Review of Bank Secrecy Act Regulations and Guidance
| Published date | 15 December 2021 |
| Citation | 86 FR 71201 |
| Record Number | 2021-27081 |
| Section | Proposed rules |
| Court | Financial Crimes Enforcement Network |
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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\12\ 31 U.S.C. 5311 (as amended by Section 6101(a) of the AML
Act).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\19\ Section 6216(a)(1)(A) of the AML Act.
---------------------------------------------------------------------------
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
[[Page 71204]]
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).
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\23\ Section 6216(a)(1)(C)(i) of the AML Act.
---------------------------------------------------------------------------
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:
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\27\ These predicate crimes are enumerated at 18 U.S.C.
1956(c)(7).
---------------------------------------------------------------------------
[[Page 71205]]
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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
