Records to be made and retained by financial institutions. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The term includes any transmittal order issued by the transmittor's financial institution or an intermediary financial institution intended to carry out the transmittor's transmittal order. Where verification is required under paragraphs (e)(2) and (e)(3) of this section, a financial institution shall verify a person's identity by examination of a document (other than a customer signature card), preferably one that contains the person's name, address, and photograph, that is normally acceptable by financial institutions as a means of identification when cashing checks for persons other than established customers. If the transmittor is an established customer of the transmittor's financial institution and has an account used for transmittals of funds, then the information also shall be retrievable by account number. Estimated Total Additional Annual Burden Hours: 10,542 hours. Therefore, the proposed rule would codify FinCEN's existing expectation. FinCEN specifically requests comment regarding the costs associated with implementing these requirements. Treasury Order 180-01 (Sept. 26, 2002). (3) To what extent would the burden of the proposed rule be reduced if the Agencies issued specific guidance about appropriate forms of identification to be used in conjunction with identity verification, including in regards to whether there are circumstances in which verification may be done remotely and what documents are acceptable as proof? 16. With respect to the effect of clarifying the meaning of money in the definitions of payment order and transmittal order in 31 CFR 1010.100, the Agencies in particular request comment on the following questions from law enforcement, financial institutions, and members of the public: (1) Describe the additional costs, if any, from complying with the Recordkeeping Rule and Travel Rule in light of the clarification included in the proposed rule, including with respect to information technology costs. BSA Definitions Amended | Banker's Compliance Consulting Accordingly, the Board and FinCEN are adopting the amendments to the definitions of funds transfer and transmittal of funds as proposed. For security reasons, the Board requires that visitors make an appointment to inspect comments. (B) Provides the information specified in paragraphs (f)(1)(i), (ii) and (vii) of this section to a financial institution that acted as an intermediary financial institution or recipient's financial institution in connection with the transmittal order, within a reasonable time after any such financial institution makes a request therefor in connection with the requesting financial institution's receipt of a lawful request for such information from a Federal, State, or local law enforcement or financial regulatory agency, or in connection with the requesting financial institution's own Bank Secrecy Act compliance program. [27] Study with Quizlet and memorize flashcards containing terms like The Bank Secrecy Act requires credit unions to collect and retain certain information in connection with "funds transfers" of: a. FinCEN understands that banks, including credit unions, currently engage in very few, if any, funds transfers involving CVC. In addition, Annunzio-Wylie authorizes the Secretary and the Board to issue joint regulations requiring insured banks and certain nonbank financial institutions to maintain records of international funds transfers and transmittals of funds. Section 1073 of the Dodd-Frank Act and the EFTA, C. Effect of Changes to the EFTA and Regulation E on the Scope of the Definitions of Transmittal of Funds and Funds Transfer Under the Regulations Implementing the BSA, III. Electronic Code of Federal Regulations (e-CFR), Subtitle BRegulations Relating to Money and Finance, CHAPTER XFINANCIAL CRIMES ENFORCEMENT NETWORK, DEPARTMENT OF THE TREASURY, Subpart DRecords Required To Be Maintained. Wire or other similar transfers conducted through Fedwire or similar wire transfer systems primarily used for transfers between financial institutions or between businesses are also specifically excluded from the definition of electronic fund transfer.. (f) Any transmittor's financial institution or intermediary financial institution located within the United States shall include in any transmittal order for a transmittal of funds in the amount of $3,000 or more, information as required in this paragraph (f). The current estimated total burden hours for OMB control number 1506-0058 is 2,150,200 hours. 21. Based on the comments received at that time, it appears that almost all banks, regardless of size, maintain records of all funds transfers and transmittals of funds regardless of the dollar amount, including those transfers/transmittals below the $3,000 regulatory threshold. (20 Edge Act institutions, 15 agreement corporations, and 168 foreign banking organizations). Territories, Rural Energy Co-ops, and More to Access Tax Credits for Building a Clean Energy Economy Washington, D.C. As part of the Biden-Harris Administration's Investing in America agenda, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) today released . on the utility of mandating information collection for smaller-value wire transfers. 3 For transmittals of funds effected through the Federal Reserve's Fedwire funds transfer system by a financial institution, only one of the items is required to be included in the transmittal order, if received with the sender's transmittal order, until such time as the bank that sends the order to the Federal Reserve Bank completes its conversion to the expanded Fedwire message format. The FATF further states that countries may adopt a de minimis threshold of no higher than USD/EUR 1,000 for cross-border wire transfers, below which the name and account numbers of the originator and beneficiary should be collected and transmitted but need not be verified for accuracy unless there is a suspicion of money laundering or terrorist financing. 31 CFR 1010.100(ll); see also U.C.C. Federal Register. regulatory information on FederalRegister.gov with the objective of (2) Transmittors other than established customers. Estimated Number of Recordkeepers: 530 money transmitters and other MSBs engaged in CVC transactions, which FinCEN assesses is a reasonable estimate of the number of MSBs engaging in transactions involving CVC. An intermediary bank or intermediary financial institution, and the beneficiary's bank or recipient's financial institution, also would be required to retain originals or copies of payment or transmittal orders. The 1,000 USD/EUR de minimis cross-border threshold specified in the FATF Recommendations has been adopted by the European Union and by the vast majority of jurisdictions around the world. the material on FederalRegister.gov is accurately displayed, consistent with Information Required To Be Collected, Retained, and Transmitted Under the Recordkeeping and Travel Rules, II. First, the Bureau is adopting amendments to increase a safe harbor threshold in the Rule. An Originator creates a Payment Order to pay money to a specific Beneficiary. A transmittal of funds is defined as a series of transactions beginning with the transmittor's transmittal order, made for the purpose of making payment to the recipient of the order (31 CFR 1010.100(ddd)). PDF Bank Secrecy Act, Anti-money Laundering, and Office of Foreign - Fdic (Emphasis added. This proposed rule would explicitly include within the requirement to collect and retain information on transmittals of funds conducted by nonbank financial institutions transactions involving (1) CVC, or (2) any digital asset having legal tender status. CR ELH-16-009, 2018 WL 1521876, at *17-18 (D. Md. 1693a(7)), as well as any other funds transfers that are made through an automated clearinghouse, an automated teller machine, or a point-of-sale system, are excluded from this definition. 1693a(7)), as well as any other funds transfers that are made through an automated clearinghouse, an automated teller machine, or a point-of-sale system, are excluded from this definition. Estimated Total Additional Annual Burden Hours: 557,616 hours. Transmittors, recipients, and transmittal orders in the context of nonbank financial institutions play the same role as originators, beneficiaries, and payment orders in the context of banks. The Financial Crimes Enforcement Network, a bureau of the Department of the Treasury, and the Board of Governors of the Federal Reserve System are issuing this Final Rule amending the regulatory definitions of funds transfer and transmittal of funds under the regulations implementing the Bank Secrecy Act (BSA). Because the Board's Regulation S generally cross-references those portions of the Recordkeeping Rule promulgated jointly by the Board and FinCEN, it is unnecessary to propose conforming amendments to Regulation S. The Recordkeeping Rule and Travel Rule collectively require banks and nonbank financial institutions to collect, retain, and transmit information on funds transfers and transmittals of funds in amounts of $3,000 or more. The Agencies are proposing to lower the threshold because the current threshold may no longer represent the appropriate balance for transmittals originating or terminating outside the United States. 701, Pub. . 5311-5314, 5316-5332; title III, secs. Aug. 22, 2016), report and recommendation adopted, 355 F. Supp. The Secretary has delegated to the Director of FinCEN the authority to implement, administer, and enforce compliance with the BSA and associated regulations. More information and documentation can be found in our 6. As set forth in the proposed revised sections below, a funds transfer or transmittal of funds would be considered to begin or end outside the United States if the financial institution knows or has reason to know that the transmittor, transmittor's financial institution, recipient, or recipient's financial institution is located in, is ordinarily resident in, or is organized under the laws of a jurisdiction other than the United States or a jurisdiction within the United States. Consequently these systems can present an attractive method to disguise the source of funds derived from illegal activity. A. The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law requiring financial institutions in the United States to assist U.S. government agencies in detecting and preventing money laundering. As described in the PRA section that follows, based upon current data there are 5,306 banks, 5,236 credit unions, and 12,692 money transmitters that would be impacted by the proposed rule changes. Financial Crimes Enforcement Network (FinCEN), Department of the Treasury; Board of Governors of the Federal Reserve System (Board). Information about this document as published in the Federal Register. The Dodd-Frank Act's amendments to the EFTA expanded the types of transactions that are covered by the EFTA, thereby excluding them from the definition of funds transfer and transmittal of funds in 31 CFR 1010.100(w) and 31 CFR 1010.100(ddd), respectively. [21] [19] The BSA establishes recordkeeping requirements related to various types of records including: customer accounts (e.g., loan, deposit, or trust), BSA filing requirements, and records that document a bank's compliance with the BSA. FinCEN determined that these SARs were potentially related to terrorist financing based on the application of certain search terms and analytic methods developed by FinCEN. The proposed changes to the Recordkeeping Rule and Travel Rule would reduce from $3,000 to $250 the threshold for the requirement to collect, retain, and transmit information on funds transfers and transmittal of funds for transactions that begin or end outside the United States. These amendments maintain the same scope of transactions subject to the requirements of the recordkeeping and travel rules as Start Printed Page 72817existed prior to this rulemaking. Financial Crimes Enforcement Network; Cross-Border Electronic A financial institution other than a bank also is subject to the requirements of this paragraph (e) with respect to a transmittal of funds in the amount of $250 or more that begins or ends outside the United States. However, FinCEN's analysis identified that only approximately 17,000 of the approximately 1.29 million transactions included within its terrorism analysis dataset involved domestic-only transactions. Of course, it is difficult to quantify the contribution of a particular rule to a reduction in the risk of a terrorist attack. This proposed rule would modify the thresholds in the rules implementing the BSA requiring financial institutions to collect and retain information on certain funds transfers and transmittals of funds. 1829b and 1951-1959, 18 U.S.C. Unless otherwise indicated, the recordkeeping requirements contained in this subpart D apply to all financial institutions. See 31 CFR 1020.410 (banks), 31 CFR 1022.410 (dealers in foreign exchange), 31 CFR 1022.400 (MSBs), 31 CFR 1023.410 (broker dealers in securities), 31 CFR 1024.410 (mutual funds), 31 CFR 1025.410 (insurance), 31 CFR 1026.410 (futures commission merchants and introducing brokers in commodities), 31 CFR 1027.410 (dealers in precious metals, precious stones, or jewels), 31 CFR 1028.410 (operators of credit card systems), 31 CFR 1029.400 (loan or finance companies), and 31 CFR 1030.400 (housing government sponsored entities). Together, the Recordkeeping Rule and Travel Rule require financial institutions to collect, retain, and transmit information on funds transfers and transmittal of funds only when the amount being transferred or transmitted is $3,000 or more. By order of the Board of Governors of the Federal Reserve System, November 13, 2013. The Meaning of Money as Applicable to the Recordkeeping and Travel Rules, B. FinCEN's Prior Guidance on CVC, and This Proposed Rule's Further Clarification of the Definition of Money as Applicable to the Recordkeeping and Travel Rules, A. Recordkeeping Rule and Travel Rule Thresholds, A. rendition of the daily Federal Register on FederalRegister.gov does not (Emphasis added. legal research should verify their results against an official edition of For example, North Korean cyber actors, such as the Lazarus Group, have continuously engaged in efforts to steal and extort CVC as a means of generating and laundering large amounts of revenue for the regime.[42]. Register documents. 26. This method of identifying excluded transactions created a link between the two statutes (and their implementing regulations) with very different goals. For example, the New York Comptroller estimated in 2002 that the direct physical and human cost of the September 11 attacks on New York was over $30.5 billion. [7] In the 1995 rulemaking implementing the Travel Rule, the Treasury noted that it would monitor the effectiveness of financial institutions' suspicious transaction reporting protocols to determine whether potentially illicit transactions below the $3,000 threshold were being reported (and thus whether it might be unnecessary, from a law enforcement perspective, to lower the threshold). However, this threshold would exclude over 88 percent of the transactions in FinCEN's Start Printed Page 68013dataset of transactions potentially linked to terrorism. Finally, the FATF has indicated that records of smaller-value transactions are valuable to law enforcement, particularly with respect to terrorist financing investigations. 52. According to the FDIC there were 5,103 FDIC-insured banks as of March 31, 2020. 311, 312, 313, 314, 319, 326, 352, Pub. [24] Mar. For example, an MSB must now report suspicious transactions[30] Q15: What is the relationship between the funds transfer recordkeeping rule and the rules for reporting suspicious transactions by financial institutions? Furthermore, nothing in this document shall constitute a determination that any asset that is within the regulatory definitions of money or convertible virtual currency that this rulemaking proposes to add to the definitions of payment order and transmittal order is currency for the purposes of the federal securities laws, 15 U.S.C. Given the usefulness of this information and the potential that financial institutions may not correctly identify a transaction as suspicious, as noted previously, the Agencies believe that it is appropriate to propose lowering the threshold of the Recordkeeping Rule, and FinCEN concludes that it is appropriate to propose lowering the threshold of the Travel Rule, even though financial institutions are subject to SAR reporting requirements through which they may report certain of these smaller-value transactions that fall below the current threshold. The proposed revision would replace the general reference to the EFTA contained in the exception to the definitions of transmittal of funds and funds transfer, by a more specific reference to section 903(7) of the EFTA, the section of the EFTA containing the definition of electronic fund transfers, which are the transactions that are currently excluded from the recordkeeping and travel rules. As noted in the 2006 ANPRM, subsequent to 1995, the responsibilities of financial institutions under the BSA have expanded. Travel Rule | Bankers Online 5311-5314 and 5316-5332 and notes thereto, with implementing regulations at 31 CFR Chapter X. See31 CFR 1010.100(e). 60 FR 220 (Jan. 3, 1995). Both the Recordkeeping Rule and Travel Rule refer to a payment order (in the case of banks) and a transmittal order (in the case of financial institutions other than banks). In 1010.100, revise paragraphs (ll) and (eee) to read as follows: (ll) Payment order. 53. The total estimated increase in burden hours as a result of this proposed rulemaking for this control number is 1,196,902 hours. However, the Agencies believe that lowering the threshold to capture smaller-value cross-border funds transfers and transmittals of funds would be valuable for law enforcement and national security authorities, despite financial institutions' suspicious activity reporting programs, because some financial institutions may not recognize or retain records for all suspicious activity below the $3,000 threshold or the suspicious pattern may not become clear until the records are aggregated. 56. Only official editions of the 314, Pub. for better understanding how a document is structured but The Secretary of the Treasury (Secretary) has delegated to the Director of FinCEN (Director) the authority to implement, administer, and enforce compliance with the BSA and associated regulations. Under OMB control number 1506-0058, FinCEN estimates that the recordkeeping burden per recordkeeper to transmit information relating to traditional transmittals of funds of $3,000 or more is 12 hours a year. Safe harbor for transmittals of funds prior to conversion to the expanded Fedwire message format. U.S. Small Business Administration. 1-26, and the regulations promulgated thereunder. Description of Recordkeepers: Banks that are the originator's bank, the intermediary bank, or the beneficiary's bank with respect to funds transfers in an amount between $250 and $3,000 that begin or end outside the United States. (4) Retrievability. BSA funds transfer definition under review | NAFCU Description of Recordkeepers: Financial institutions, including banks and credit unions, that are the transmitting or intermediary financial institution in a transmittal of funds in an amount between $250 and $3,000 that begin or end outside the United States. PDF Bank Secrecy Act Funds Recordkeeping and Travel Rule Threshold Update This prototype edition of the Until the ACFR grants it official status, the XML 42. * * * Electronic fund transfers as defined in section 903(7) of the Electronic Fund Transfer Act (15 U.S.C. Application of the Recordkeeping and Travel Rules to CVC and Digital Assets That Have Legal Tender Status, A. Although the proposed changes would apply to a substantial number of small entities, the Agencies believe that the changes would not have a significant economic impact on such entities for the reasons noted below. Estimated Average Annual Burden Hours per Recordkeeper: The estimated average burden hours will vary depending on the number of transmittals of funds conducted by a nonbank financial institution engaged in CVC transactions. Third, FinCEN considered applying the requirements of the proposed rule to all transactions, including those that begin and end within the United States. corresponding official PDF file on govinfo.gov. 19. The Agencies believe that most money transmitters are small entities. on NARA's archives.gov. 599. Register (ACFR) issues a regulation granting it official legal status. 3,072,160 hours (lower threshold) + 243,684 hours (CVC transactions) = 3,315,844 hours. The regulatory definitions of money and convertible virtual currency that this rulemaking proposes to add to the definitions of payment order and transmittal order at 31 CFR 1010.100(ll) and (eee) are specific to those provisions and not intended to have any impact on, inter alia, the definition of currency in 31 CFR 1010.100(m). BSA Definitions Amended. 54. (G) Any form relating to the transmittal of funds that is completed or signed by the person placing the transmittal order. If a budgetary impact statement is required, section 202 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. publication in the future. 12 U.S.C. 3. and services, go to Learn more here. Summary of significant issues raised by public comment on the Board's initial analysis of issues, and a statement of any changes made as a result. 5. The mean and median dollar-value of transmittals of funds mentioned in these SARs were approximately $588 and $283, respectively. In proposing to lower the current threshold under the Recordkeeping and Travel Rules, the Agencies have specifically considered Suspicious Activity Reports (SARs) filed by money transmitters, which indicate that a substantial volume of potentially illicit funds transfers and transmittals of funds occur below the $3,000 threshold; evidence used in recent criminal prosecutions; and the views of law enforcement partners and the Financial Action Task Force (FATF)[14] developer tools pages. In deciding on a threshold of $3,000 in 1995, the Agencies balanced the value of data on funds transfers and transmittals of funds with the burden that the Recordkeeping Rule and Travel Rule imposed on both bank and nonbank financial institutions. 307. a. Revising the last sentence of paragraph (w), and. Estimates based on data from blockchain.com, https://www.blockchain.com/charts/estimated-transaction-volume-usd. Current Regulations Regarding Funds Transfers and Transmittals of Funds, B. requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation's impact on small entities. 1376, section 1073 (2010). With respect to the effect of lowering the threshold for the requirement in 31 CFR 1020.410 and 31 CFR 1010.410(e) and (f) to collect, retain, and transmit information on funds transfers and transmittals of funds that begin or end outside the United States, the Agencies in particular request comment on the following questions from financial institutions and members of the public: (1) To what extent would the proposed rule impose a burden on financial institutions, including with respect to information technology implementation costs? This prototype edition of the While every effort has been made to ensure that Similarly, in 2006, many money transmitters indicated that they maintained records of transfers/transmittals at approximately the $1,000 level. While not the official comment of each such agency, the agents and prosecutors specializing in money laundering cases and who routinely use wire transfer information supported lowering or eliminating altogether the reporting threshold to disrupt illegal activity and increase its cost to the perpetrators. The collection of information requirements have been reviewed and approved by the Office of Management and Budget (OMB) under section 3507 of the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 314, Pub. better and aid in comparing the online edition to the print edition.
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