Review of Bank Secrecy Act Regulations and Guidance

CourtFinancial Crimes Enforcement Network
Citation86 FR 71201
Record Number2021-27081
Publication Date15 December 2021
Federal Register, Volume 86 Issue 238 (Wednesday, December 15, 2021)
[Federal Register Volume 86, Number 238 (Wednesday, December 15, 2021)]
                [Proposed Rules]
                [Pages 71201-71207]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-27081]
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                DEPARTMENT OF THE TREASURY
                Financial Crimes Enforcement Network
                31 CFR Chapter X
                [Docket No. FINCEN-2021-0008]
                Review of Bank Secrecy Act Regulations and Guidance
                AGENCY: Financial Crimes Enforcement Network, Treasury.
                ACTION: Request for information and comment.
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                SUMMARY: The Financial Crimes Enforcement Network (FinCEN) is issuing
                this request for information (RFI) to solicit comment on ways to
                streamline, modernize, and update the anti-money laundering and
                countering the financing of terrorism (AML/CFT) regime of the United
                States. In particular, FinCEN seeks comment on ways to modernize risk-
                based AML/CFT regulations and guidance, issued pursuant to the Bank
                Secrecy Act (BSA), so that they, on a continuing basis, protect U.S.
                national security in a cost-effective and efficient manner. This RFI
                also supports FinCEN's ongoing formal review of BSA regulations and
                guidance required pursuant to Section 6216 of the Anti-Money Laundering
                Act of 2020 (the AML Act). Section 6216 requires the Secretary of the
                Treasury (the Secretary) to solicit public comment and submit a report,
                in consultation with specified stakeholders, to Congress by January 1,
                2022, that contains the findings and determinations that result from
                the formal review, including administrative and legislative
                recommendations.
                DATES: Written comments on this RFI must be received on or before
                February 14, 2022.
                ADDRESSES: Comments may be submitted by any of the following methods:
                 Federal eRulemaking Portal: https://www.regulations.gov.
                Follow the instructions for submitting comments. Refer to Docket Number
                FINCEN-2021-0008.
                [[Page 71202]]
                 Mail: Policy Division, Financial Crimes Enforcement
                Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-
                2021-0008.
                FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section
                at 1-800-767-2825 or electronically at https://fincen.gov/contact.
                SUPPLEMENTARY INFORMATION:
                I. Scope of the RFI
                 FinCEN seeks comment on ways to streamline, modernize, and update
                BSA regulations and guidance so that they, on a continuing basis,
                protect U.S. national security in a cost-effective and efficient
                manner. FinCEN is particularly interested in new and innovative
                approaches to BSA compliance that promote a risk-based approach to
                protecting the financial system from threats to national security posed
                by various forms of financial crime, including money laundering, the
                financing of terrorism and proliferation, while also providing for the
                reporting of information with a high degree of usefulness to government
                authorities. FinCEN recognizes the evolving illicit finance threat
                landscape and appreciates the important role that technology,
                innovation, and the efficient application of resources to BSA reporting
                play in promoting a risk-based approach to BSA compliance. In this
                context, the efficient application of resources can refer to the
                prioritization of resources by financial institutions to provide more
                useful information to law enforcement or other U.S. Government
                entities, including reporting highly useful information in a timely
                manner, or reducing redundancies and information of little use reported
                to law enforcement or other U.S. Government entities.
                 The review of BSA regulations and guidance \1\ required by Section
                6216 of the AML Act will support these efforts by enhancing the
                protection of U.S. national security and assisting in the development,
                revision, or update of regulations that are outdated, redundant, or
                otherwise do not support an effective and risk-based AML/CFT
                framework.\2\ As described in the BSA, AML/CFT programs should, among
                other things, be reasonably designed to assure and monitor compliance
                with the BSA and be risk-based, including ensuring that financial
                institutions direct more attention and resources toward higher-risk
                customers and activities, consistent with the risk profile of the
                financial institution, rather than toward lower-risk customers and
                activities.\3\
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                 \1\ FinCEN's regulations are codified at 31 CFR chapter X. For
                the purposes of this document, ``guidance'' should be interpreted
                broadly and includes, for instance, all administrative rulings,
                advisories, bulletins, fact sheets, responses to frequently asked
                questions, and notices issued by FinCEN and posted on FinCEN's
                website.
                 \2\ The AML Act is Division F of the William M. (Mac) Thornberry
                National Defense Authorization Act for Fiscal Year 2021, Public Law
                116-283 (January 1, 2021). The AML Act defines the BSA as section 21
                of the Federal Deposit Insurance Act (12 U.S.C. 1829b), chapter 2 of
                title 1 of Public Law 91-508 (12 U.S.C. 1951 et seq.), and
                subchapter II of chapter 53 of title 31, United States Code. Section
                6003(1) of the AML Act.
                 \3\ 31 U.S.C. 5318(h)(2)(B)(iv).
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                 According to Section 6216(a), the purposes of the review are to:
                (i) Ensure the Department of the Treasury (Treasury) provides, on a
                continuing basis, for appropriate safeguards to protect the financial
                system from threats, including money laundering and the financing of
                terrorism and proliferation, to national security posed by various
                forms of financial crime; (ii) ensure that the regulations and guidance
                implementing the BSA continue to require certain reports or records
                that are highly useful in countering financial crime; and (iii)
                identify regulations and guidance that may be outdated, redundant, or
                otherwise do not promote a risk-based AML/CFT compliance regime for
                financial institutions, or that do not conform with the commitments of
                the United States to meet international standards to combat money
                laundering, financing of terrorism, serious tax fraud, or other
                financial crimes. Comments received in response to this RFI will
                support FinCEN's efforts to conduct the review required by Section 6216
                of the AML Act. Following that review, the Secretary--in consultation
                with specified stakeholders \4\--is required to make appropriate
                changes to the regulations and guidance to improve, as appropriate, the
                efficiency of those provisions, and submit a report to Congress that
                contains all findings and determinations made in carrying out the
                review, including administrative or legislative recommendations.
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                 \4\ Under Section 6216(a) of the AML Act, the Secretary is
                required to consult with the Federal functional regulators, the
                Federal Financial Institutions Examination Council, the Attorney
                General, Federal law enforcement agencies, the Director of National
                Intelligence, the Secretary of Homeland Security, and the
                Commissioner of Internal Revenue. Section 6003(3) of the AML Act
                defines the term ``Federal functional regulator'' as having: (A) The
                meaning given the term in section 509 of the Gramm-Leach-Bliley Act
                (15 U.S.C. 6809); and (B) includes any Federal regulator that
                examines a financial institution for compliance with the BSA.
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                II. Background
                A. History of the BSA
                 Enacted in 1970, the BSA is the principal U.S. law for the
                prevention of money laundering, terrorist financing and proliferation,
                and other forms of illicit financial activity. Congress has authorized
                the Secretary to administer the BSA. The Secretary has delegated to the
                Director of FinCEN the authority to implement, administer, and enforce
                compliance with the BSA and associated regulations.\5\ FinCEN is
                authorized to require financial institutions or nonfinancial trades or
                businesses to maintain procedures to ensure compliance with the BSA and
                the regulations promulgated thereunder and to guard against money
                laundering, the financing of terrorism, and other forms of illicit
                finance.\6\ Statutory amendments, most recently through the AML Act,
                have expanded the scope and range of BSA requirements and the
                complexity of FinCEN's regulations, including the types of information
                FinCEN can require financial institutions to maintain or report.
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                 \5\ Treasury Order 180-01 (Jan. 14, 2020).
                 \6\ 31 U.S.C. 5318(a)(2) (as amended by Section 6102(c)(2) of
                the AML Act).
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                 The Money Laundering Control Act of 1986 (MLCA) \7\ and the
                Annunzio-Wylie Anti-Money Laundering Act of 1992 (Annunzio-Wylie) made
                money laundering a Federal crime, amended the BSA by strengthening
                sanctions for BSA violations,\8\ and authorized Treasury to require the
                reporting of suspicious activities.\9\ Annunzio-Wylie also authorized
                Treasury to issue regulations requiring all financial institutions, as
                defined in BSA regulations, to maintain ``minimum standards'' of an AML
                program.\10\ The USA PATRIOT Act also ushered in an expanded role for
                AML and other financial and economic measures in countering threats to
                U.S. national security and protecting the U.S. financial system. For
                example, Title III
                [[Page 71203]]
                of the USA PATRIOT Act further amended the BSA by authorizing Treasury
                to require financial institutions to establish customer identification
                programs and by directly requiring financial institutions to maintain
                AML programs that satisfied statutorily mandated requirements.\11\
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                 \7\ Public Law 99-570, 100 Stat. 3207 (Oct. 27, 1986).
                 \8\ Title XV, Public Law102-550, 106 Stat. 3672 (Oct. 28, 1992),
                at sec. 1502 (authorizing proceedings to terminate federal
                depository institution and credit union charters when convicted of a
                criminal violation of the BSA), sec. 1503 (authorizing the
                termination of federal deposit insurance for federally insured,
                state-chartered depository institutions, and federal share insurance
                for federally insured, state-chartered credit unions, when convicted
                of a criminal violation of the BSA), sec. 1504 (authorizing the
                removal officers or directors of depository institutions, and
                institution-affiliated parties of federally insured credit unions,
                when such parties are found to have violated a BSA requirement).
                 \9\ Id. at sec. 1517 (authorizing Treasury to require the
                reporting of suspicious transactions).
                 \10\ Id.
                 \11\ Public Law 107-56, 115 Stat. 272 (Oct. 26, 2001). FinCEN
                issued four interim final AML program rules on April 29, 2002 for
                financial institutions regulated by a Federal functional regulator:
                Casinos (67 FR 21110), money services businesses (67 FR 21114),
                mutual funds (67 FR 21117), and operators of credit card systems (67
                FR 21121). FinCEN's rule originally cross-referenced the regulations
                of the Federal functional regulators and provided that satisfaction
                of the appropriate Federal functional regulator's AML program rule
                requirements would be deemed to satisfy the requirements of
                Treasury's rule.
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                 Most recently, the AML Act greatly expanded the express purposes of
                the BSA. In addition to requiring the filing of certain highly useful
                reports and the maintenance of certain highly useful records, the
                express purposes of the BSA now include, among other things:
                 [cir] Preventing the laundering of money and the financing of
                terrorism through the establishment by financial institutions of
                reasonably designed risk-based programs to combat money laundering and
                the financing of terrorism;
                 [cir] facilitating the tracking of money that has been sourced
                through criminal activity or is intended to promote criminal or
                terrorist activity; and
                 [cir] assessing the money laundering, terrorism finance, tax
                evasion, and fraud risks to financial institutions, products, or
                services to--
                 [ssquf] protect the financial system of the United States from
                criminal abuse; and
                 [ssquf] safeguard the national security of the United States.\12\
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                 \12\ 31 U.S.C. 5311 (as amended by Section 6101(a) of the AML
                Act).
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                B. Regulatory Reform Initiatives Prior to the AML Act
                 Numerous provisions of the AML Act codify and elaborate upon
                existing or prior Treasury initiatives on innovation, regulatory
                reform, and industry engagement, in response to evolving threats. These
                various efforts include: The BSA Advisory Group; an interagency AML
                Task Force led by Treasury's Under Secretary for Terrorism and
                Financial Intelligence; \13\ a Regulatory Reform Working Group for
                Treasury and the Federal Banking Agencies (FBAs); \14\ FinCEN Exchange;
                \15\ studying the value of BSA data; and, the FinCEN Innovation Hours
                Initiative.\16\ FinCEN has also issued final rules in recent years that
                have aimed to close AML regulatory gaps that represent vulnerabilities
                in the U.S. financial system that illicit actors could exploit.\17\ In
                addition, to fulfill its obligations under the Paperwork Reduction Act,
                FinCEN issued multiple notices soliciting input from the public in an
                effort to better understand and estimate the burden and cost of various
                BSA regulations.\18\ Many of the comments that FinCEN received are
                relevant to the formal review required under Section 6216 of the AML
                Act.
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                 \13\ See Treasury, Remarks of Under Secretary David S. Cohen at
                the American Bankers Association and the American Bar Association
                Money Laundering Enforcement Conference, (Nov. 10, 2014), available
                at https://www.treasury.gov/press-center/press-releases/Pages/jl2692.aspx.
                 \14\ The FBAs include the Board of Governors of the Federal
                Reserve System, the Federal Deposit Insurance Corporation, the
                National Credit Union Administration, and the Office of the
                Comptroller of the Currency.
                 \15\ See FinCEN, FinCEN Exchange, available at https://www.fincen.gov/resources/financial-crime-enforcement-network-exchange.
                 \16\ See FinCEN, FinCEN's Innovation Hours Program, available at
                https://www.fincen.gov/resources/fincens-innovation-hours-program.
                 \17\ See FinCEN, Final rule--Customer Due Diligence Requirements
                for Financial Institutions, 81 FR 29397 (May 11, 2016); see also
                FinCEN, Final rule--Customer Identification Programs, Anti-Money
                Laundering Programs, and Beneficial Ownership Requirements for Banks
                Lacking a Federal Functional Regulator, 85 FR 57129 (Sept. 15,
                2020).
                 \18\ See, e.g., FinCEN, Agency Information Collection
                Activities; Proposed Renewal; Comment Request; Renewal Without
                Change of the Bank Secrecy Act Reports of Transactions in Currency
                Regulations at 31 CFR 1010.310 Through 1010.314, 31 CFR 1021.311,
                and 31 CFR 1021.313, and FinCEN Report 112--Currency Transaction
                Report, 85 FR 29022 (May 14, 2020); FinCEN, Agency Information
                Collection Activities; Proposed Renewal; Comment Request; Renewal
                Without Change of the Bank Secrecy Act Reports by Financial
                Institutions of Suspicious Transactions at 31 CFR 1020.320,
                1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, and
                1029.320, and FinCEN Report 111--Suspicious Activity Report, 85 FR
                31598 (May 26, 2020); FinCEN, Agency Information Collection
                Activities; Proposed Renewal; Comment Request; Renewal Without
                Change of Anti-Money Laundering Programs for Certain Financial
                Institutions, 85 FR 49418 (Aug. 13, 2020); and FinCEN, Agency
                Information Collection Activities; Proposed Renewal; Comment
                Request; Renewal Without Change of the Customer Identification
                Program Regulatory Requirements for Certain Financial Institutions,
                85 FR 49425 (Aug. 13, 2020).
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                C. Technology and Application of the BSA
                 New and innovative approaches in the financial sector in recent
                years have resulted in the development of new business models,
                products, and services, fueled in part by rapid advances in technology.
                As innovation has presented new business and other opportunities,
                illicit finance threats have also evolved and present new challenges
                for financial institutions to comply with BSA obligations. FinCEN
                recognizes the need to consider how to adapt the BSA's regulatory
                requirements to better address illicit finance threats that have
                changed considerably in scope, nature, and impact since the initial
                passage of the BSA. FinCEN also recognizes that innovation and
                technological advancements can enhance the ability of financial
                institutions to comply with their BSA obligations, making it easier to
                collect information that may be highly useful in combatting a variety
                of financial crimes, and for U.S. Government authorities to better
                analyze the information reported by financial institutions.
                III. Requirements Under Section 6216 of the AML Act
                A. Safeguards To Protect the Financial System From Threats
                 Section 6216 of the AML Act directs FinCEN to review BSA
                regulations and guidance to ensure that Treasury provides, on a
                continuing basis, for appropriate safeguards to protect the financial
                system from threats to national security posed by various forms of
                financial crime, including money laundering and the financing of
                terrorism and proliferation.\19\ To meet this objective, FinCEN is
                soliciting input regarding financial services and related activity that
                present risk of exploitation by illicit actors or otherwise present a
                risk to the U.S. financial system but might not be addressed, in whole
                or in part, by existing regulations. At the same time, FinCEN seeks
                comment on whether these risks can be addressed by new or amended
                approaches toward AML program rule, recordkeeping, and reporting
                requirements that protect national security and safeguard the U.S.
                financial system while minimizing regulatory burden. In addition,
                FinCEN seeks comment identifying BSA regulations or guidance where the
                present safeguards do not effectively mitigate the risks they are
                intended to prevent or mitigate. Specifically, FinCEN seeks to
                understand whether AML program rule, recordkeeping, and reporting
                requirements are sufficient to prevent or mitigate the serious risks
                they are intended to address.
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                 \19\ Section 6216(a)(1)(A) of the AML Act.
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                 FinCEN views this objective as separate from the objective to
                identify BSA regulations and guidance that do not promote a risk-based
                approach, which is described in section C below. For this objective,
                FinCEN is soliciting input from the public regarding: (i) Threats to
                the financial system and to national security that are not adequately
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                addressed by BSA regulations and guidance; and (ii) regulatory
                safeguards that FinCEN should implement via regulation or guidance to
                better protect the financial system from such threats.
                B. Reports and Records That Are Highly Useful in Countering Financial
                Crime
                 Section 6216 also directs FinCEN to evaluate BSA regulations and
                guidance to ensure that they continue to require certain reports or
                records that are highly useful in countering financial crimes.\20\ The
                purposes of the BSA include requiring reports or records that are
                highly useful in criminal, tax, regulatory, or intelligence matters,
                and preventing a variety of financial crime, including money laundering
                and the financing of terrorism.\21\ FinCEN is authorized to require
                financial institutions or nonfinancial trades or businesses to maintain
                procedures to ensure compliance with the BSA and the regulations
                implementing it, and to guard against money laundering, the financing
                of terrorism, and other forms of illicit finance.\22\ The BSA and
                FinCEN's implementing regulations currently require financial
                institutions, nonfinancial trades and businesses, and individuals to
                file a variety of reports, including, for example, suspicious activity
                reports (SARs), currency transaction reports (CTRs), reports of certain
                domestic coin and currency transactions (Form 8300s), and reports of
                foreign bank and financial accounts (FBARs). In addition, under 31
                U.S.C. 5326(a), if the Secretary finds that reasonable grounds exist
                for concluding that additional recordkeeping and reporting are
                necessary to carry out the purposes of the BSA or to prevent evasions
                thereof, the Secretary may issue an order requiring any domestic
                financial institution or nonfinancial trade or business or group of
                domestic financial institutions or nonfinancial trades or businesses in
                a geographic area to obtain, record, and report information concerning
                certain transactions (as the Secretary may describe in such order).
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                 \20\ Section 6216(a)(1)(B) of the AML Act.
                 \21\ 31 U.S.C. 5311 (as amended by Section 6101(a) of the AML
                Act).
                 \22\ 31 U.S.C. 5318(a)(2) (as amended by Section 6102(c)(2) of
                the AML Act).
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                 The second objective of Section 6216 essentially poses two
                questions. First, are the reports or records that are currently
                required to be filed or maintained highly useful in countering
                financial crime? Second, are there any reports or records that are not
                currently required to be filed or maintained that, if required, would
                be highly useful in countering financial crime? This objective also
                poses similar questions with respect to the BSA's numerous
                recordkeeping requirements--namely, whether the current requirements
                mandate any recordkeeping that is not highly useful in countering
                financial crime, and whether different or additional recordkeeping
                would be highly useful in countering financial crime.
                C. Identify BSA Regulations and Guidance That May Be Outdated,
                Redundant, or Do Not Promote a Risk-Based AML/CFT Regime for Financial
                Institutions
                 Section 6216 also requires FinCEN to evaluate BSA regulations and
                guidance that may be outdated, redundant, or otherwise do not promote a
                risk-based AML and CFT compliance regime for financial
                institutions.\23\
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                 \23\ Section 6216(a)(1)(C)(i) of the AML Act.
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                 FinCEN considers outdated regulations for the purposes of this RFI
                to include regulations that: (i) No longer promote the maintenance of
                risk-based safeguards that adequately address the regulation's original
                purpose; or (ii) are no longer useful or appropriate. That is, if
                reports filed consistent with a regulation no longer provides highly
                useful information to the government, or if a regulation once
                appropriately addressed a significant risk but no longer does so, that
                regulation is outdated. Outdated regulations would also include
                regulations that do not promote a risk-based approach to AML/CFT
                compliance by failing to take into account innovation or technological
                advancements in the financial system, or are obsolete in light of
                subsequent statutory or regulatory changes.
                 FinCEN considers redundant regulations for the purpose of this RFI
                to include BSA regulations that: (i) Impose requirements on regulated
                entities that are identical to, or significantly overlap with, the
                requirements imposed by other BSA regulations; or (ii) were issued
                under a different statutory authority, but for which it is not possible
                to comply with both mandates by taking one set of actions. Regulations
                imposing such requirements will not be considered redundant to the
                extent that fully satisfying one requirement under one framework fully
                satisfies the other requirement as well.
                 Regulations Failing to Promote a Risk-Based Approach: FinCEN looked
                at several sources to determine how BSA regulations and guidance might
                fail to promote a risk-based AML/CFT regime for financial institutions,
                for the purpose of this RFI, including the 2018 National Money
                Laundering Risk Assessment (NMLRA),\24\ FinCEN's AML/CFT National
                Priorities,\25\ and guidance from the Financial Action Task Force
                (FATF),\26\ the international standard-setting body on combatting money
                laundering and the financing of terrorism and proliferation. The NMLRA
                in particular provides definitions of several key concepts that can
                offer helpful clarification in connection with the Section 6216 review:
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                 \24\ See Treasury, National Money Laundering Risk Assessment,
                (Dec. 20, 2018), at page 6, available at https://home.treasury.gov/system/files/136/2018NMLRA_12-18.pdf; see also Treasury, National
                Terrorist Financing Risk Assessment, (Dec. 20, 2018), available at
                https://home.treasury.gov/system/files/136/2018ntfra_12182018.pdf;
                see also Treasury, National Proliferation Financing Risk Assessment,
                (Dec. 20, 2018), available at https://home.treasury.gov/system/files/136/2018npfra_12_18.pdf.
                 \25\ FinCEN, Anti-Money Laundering and Countering the Financing
                of Terrorism Priorities, (June 30, 2021), available at https://www.fincen.gov/sites/default/files/shared/AML_CFT%20Priorities%20(June%2030%2C%202021).pdf.
                 \26\ The FATF is a member-led taskforce established in 1989 by
                the Group of 7 (G7). Today it has 39 members, and more than 200
                jurisdictions have committed to implementing the FATF standards and
                are assessed against them by the FATF and/or one of nine FATF-style
                regional bodies. Through its membership in the G7 and the Group of
                20 (G20), the United States has also signed onto numerous G7 and G20
                commitments to effectively implement the FATF standards. In 2013,
                2019 and 2021, FATF issued guidelines and standards for the
                assessment of systemic exposures to the risks of money laundering,
                terrorist financing, and proliferation financing. According to these
                guidelines, a systemic risk assessment is the result of a process,
                based on a methodology agreed by those parties involved, that
                attempts to identify, analyze, and understand the combination of
                vulnerabilities, threats, and consequences affecting a regulated
                subject, event, or activity. See FATF, Guidance on National Money
                Laundering and Terrorist Financing Risk Assessment, (Feb. 2013), at
                page 6, Introduction and Terminology, Section 1.3-Key concepts and
                terms relevant to a money laundering risk assessment, available at
                https://www.fatf-gafi.org/media/fatf/content/images/national_ml_tf_risk_assessment.pdf; see also FATF, Guidance on
                Terrorist Financing Risk Assessment, (Mar. 2019), at pages 7-9 for
                terminology relevant to a terrorist financing risk assessment,
                available at https://www.fatf-gafi.org/media/fatf/documents/reports/Terrorist-Financing-Risk-Assessment-Guidance.pdf; see also FATF,
                Guidance on Proliferation Risk Assessment and Mitigation, (June
                2021), at pages 9-10 for key terminology, available at https://
                www.fatf-gafi.org/media/fatf/documents/reports/Guidance-Proliferation-Financing-Risk-Assessment-Mitigation.pdf.
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                 Threat: The NMLRA uses this term for predicate crimes associated
                with money laundering.\27\ The NMLRA deems the environment in which
                predicate offenses are committed and criminal proceeds generated as
                being relevant to understanding why, in some cases, specific crimes are
                associated with specific money laundering methods.
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                 \27\ These predicate crimes are enumerated at 18 U.S.C.
                1956(c)(7).
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                 Vulnerability: The NMLRA uses this term for circumstances or
                situations that facilitate or create the opportunity for money
                laundering. A vulnerability may relate to a specific financial sector
                or product, or a weakness in regulation, supervision, or enforcement. A
                vulnerability may also reflect unique circumstances pursuant to which
                it may be difficult to distinguish legal from illegal activity. The
                methods that allow for the most amount of money to be laundered most
                effectively or most quickly present the greatest potential
                vulnerabilities.
                 Risk: The NMLRA conceives of risk as a function of threat and
                vulnerability. Risk represents a synthesis, taking into consideration
                the effect of mitigating measures including regulation, supervision,
                and enforcement.
                 The NMLRA also informed Treasury's 2020 National Strategy for
                Combating Terrorist and Other Illicit Financing in considering
                approaches to risk. According to that strategy, a risk-based approach
                in the context of AML/CFT means allocating resources and implementing
                measures to prevent or mitigate illicit finance in a way that takes
                into account identified and well understood risks.\28\ Further, in 2019
                FinCEN and the FBAs issued a Joint Statement on Risk-Focused BSA/AML
                Supervision noting that risk-based compliance programs enable the
                allocation of compliance resources commensurate with risk.\29\ The goal
                of the risk-based approach is to establish and maintain AML/CFT
                programs proportionate to the risk present in financial institutions
                based on customers and activities. It focuses available resources in
                the areas of highest risk in order to have the greatest impact, while
                reducing the resources devoted to activities carrying lower risk. For
                purposes of this RFI, when attempting to identify regulations and
                guidance that do not promote a risk-based AML/CFT regime for financial
                institutions, commenters are encouraged to identify regulations and
                guidance that discourage or hinder financial institutions from using or
                allocating resources commensurate with risk.
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                 \28\ See Treasury, 2020 National Strategy for Combating
                Terrorist and Other Illicit Financing, at pages 6-7, available at
                https://home.treasury.gov/system/files/136/National-Strategy-to-Counter-Illicit-Financev2.pdf; see also FATF, FATF Recommendations:
                International Standards on Combatting Money Laundering and the
                Financing of Terrorism & Proliferation, (updated Oct. 2021), page
                31, Interpretive Note for FATF Recommendation 1 (describing the
                risk-based approach), available at http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATFRecommendations2012.pdf.
                 \29\ See FinCEN, Joint Statement on Risk Focused Bank Secrecy
                Act Anti Money Laundering Supervision, (July 22, 2019), available at
                https://www.fincen.gov/sites/default/files/2019-10/JointStatementonRisk-FocusedBankSecrecyAct-Anti-MoneyLaunderingSupervisionFINAL1.pdf.
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                D. Identify BSA Regulations and Guidance That Do Not Conform With
                International Standards To Combat Financial Crime
                 Section 6216 requires FinCEN to identify regulations and guidance
                that do not conform to commitments of the United States to meet
                international standards to combat money laundering, financing of
                terrorism, serious tax fraud, or other financial crimes.\30\ Preeminent
                among such standards are the FATF Recommendations that promote
                effective implementation of legal, regulatory and operational measures
                for combating money laundering, terrorist financing, and other related
                threats to the integrity of the international financial system.\31\
                FATF monitors countries' progress in implementing the FATF standards
                through mutual evaluations; reviews money laundering and terrorist
                financing techniques and counter-measures; and promotes the adoption
                and implementation of the FATF standards globally.\32\ Given their
                international recognition as standards for AML, CFT, and countering the
                financing of proliferation, the FATF Recommendations will factor into
                how Treasury approaches meeting this objective under Section 6216.
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                 \30\ Section 6216(a)(1)(C)(ii) of the AML Act.
                 \31\ See FATF, FATF Recommendations,--International Standards on
                Combatting Money Laundering and the Financing of Terrorism &
                Proliferation (``FATF Recommendations''), (updated Oct. 2021), at
                page 7, available at https://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATFRecommendations2012.pdf
                 \32\ See FATF, FATF Recommendations, at page 8.
                ---------------------------------------------------------------------------
                 FATF published its most recent mutual evaluation of the United
                States in December 2016 \33\ and, in March 2020, issued a follow-up
                report.\34\ The purpose of this third follow-up report was to assess
                the United States' progress in addressing certain technical compliance
                deficiencies identified in the 2016 Mutual Evaluation Report, most
                notably relating to customer due diligence obligations, and to analyze
                the United States' progress in implementing new requirements relating
                to FATF Recommendations that have changed since the end of the 2016
                Mutual Evaluation.
                ---------------------------------------------------------------------------
                 \33\ See FATF, Anti-money laundering and counter-terrorist
                financing measures--United States, Fourth Round Mutual Evaluation
                Report, (2016), available at http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-united-states-2016.html.
                 \34\ See FATF, Anti-money laundering and counter-terrorist
                financing measures--United States, 3rd Enhanced Follow-up Report &
                Technical Compliance Re-Rating, (2020), available at https://www.fatf-gafi.org/media/fatf/documents/reports/fur/Follow-Up-Report-United-States-March-2020.pdf.
                ---------------------------------------------------------------------------
                E. Make Changes to BSA Regulations and Guidance To Improve Efficiency
                 Finally, Section 6216 requires FinCEN to make changes, as
                appropriate, to regulations and guidance to improve the efficiency of
                those provisions.\35\ FinCEN is asking the public to identify specific
                changes to BSA regulations and guidance that would make them more
                efficient. Efficiency in this context can refer to financial
                institutions focusing resources on providing information that is more
                useful to law enforcement, reporting highly useful information in a
                timely manner, or reducing redundancies and information of little use
                to law enforcement. As part of this process, FinCEN requests comment on
                regulations and guidance that do not support timely and cost-effective
                compliance with BSA obligations that produces highly useful information
                for law enforcement or U.S. Government entities.
                ---------------------------------------------------------------------------
                 \35\ Section 6216(a)(2) of the AML Act.
                ---------------------------------------------------------------------------
                IV. Questions for Comment
                A. Safeguards To Protect the Financial System From Threats
                 1. The objective of Section 6216(a)(1)(A) of the AML Act is to
                ensure that Treasury provides, on a continuing basis, for appropriate
                safeguards to protect the financial system from threats to national
                security posed by various forms of financial crime. Are there any
                threats, vulnerabilities, or risks that you think Treasury is unaware
                of, or that you think Treasury is not responding to with sufficient and
                appropriate safeguards? If so, please identify the threats, along with
                any suggestions you have for how Treasury might better identify and
                respond to them, including any safeguards that Treasury should
                implement.
                 2. Do AML program requirements for financial institutions
                sufficiently address the threats, vulnerabilities, and risks faced by
                the U.S. financial system? If not, what changes do you recommend to
                ensure that AML program requirements adequately and effectively
                safeguard U.S. national security?
                B. Reports and Records That Are Highly Useful in Countering Financial
                Crime
                 3. Are there BSA reporting or recordkeeping requirements that you
                believe do not provide information that is highly useful in countering
                financial crimes? If so, what reports or records, and why? Conversely,
                are there reports
                [[Page 71206]]
                or records not currently required that would be highly useful? If so,
                what reports and records, and why?
                 4. Are there specific changes to BSA reporting or recordkeeping
                requirements that would provide information that is more useful to law
                enforcement in countering financial crimes or allow financial
                institutions to better understand what information to report? If so,
                which reports or records, and what changes do you recommend?
                 5. How can FinCEN ensure that BSA reporting and recordkeeping
                requirements are highly useful in countering financial crimes on a
                continuing basis? For example, should FinCEN conduct certain studies or
                analyze certain data on a regular basis to ensure BSA reports and
                records continue to be highly useful in countering financial crimes?
                 6. Should FinCEN consider certain regular or automatic updates to
                specific BSA regulations to ensure the reports or records they require
                continue to be highly useful in countering financial crimes? For
                example, should FinCEN more regularly update certain BSA reports'
                fields based on frequency of use, terms included, or other relevant
                factors and trends identified? What other events might necessitate such
                updates?
                 7. Would automatically updating certain BSA reporting or
                recordkeeping requirements streamline or reduce the potential
                compliance burden without sacrificing the usefulness of the required
                BSA reports and records in countering financial crimes? If so, what
                other requirements might benefit from automatic updates? For example,
                should automatic updates to dollar thresholds for certain BSA reports
                and records occur to account for inflation adjustments? What other
                circumstances might necessitate automatic updates?
                 8. Should FinCEN consider periodic adjustments, such as customized
                thresholds, to BSA regulations and guidance to account for changes in
                risk, such as changes in geographic risk? What circumstances might
                necessitate customized thresholds and why?
                C. Identify BSA Regulations and Guidance That May Be Outdated,
                Redundant, or Do Not Promote a Risk-Based AML/CFT Regime for Financial
                Institutions
                i. Outdated Regulations
                 9. Are there BSA regulations or guidance that do not promote risk-
                based safeguards or that no longer fulfill their original purpose? If
                so, which regulations or guidance, and what changes do you recommend?
                 10. Are there BSA regulations or guidance that are obsolete or no
                longer provide useful information to the government? Alternatively, are
                there any BSA regulations or guidance that target risks that no longer
                exists? If so, which regulations or guidance, and what changes do you
                recommend?
                 11. Are there any BSA regulations or guidance that are obsolete
                because of changes in compliance business practices and/or
                technological innovation in the financial system or elsewhere? If so,
                how should FinCEN address this?
                 12. Do FinCEN's regulations and guidance sufficiently allow
                financial institutions to incorporate innovative and technological
                approaches to BSA compliance? If not, how can FinCEN facilitate greater
                use of these tools, while ensuring that appropriate safeguards are in
                place and highly useful information continues to be reported to
                government authorities?
                ii. Redundant Regulations
                 13. Are there BSA regulations that impose requirements identical to
                or significantly overlapping with requirements imposed by other BSA
                regulations? If so, which BSA regulations, and what amendments do you
                recommend?
                 14. Are there BSA regulations that impose requirements that are
                identical to or significantly overlap with requirements imposed under
                another regulatory regime? If so, which BSA regulations, and which
                other regulatory framework?
                 15. Are there other provisions under the AML Act, or the BSA as
                amended by the AML Act, that you think will assist in eliminating
                redundant BSA regulations and guidance? If so, which sections of the
                AML Act or amended BSA, and why?
                iii. Other Regulations That Do Not Promote a Risk-Based Regime
                 16. Do any BSA regulations or guidance require or encourage
                resources be allocated inefficiently based on the level of risk that
                the regulations or guidance are intended to prevent or mitigate? If so,
                which regulations or guidance, and what changes would you recommend
                FinCEN make?
                 17. Aside from any issues mentioned in response to the questions
                above, are there other BSA regulations or guidance that do not promote
                a risk-based approach? If so, which regulations or guidance, how do
                they fail to promote a risk-based regime, and what changes would you
                recommend FinCEN make? Please distinguish as clearly as possible
                between issues that result from the content of a regulation or
                guidance, and issues that result from compliance supervision,
                examinations, or audits.
                 18. How else can FinCEN reaffirm that BSA regulations and guidance
                are intended to foster a risk-based approach?
                 19. Are there BSA regulations or guidance for which applying a
                risk-based approach is challenging? If so, which regulations or
                guidance, what are the challenges, and how might FinCEN reduce or
                eliminate those challenges?
                 20. Are there BSA regulations or guidance that are highly effective
                at promoting a risk-based approach such that they should be used as a
                model for other BSA regulations and guidance? If so, which regulations
                or guidance, and why?
                D. Identify BSA Regulations and Guidance That Do Not Conform With
                International Standards To Combat Financial Crime
                 21. Do any BSA regulations or guidance fail to conform with U.S.
                commitments to meet international standards, or do not fully implement
                international standards, including the FATF Recommendations? If so,
                which regulations or guidance, and why?
                 22. Which deficiencies identified in the FATF's 2016 U.S. Mutual
                Evaluation Report and addressed in the third Follow-Up Report most
                significantly prevent the United States from fully implementing an
                effective and risk-based approach? What changes to regulations or
                guidance would you recommend to address the deficiencies identified?
                E. Identify Changes to BSA Regulations and Guidance To Improve
                Efficiency
                 23. Are there BSA regulations or guidance that should be amended to
                improve their efficiency? If so, which regulations or guidance, and
                what amendments do you recommend?
                 24. Are there BSA regulations or guidance that are unclear or are
                overly burdensome in comparison to the risk posed? If so, which
                regulations or guidance? To what do you attribute the additional
                burden, and in what way (if any) is the burden excessive compared to
                the benefits of the regulation? Could the burden be reduced without
                making the regulations or guidance less effective? If so, how?
                 25. Aside from any regulations or guidance identified in response
                to previous questions, are there any BSA regulations or guidance with
                which you believe compliance provides minimal or no benefit to the
                government, thus making any compliance burden excessive? If so, which
                regulations or
                [[Page 71207]]
                guidance, and would you propose to amend or repeal them? If amend, how?
                And if repeal, why repeal rather than amend?
                 26. In what ways could BSA regulations or guidance be more
                efficient in light of innovative approaches and new technologies. For
                should any BSA regulations or guidance account for technological
                advancements, such as digital identification, machine learning, and
                artificial intelligence? If so, how?
                V. Conclusion
                 Conducting the formal review required under Section 6216 of the AML
                Act will assist FinCEN in modernizing and streamlining BSA regulations
                and guidance to ensure that they continue to: (i) Support the purposes
                and goals of the BSA and the AML Act, and (ii) safeguard the U.S.
                financial system. The formal review will also allow FinCEN to identify
                and, as appropriate, revise regulations and guidance that do not
                promote a risk-based AML/CFT regime for financial institutions, are not
                in conformity with international standards, or are outdated, redundant,
                or inefficient. In addition, the formal review will assist FinCEN in
                identifying recommendations for administrative and legislative changes
                to BSA regulations and guidance. FinCEN seeks input from the public on
                the questions set forth above, including from regulated parties; state,
                local, and Tribal governments; law enforcement; regulators; other
                consumers of BSA data; and any other interested parties. We encourage
                all interested parties to provide their views.
                Himamauli Das,
                Acting Director, Financial Crimes Enforcement Network.
                [FR Doc. 2021-27081 Filed 12-14-21; 8:45 am]
                BILLING CODE 4810-02-P
                

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