                12 CFR Part 21
                 Crime, Currency, National banks, Reporting and recordkeeping
                requirements, Security measures.
                12 CFR Part 163
                 Accounting, Administrative practice and procedure, Advertising,
                Crime, Currency, Investments, Mortgages, Reporting and recordkeeping
                requirements, Savings associations.
                Authority and Issuance
                 For the reasons stated in the SUPPLEMENTARY INFORMATION, chapter I
                of title 12 of the Code of Federal Regulations is amended as follows:
                PART 21--MINIMUM SECURITY DEVICES AND PROCEDURES, REPORTS OF
                SUSPICIOUS ACTIVITIES, AND BANK SECRECY ACT COMPLIANCE PROGRAM
                0
                1. Revise the authority citation for part 21 to read as follows:
                 Authority: 12 U.S.C. 1, 93a, 161, 1462a, 1463, 1464, 1818, 1881-
                1884, and 3401-3422; 31 U.S.C. 5318.
                0
                2. In Sec. 21.11, add paragraph (m) to read as follows:
                Sec. 21.11 Suspicious Activity Report.
                * * * * *
                 (m) Exemptions. (1) The Office of the Comptroller of the Currency
                (OCC) may grant a national bank an exemption from the requirements of
                this section. A national bank requesting an exemption must submit a
                request in writing to the OCC. In reviewing such requests, the OCC will
                consider whether the exemption is consistent with the purposes of the
                Bank Secrecy Act (if applicable) and safe and sound banking, and may
                consider other appropriate factors. Any exemption will apply only as
                expressly stated in the exemption. (A national bank requesting an
                exemption that also requires relief from the requirements of applicable
                regulations issued by the Department of the Treasury at 31 CFR chapter
                X must submit a request in writing to both the OCC and FinCEN for
                approval.)
                 (2) The OCC will respond in writing to a national bank that submits
                a request pursuant to paragraph (m)(1) of this section after
                considering whether the exemption is consistent with the factors in
                paragraph (m)(1) of this section. Any exemption granted by the OCC
                under paragraph (m)(1) of this section will continue for the time
                specified by the OCC.
                 (3) The OCC may extend the period of time or may revoke an
                exemption granted under paragraph (m)(1) of this section. Exemptions or
                extensions may be revoked in the sole discretion of the OCC. Before
                revoking an exemption, the OCC will provide written notice to the
                national bank of the OCC's intention to revoke an exemption. Such
                notice will include the basis for the revocation and will provide an
                opportunity for the national bank to submit a response to the OCC. The
                OCC will consider any response before deciding whether or not to revoke
                an exemption and provide written notice to the national bank of the
                OCC's final decision to revoke an exemption.
                 (4) With respect to requests for exemptions that will also require
                relief from the requirements of applicable regulations issued by the
                Department of the Treasury at 31 CFR chapter X, upon receiving approval
                from both the OCC and FinCEN, the requestor will be relieved of its
                obligations under this section to the extent stated in such approvals.
                PART 163--SAVINGS ASSOCIATIONS--OPERATIONS
                0
                3. Revise the authority citation for part 163 to read as follows:
                 Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 1467a, 1817,
                1820, 1828, 1831o, 3806, 5101 et seq., 5412(b)(2)(B); 31 U.S.C.
                5318; 42 U.S.C. 4106.
                0
                4. In Sec. 163.180, add paragraph (f) to read as follows:
                Sec. 163.180 Suspicious Activity Reports and other reports and
                statements.
                * * * * *
                 (f) Exemptions. (1) The OCC may grant a Federal savings association
                or service corporation an exemption from the requirements of this
                section. A Federal savings association or service corporation
                requesting an exemption must submit a request in writing to the OCC. In
                reviewing such requests, the OCC will consider whether the exemption is
                consistent with the purposes of the Bank Secrecy Act (if applicable)
                and safe and sound banking, and may consider other appropriate factors.
                Any exemption will apply only as expressly stated in the exemption. (A
                Federal savings association or service corporation requesting an
                exemption that also requires relief from the requirements of applicable
                regulations issued by the Department of the Treasury at 31 CFR chapter
                X must submit a request in writing to both the OCC and FinCEN for
                approval.)
                 (2) The OCC will respond in writing to the Federal savings
                association or service corporation that submits a request pursuant to
                paragraph (f)(1) of this section after considering whether the
                exemption is consistent with the factors in paragraph (f)(1) of this
                section. Any exemption granted by the OCC under paragraph (f)(1) of
                this section will continue for the time specified by the OCC.
                 (3) The OCC may extend the period of time or may revoke an
                exemption granted under paragraph (f)(1) of this section. Exemptions or
                extensions may be revoked in the sole discretion of the OCC. Before
                revoking an exemption, the OCC will provide written notice to the
                Federal savings association or service corporation of the OCC's
                intention to revoke an exemption. Such notice will include the basis
                for the revocation and will provide an opportunity for the Federal
                savings association or service corporation to submit a response to the
                OCC. The OCC will consider any response before deciding whether or not
                to revoke an exemption and provide written notice to the Federal
                savings association or service corporation of the OCC's final decision
                to revoke an exemption.
                 (4) With respect to requests for exemptions that will also require
                relief from the requirements of applicable regulations issued by the
                Department of the Treasury at 31 CFR chapter X, upon receiving approval
                from both the OCC and FinCEN, the requestor will be relieved of its
                obligations under this section to the extent stated in such approvals.
                Michael J. Hsu,
                Acting Comptroller of the Currency.
                [FR Doc. 2022-05521 Filed 3-17-22; 8:45 am]
                BILLING CODE 4810-33-P
                

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