[Federal Register Volume 60, Number 173 (Thursday, September 7, 1995)]
[Proposed Rules]
[Pages 46556-46562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22223]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA13
Proposed Amendment to the Bank Secrecy Act Regulations--
Requirement to Report Suspicious Transactions
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing rules for the centralized filing with it of reports of
suspicious transactions under the Bank Secrecy Act. The proposal is a
key to the creation of a new method for the reporting, on a uniform
``Suspicious Activity Report,'' of suspicious
[[Page 46557]]
transactions and known or suspected criminal violations by depository
institutions; related rules have been or will be issued by the five
federal financial supervisory agencies that examine and regulate the
safety and soundness of depository institutions. The new centralized
reporting system will eliminate the need for burdensome filing of
multiple copies of reports with various federal regulatory and law
enforcement agencies and will ensure more effective use of the
information reported to such agencies.
DATES: Written comments on all aspects of the proposal are welcome and
must be received on or before October 10, 1995.
ADDRESSES: Written comments should be submitted to: Office of
Regulatory Policy and Enforcement, Financial Crimes Enforcement
Network, Department of the Treasury, 2070 Chain Bridge Road, Vienna,
Virginia 22182, Attention: NPRM--Suspicious Transaction Reporting.
Submission of Comments: An original and four copies of any comment
must be submitted. All comments will be available for public inspection
and copying, and no material in any such comments, including the name
of any person submitting comments, will be recognized as confidential.
Accordingly, material not intended to be disclosed to the public should
not be submitted.
Inspection of Comments: Comments may be inspected at the Department
of the Treasury between 10:00 a.m. and 4:00 p.m., in the Treasury
Library, which is located in room 5030, 1500 Pennsylvania Avenue, N.W.,
Washington, D.C. 20220. Persons wishing to inspect the comments
submitted should request an appointment at the Treasury Library by
telephoning (202) 622-0990.
FOR FURTHER INFORMATION CONTACT: Charles Klingman, Office of Financial
Institutions Policy, FinCEN, at (703) 905-3920, or Joseph M. Myers,
Attorney-Advisor, Office of Legal Counsel, FinCEN, at (703) 905-3590.
SUPPLEMENTARY INFORMATION:
I. Introduction
This document proposes to add a new section 103.21 to 31 CFR Part
103 to require banks and other depository institutions 1 to report
to the Department of the Treasury any suspicious transaction relevant
to a possible violation of law or regulation. The amendments are
proposed by FinCEN, to implement the authority granted to the Secretary
of the Treasury by 31 U.S.C. 5318(g), in coordination with the Office
of the Comptroller of the Currency (the ``OCC''), the Board of
Governors of the Federal Reserve System (the ``Board''), the Federal
Deposit Insurance Corporation (the ``FDIC''), the Office of Thrift
Supervision (the ``OTS''), and the National Credit Union Administration
(the ``NCUA'').
\1\ References to ``bank'' include not only commercial banks,
but also thrift institutions, credit unions, and other types of
depository institutions. See 31 CFR 103.11(b) (defining ``bank'' for
purposes of 31 CFR Part 103).
---------------------------------------------------------------------------
The proposed regulation creates a single coordinated process for
the reporting of suspicious transactions under the Bank Secrecy Act and
known or suspected criminal violations involving such institutions
under the regulations of the regulatory agencies. The new process
represents a fundamental change in the manner in which potential
violations and suspicious activities are reported by banks and other
depository institutions to the federal government.
II. Background
A. Statutory Provisions
The Bank Secrecy Act, Pub. L. 91-508, as amended, codified at 12
U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330, authorizes
the Secretary of the Treasury, inter alia, to issue regulations
requiring financial institutions to keep records and file reports that
are determined to have a high degree of usefulness in criminal, tax,
and regulatory matters, and to implement counter-money laundering
programs and compliance procedures. Regulations implementing Title II
of the Bank Secrecy Act (codified at 31 U.S.C. 5311-5330), appear at 31
CFR Part 103. The authority of the Secretary to administer the Bank
Secrecy Act has been delegated to the Director of FinCEN.
The authority to require reporting of suspicious transactions was
added to the Bank Secrecy Act by section 1517 of the Annunzio-Wylie
Anti-Money Laundering Act (``Annunzio-Wylie''), Title XV of the Housing
and Community Development Act of 1992, Pub. L. 102-550; it was expanded
by section 403 of the Money Laundering Suppression Act of 1994 (the
``Money Laundering Suppression Act''), Title IV of the Riegle Community
Development and Regulatory Improvement Act of 1994, Pub. L. 103-325, to
require designation of a single government recipient for reports of
suspicious transactions.
The provisions of 31 U.S.C. 5318(g) deal with the reporting of
suspicious transactions by financial institutions subject to the Bank
Secrecy Act and the protection from liability to customers of persons
who make such reports. Subsection (g)(1) states generally:
The Secretary may require any financial institution, and any
director, officer, employee, or agent of any financial institution
to report any suspicious transaction relevant to a possible
violation of law or regulation.
Subsection (g)(2) provides further:
A financial institution, and a director, officer, employee, or agent
of any financial institution, who voluntarily reports a suspicious
transaction, or that reports a suspicious transaction pursuant to
this section or any other authority, may not notify any person
involved in the transaction that the transaction has been reported.
Subsection (g)(3) provides that neither a financial institution, nor
any director, officer, employee, or agent
That makes a disclosure of any possible violation of law or
regulation or a disclosure pursuant to this subsection or any other
authority . . . shall . . . be liable to any person under any law or
regulation of the United States or any constitution, law, or
regulation of any State or political subdivision thereof, for such
disclosure or for any failure to notify the person involved in the
transaction or any other person of such disclosure.
Finally, subsection (g)(4) requires the Secretary of the Treasury, ``to
the extent practicable and appropriate,'' to designate ``a single
officer or agency of the United States to whom such reports shall be
made.'' This designation is not to preclude the authority of
supervisory agencies to require financial institutions to submit other
reports to the same agency ``under any other applicable provision of
law.'' 31 U.S.C. 5318(g)(4)(C). The designated agency is in turn
responsible for referring any report of a suspicious transaction to
``any appropriate law enforcement agency.'' Id., at subsection
(g)(4)(B).
B. Coordinated Process for Reporting Suspicious Transactions
At present, banks report transactions that indicate the existence
of ``known or suspected violations of federal law'' by filing multiple
copies of criminal referral forms with their respective primary federal
financial regulator and with federal law enforcement agencies
(including in most cases the Federal Bureau of Investigation, the
United States Secret Service, and the Criminal Investigation Division
of the Internal Revenue Service). The referral forms (each promulgated
by a different regulator, under independent but parallel authority) are
not uniform, and the requirement for multiple filings imposes a
considerable administrative burden on filers. In the absence of a
central repository, law enforcement and
[[Page 46558]]
regulatory agencies--receiving different forms from different filers in
different regions of the country--struggle to analyze and correlate the
filings and to coordinate investigations.
At the same time, banks (and other financial institutions) are
required under the Bank Secrecy Act to file a Currency Transaction
Report (or ``CTR'') to report transactions in currency of more than
$10,000. The CTR form includes a box that can be checked to indicate
that the currency transaction is ``suspicious.'' 2 The box on the
CTR may also be used to report suspicious currency transactions in
amounts less than $10,000. In practice, some financial institutions
have also used the CTR form to report non-currency transactions that
they believed to be ``suspicious'' but did not rise to the level of a
known or suspected violation of law. Still other financial institutions
reported such transactions by telephone to local offices of federal law
enforcement or regulatory agencies. In many cases, financial
institutions that were uncertain what to do naturally and commendably
filed all possibly applicable reports.
\2\ The revised and simplified CTR that goes into effect on
October 1, 1995 eliminates the box in anticipation of the adoption
of the Suspicious Activity Report for reporting of, inter alia,
suspicious currency transactions. An advance copy of the revised CTR
was issued by FinCEN in early May 1995. See ``FinCENnews'', May 10,
1995.
---------------------------------------------------------------------------
As also discussed in proposed regulations issued in connection with
the creation of the unified reporting system by the Office of the
Comptroller of the Currency, 60 FR 34,476 (July 3, 1995), and the Board
of Governors of the Federal Reserve System, 60 FR 34,481 (July 3,
1995), the current criminal referral system is cumbersome and
burdensome, for both regulators and depository institutions. Moreover,
it does not maximize the amount of usable information available to law
enforcement officials and bank regulators. Therefore, beginning in
1991, the regulatory agencies began working on a project to improve the
criminal referral process, with the goal of creating a single form and
placing all referrals in an automated information system, managed on
their behalf by FinCEN, to which all regulators and FinCEN would have
access. The purpose of that project, begun under the auspices of the
inter-agency Bank Fraud Working Group, was to assure that information
generated by referrals of banking crimes would be uniformly available
both as a basis for regulatory decisions and for analysis of the
effectiveness of the reporting process and banking crime enforcement
efforts.
A year later, Annunzio-Wylie vested broad suspicious transaction
reporting authority in the Department of the Treasury. Soon thereafter,
a ``Money Laundering Review Task Force,'' made up of enforcement and
regulatory officials, was established in the Office of the then-
Assistant Secretary (Enforcement) to examine the effectiveness of
Treasury's anti-money laundering policies. The Task Force's analysis
emphasized that identification and reporting of suspicious activity can
and should be one of law enforcement's most effective tools against
money laundering, so long as the reporting is not burdensome and
reflects as much guidance about money laundering transactions and
methods as government can provide. The work of the Task Force resulted
in a consensus at Treasury that a reasoned implementation of Treasury's
expanded suspicious transaction reporting authority (together with the
accompanying ``know your customer'' rule) would increase the
effectiveness of counter-money laundering efforts and permit
significant reduction in mechanical currency transaction reporting
requirements.
The single integrated system of which this proposed rule is a part
thus reflects (i) the effect on the pre-existing criminal referral
process of the statutory grant of central authority to Treasury, under
the Bank Secrecy Act, to require reporting of all suspicious
transactions (not merely transactions in currency or its equivalents)
involving financial institutions, (ii) the mutual desire of Treasury
and the financial regulators to simplify and reduce the burdensomeness
of the reporting process, and (iii) the centrality of suspicious
transaction reporting to Treasury counter-money laundering policy.
The central feature of the integrated reporting system is the
creation of a single reporting form, filing point, and information
system for all reports of suspicious activity made by depository
institutions. The single form standardizes filing requirements and
facilitates the creation of a single, automated data base containing
information from all filings. The single filing point not only
eliminates the need for multiple copies but also permits magnetic
filing of reports by most institutions capable of and accustomed to
making such filings with the Internal Revenue Service. (In a related
development, as explained more fully below, the requirement that
supporting documentation be filed with the report has been eliminated.)
Finally, the single data base will permit rapid dissemination to
appropriate law enforcement agencies of reports within their
jurisdiction, more thorough analysis and tracking of those reports,
and, in time, the provision to the financial communities of information
about trends and patterns gleaned from the information reported.
Each agency involved has issued or shortly will issue a proposed
rule requiring reporting under its respective authority. It is
anticipated that those proposed rules will be conformed to one another
in their final form and that they will be identical with Treasury's
suspicious transaction reporting rules. Thus a financial institution
will file a suspicious activity report in satisfaction of both the
rules of FinCEN and the rules of the applicable banking regulator or
regulators.
The selection of a single term--Suspicious Activity Report
(``SAR'')--for the new report reflects the overlap and consolidation of
the two reporting requirements. There will be a significant group of
activities that are required to be reported both under the authority of
31 U.S.C. 5318(g) and under the financial regulatory agencies own
administrative requirements. A single filing, however, will suffice to
comply with all requirements.
C. Importance of Suspicious Transaction Reporting in Treasury's Anti-
Money Laundering Program
The Congressional mandate to require reporting of suspicious
transactions recognizes two basic points that have increasingly become
central to Treasury's anti-money laundering and anti-financial crime
programs. First, it is to financial institutions that money launderers
must go. Second, the officials of those institutions are more likely
than government officials to have a sense as to what transactions
appear to lack commercial justification or otherwise cannot be
explained as falling within the usual methods of legitimate commerce.
Money laundering transactions are often designed to appear legitimate
in order to avoid detection. Under these circumstances, the creation of
a meaningful system for detection and prevention of money laundering is
impossible without the cooperation of financial institutions.
The provisions of Annunzio-Wylie and the Money Laundering
Suppression Act recognize that the traditional reliance of Treasury
counter-money laundering programs on the reporting of currency
transactions between financial institutions and their customers and the
transportation of currency and certain monetary instruments into or out
of the United States is neither adequate nor
[[Page 46559]]
cost effective. The change in emphasis from routine reporting of all
currency transactions above a certain amount to reporting of
information most likely to be of use to law enforcement officials and
financial regulators is a key component of the flexible and cost-
efficient compliance system required to prevent the use of the nation's
financial system for illegal purposes.
The placement of illegally-derived currency into the financial
system and the smuggling of such currency out of the country remain two
of the most serious issues facing financial law enforcement efforts in
the United States and around the world. But banks and other depository
institutions, in cooperation with law enforcement agencies and federal
and state banking regulators, have responded in many positive ways to
the challenges posed by money laundering. It is now far more difficult
than in the past to pass large amounts of cash directly into the
nation's banks unnoticed and far easier to identify and isolate those
institutions and officials still willing to assist or ignore money
launderers.
Moreover, the placement of currency into the financial system is at
most only the first stage in the money laundering process. While many
currency transactions are not indicative of money laundering or other
violations of law, many non-currency transactions can indicate illicit
activity, especially in light of the breadth of the statutes that make
money laundering itself a crime. See 18 U.S.C. 1956 and 1957.
No system for the reporting of suspicious transactions can be
effective unless information flows from as well as to the government.
Thus, Treasury recognizes its responsibility to issue and update
guidelines about patterns of suspicious activity.
The reporting of suspicious transactions is also a key to the
emerging international consensus on the prevention of money laundering.
One of the central recommendations in the Report of the Financial
Action Task Force of the G-7 nations (the United States, The United
Kingdom, Germany, France, Italy, Japan, and Canada) is that:
If financial institutions suspect that funds stem from a
criminal activity, they should be permitted or required to report
promptly their suspicions to the competent authorities.
Financial Action Task Force Report (April 19, 1990), Section III(B)(3)
(Recommendation 16). The European Community's Directive on prevention
of the use of the financial system for the purpose of money laundering
calls for member states to
Ensure that credit and financial institutions and their
directors and employees cooperate fully with the authorities
responsible for combating money laundering . . . by [in part]
informing those authorities, on their own initiative, of any fact
which might be an indication of money laundering.
EC Directive, O.J. Eur. Comm. (No. L 166) 77 (1991), Article 6. Accord,
the Model Regulations Concerning Laundering Offenses Connected to
Illicit Drug Trafficking and Related Offenses of the Organization of
American States, OEA/Ser. P. AG/Doc. 2916/92 rev. 1 (May 23, 1992),
Article 13, section 2.3
\3\ The OAS reporting requirement is linked to the provision of
the Model Regulations that institutions ``shall pay special
attention to all complex, unusual or large transactions, whether
completed or not, and to all unusual patterns of transactions, and
to insignificant but periodic transactions, which have no apparent
economic or lawful purpose.'' OAS Model Regulation, Article 13,
section 1.
---------------------------------------------------------------------------
D. Suspicious Transaction Reporting by Financial Institutions Other
Than Banks
31 U.S.C. 5318(g) authorizes the Treasury to require the reporting
of suspicious transactions by all financial institutions, and extends
to financial institutions other than banks. FinCEN intends to extend
the obligation to report suspicious transactions to such other
institutions in the near future. However, this proposed rule applies
only to reporting of suspicious transactions by banks and other
depository institutions.
III. Specific Provisions
A. 103.11(qq) FinCEN
FinCEN is specifically defined for the first time in the Bank
Secrecy Act regulations, because FinCEN is being designated by the
Secretary of the Treasury as the central recipient of SARs filed
pursuant to 31 U.S.C. 5318.
B. 103.11(r) Transaction
The definition of ``transaction in currency'' in the Bank Secrecy
Act regulations has been changed to a definition of ``transaction.''
The definition conforms to the definitions in 18 U.S.C. 1956 used when
Congress criminalized money laundering in 1986.4 This definition
of transaction is broad enough to cover all activity that will be
reported on an SAR.
\4\ See Pub. L. 99-570, Title XIII, 1352(a), 100 Stat. 3207-18
(Oct. 27, 1986).
---------------------------------------------------------------------------
Treasury does not believe that the change varies the substance of
the requirement to report currency transactions under 31 CFR 103.22,
other than in the case of deposits of cash in safe deposit boxes, and
the change is not intended to make any other modifications in that
requirement. Treasury would be interested in comments concerning the
safe deposit box issue and other instances in which financial
institution personnel believe that application of the new definition,
required for implementation of the suspicious transaction reporting
rule, would unintentionally alter the separate currency transaction
reporting requirement.
C. 103.20 Determination by the Secretary
Section 103.21 is redesignated as section 103.20 in order to make
room in Subpart B, ``Reports Required To Be Made,'' for the suspicious
transaction reporting requirement in this proposed rule.
D. 103.21 Reports of Suspicious Transactions
New section 103.21 contains the rules setting forth the obligation
of banks to file reports of suspicious transactions. Paragraph (a)
contains the general statement of the obligation to file, and a general
definition of the term ``suspicious transaction.'' The obligation
extends only to transactions conducted or attempted by, at, through, or
otherwise involving, the bank; however, it is important to recognize
that transactions are reportable under this rule and 31 U.S.C. 5318(g)
whether or not they involve currency.
The proposed rule designates three classes of transactions as
requiring reporting. The first class, described in proposed paragraph
(a)(2)(i), includes transaction involving funds derived from illegal
activity or intended or conducted in order to hide or disguise funds or
assets derived from illegal activity. The second class, described in
proposed paragraph (a)(2)(ii), involves transactions designed to evade
the requirements of the Bank Secrecy Act. The third class, described in
proposed paragraph (a)(2)(iii), involves transactions that appear to
have no business purpose or vary so substantially from normal
commercial activities or activities appropriate for the particular
customer or class of customer as to have no reasonable explanation.
Of course, determinations as to whether a report is required must
be based on all the facts and circumstances relating to the transaction
and bank customer in question. Different fact patterns will require
different types of judgments. In some cases, the facts of the
transaction may clearly indicate the need to report. For example,
continued payments or withdrawals of currency in amounts each beneath
the currency transaction reporting threshold
[[Page 46560]]
applicable under 31 CFR 103.22, or multiple exchanges of small
denominations of currency into large denominations of currency, can
indicate that a customer is involved in suspicious activity. Similarly,
the fact that a customer refuses to provide information necessary for
the bank to make reports or keep records required by this Part or other
regulations, provides information that a bank determines to be false,
or seeks to change or cancel the transaction after such person is
informed of reporting requirements relevant to the transaction or of
the bank's intent to file reports with respect to the transaction,
would all indicate that an SAR should be filed.
In other situations a more involved judgment may need to be made
whether a transaction is suspicious within the meaning of the rule.
Transactions that raise the need for such judgments may include, for
example, (i) funds transfers, payments or withdrawals that are not
commensurate with the stated business or other activity of the person
conducting the transaction or on whose behalf the transaction is
conducted; (ii) transmission or receipt of funds transfers without
normal identifying information or in a manner that indicates an attempt
to disguise or hide the country of origin or destination or the
identity of the customer sending the funds or of the beneficiary to
whom the funds are sent; or (iii) repeated use of an account as a
temporary resting place for funds from multiple sources without a clear
business purpose therefor. The judgments involved will also extent to
whether the facts and circumstances and the institution's knowledge of
its customer provide a reasonable explanation for the transaction that
removes it from the suspicious category.
The means of commerce and the techniques of money launderers are
continually evolving, and there is no way to provide an exhaustive list
of suspicious transactions. For these reasons, Treasury ultimately must
rely on creation of a working partnership that enables the financial
community to apply its knowledge of both its customers and of the
developments in financial commerce to identify and report suspicious
activity. At the same time, Treasury intends to provide meaningful
guidance to the banking community concerning the particular
circumstances and types of behavior that Treasury believes indicate
suspicious activity.
31 U.S.C. 5318(g)(1) authorizes Treasury to require suspicious
transaction reporting not only by financial institutions but by ``any
director, officer, employee, or agent of any financial institution.''
This proposed rule addresses reporting by banks, but it is not intended
to reduce the obligations of bank employees or agents, within the
context of a bank's reporting and Bank Secrecy Act compliance
obligations, but simply to avoid at this time creating an obligation on
the part of bank employees and agents independent of those general
obligations. It is anticipated that a forthcoming notice of proposed
rulemaking on anti-money laundering compliance programs will contain
additional guidance on this matter.
Paragraph (b) sets forth the filing procedures to be followed by
banks making reports of suspicious transactions. Reports are to be made
within 30 days after the bank becomes aware of the suspicious
transaction by completing an SAR and filing it in a central location,
to be determined by FinCEN. Supporting documentation is to be collected
and maintained separately by the bank, and made available to law
enforcement, as necessary. Special provision is made for situations
requiring immediate attention, in which case banks are to telephone the
appropriate law enforcement authority in addition to filing an SAR.
These filing procedures represent a significant improvement over the
procedures currently followed by banks filing criminal referral forms.
There is no requirement to file multiple copies of forms with multiple
agencies, and no requirement to file supporting documentation with the
SAR itself.
Paragraph (c) continues in effect the longstanding exception from
the obligation to file in the case of a robbery or burglary that is
otherwise reported to appropriate law enforcement authorities. Treasury
and the financial regulators recognize that bank robbery and burglary
require the immediate attention of the appropriate police authorities,
and are not the types of crimes about which this regulation is directly
concerned.
Paragraph (d) states the obligation of filing banks to maintain
copies of SARs and the original related documentation for a period of
ten years from the date of filing. As indicated above, supporting
documentation is to be made available to FinCEN and appropriate law
enforcement authorities on request.
Paragraph (e) incorporates the terms of 31 U.S.C. 5318 (g)(2) and
(g)(3). This paragraph thus specifically prohibits those filing SARs
from making any disclosure, except to authorized law enforcement and
regulatory agencies, about either the reports themselves, the
information contained therein, or the supporting documentation. This
paragraph thus also restates the broad protection from liability for
making reports of suspicious transactions, and for failures to disclose
the fact of such reporting, contained in the statute. The regulatory
provisions do not extend the scope of either the statutory prohibition
or the statutory protection; however, because Treasury recognizes the
importance of these statutory provisions to the overall effort to
encourage meaningful reports of suspicious transactions, they are
described in the regulation in order to remind compliance officers and
others of their existence.
Finally, paragraph (f) notes that compliance with the obligation to
report suspicious transactions will be audited, and provides that
failure to comply with the rule shall constitute a violation of the
Bank Secrecy Act and the Bank Secrecy Act regulations, which may
subject non-complying banks to enforcement action. The paragraph also
notes that compliance with the obligation to report suspicious
transactions will have no direct bearing on a bank's potential exposure
under the criminal provisions of Title 18 of the U.S. Code. The ``safe
harbor'' provisions of 31 U.S.C. 5318(g) do not protect against
criminal prosecutions.
IV. Comments
FinCEN invites public comment on all aspects of this proposal.
FinCEN is particularly interested in, and specifically requests that
financial institutions comment on, the following issues.
1. Consolidating information reported on the existing criminal
referral form (CRF) with that reported on suspicious currency
transaction reports was done to eliminate confusion and avoid duplicate
reporting. Currently, in the absence of specific guidelines, each
financial institution has developed internal and specific thresholds
and procedures for reporting different types of activity on each form.
In this proposed rule, Treasury has attempted to describe instances
where, and circumstances in which, a financial institution would
determine a transaction to be suspicious and file a report. However, no
regulation could possibly cover all instances of potential suspicious
activity. Conversely, a regulation should not be crafted so broadly as
to provide no parameters or guidelines to follow. Treasury needs to
know if the terms set forth in this proposed regulation are clear,
specific, and sufficient as a basis for financial institutions to
determine when activity is suspicious. If not, Treasury requests
specific, detailed suggestions for
[[Page 46561]]
substitute language that should be considered.
2. In addition, over 100 predicate offenses may serve as the basis
for a criminal money laundering charge under 18 U.S.C. 1956. The
instructions for the SAR, as well as the proposed notices issued by the
regulatory agencies, provide specific thresholds for reporting
particular types of violations. Treasury is interested in the
industry's position as to whether similar types of thresholds should be
imposed for reporting Bank Secrecy Act and money laundering violations.
3. Finally, Treasury understands that, after filing a report on a
particular customer, a financial institution may be confronted with a
decision as to whether to terminate its relationship with that
customer. Treasury believes that unless instructed by an authorized
official, this is a decision which must be made by the financial
institution. However, Treasury is interested in working with the
industry to develop procedures which could help frame such decisions.
The comment period for this rule is 30 days. Although the comment
period is shorter than that which would normally be employed, many of
the terms reflected in this rule are also contained in the rules
already proposed by the financial regulators. FinCEN will have access
to those comments, and it is believed that on that basis the short
comment period is justified, in light of the desire of the agencies
involved to commence the operation of the less burdensome single form
reporting system on October 1, 1995.
V. Regulatory Flexibility Act
FinCEN certifies that this proposed regulation will not have a
significant financial impact on a substantial number of small
depository institutions.
VI. Paperwork Reduction Act
The collection of information contained in this proposed rule has
been submitted to the Office of Management and Budget (OMB) for review
in accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.
3504(h)). Comments on the collection of information should be sent to
OMB, Paperwork Reduction Project, Washington, DC 20503, with copies to
FinCEN, Office of Financial Institutions Policy, 2070 Chain Bridge
Road, Suite 200, Vienna, Virginia 22182.
VII. Executive Order 12866
The Department of the Treasury has determined that this proposed
rule is not a significant regulatory action under Executive Order
12866.
VIII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), March 22, 1995, requires that an agency
prepare a budgetary impact statement before promulgating a rule that
includes a federal mandate that may result in expenditure by state,
local and tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year. 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. FinCEN has
determined that it is not required to prepare a written statement under
section 202 and has concluded that on balance this proposal provides
the most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Investigations, Law enforcement, Reporting and recordkeeping
requirements.
Amendment
For the reasons set forth above in the preamble, 31 CFR Part 103 is
proposed to be amended as set forth below:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for Part 103 is revised to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. In Sec. 103.11, paragraph (r) is revised and paragraph (qq) is
added to read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(r) Transaction. Transaction means a purchase, sale, loan, pledge,
gift, transfer, delivery or other disposition, and with respect to a
financial institution includes a deposit, withdrawal, transfer between
accounts, exchange of currency, loan, extension of credit, purchase or
sale of any stock, bond, certificate of deposit, or other monetary
instrument, use of a safe deposit box, or any other payment, transfer,
or delivery by, through, or to a financial institution, by whatever
means effected.
* * * * *
(qq) FinCEN. FinCEN means the Financial Crimes Enforcement Network,
an office within the Office of the Under Secretary (Enforcement) of the
Department of the Treasury.
3. Section 103.21 is redesignated as Sec. 103.20.
4. New Sec. 103.21 is added to read as follows:
Sec. 103.21 Reports of suspicious transactions.
(a) General. (1) Every bank shall file with the Treasury
Department, as required by this Sec. 103.21, a report of any suspicious
transaction relevant to a possible violation of law or regulation.
(2) A transaction requires reporting under the terms of this
section if it is conducted or attempted by, at, or through, or
otherwise involves, the bank, and
(i) The bank knows, suspects, or has reason to suspect that the
transaction involves funds derived from illegal activity or is intended
or conducted in order to hide or disguise funds or assets derived from
illegal activity (including, without limitation, the ownership, nature,
source, location, or control of such funds or assets) as part of a plan
to violate or evade any law or regulation or to avoid any transaction
reporting requirement under federal law;
(ii) The bank knows, suspects, or has reason to suspect that the
transaction is designed to evade any requirements of this Part or of
any other regulations promulgated under the Bank Secrecy Act; or
(iii) The transaction or its details appear to have no business
purpose, the transaction varies from the normal methods of financial
commerce, or the transaction is not the sort in which the particular
customer or class of customer would normally be expected to engage,
and, in each case, the bank knows of no reasonable explanation for the
transaction.
(b) Filing procedures--(1) What to file. A suspicious transaction
shall be reported by completing, in accordance with the instructions, a
Suspicious Activity Report (``SAR''), and collecting and maintaining
supporting documentation related information, in accordance with this
rule.
(2) Where to file. The SAR shall be filed in a central location, to
be determined by FinCEN.
(3) When to file. A bank is required to file each SAR not later
than 30 calendar days after the first date on which the bank becomes
aware of the facts constituting the transaction to which the report
relates. If no suspect is identified on the date of detection of the
incident triggering the filing, a bank may delay
[[Page 46562]]
filing an SAR for an additional 30 calendar days, but in no case shall
reporting be delayed more than 60 calendar days after the date of the
transaction. In situations involving violations that require immediate
attention, such as when a reportable violation is ongoing, the bank
shall immediately notify by telephone the appropriate law enforcement
authority in addition to filing an SAR.
(c) Exception. A bank is not required to file a suspicious
transaction report for a robbery or burglary committed or attempted
that is reported to appropriate law enforcement authorities.
(d) Retention of records. A bank shall maintain a copy of any SAR
filed and the original of any related documentation for a period of ten
years from the date of filing the SAR, unless the bank is informed by
FinCEN in writing that the bank may discard the materials sooner.
Supporting documentation shall be identified, segregated, and treated
as filed with the SAR. A bank shall make all supporting documentation
available to FinCEN and any appropriate law enforcement agencies upon
request.
(e) Confidentiality of reports; limitation of liability. No
financial institution, nor any director, officer, employee, or agent of
any financial institution, who reports a suspicious transaction under
this Part, may notify any person involved in the transaction that the
transaction has been reported. Thus, any person subpoenaed or otherwise
requested to disclose an SAR, the information contained in an SAR or
any information contained in the documentation supporting an SAR,
except where such disclosure is requested by a law enforcement agency,
shall refuse to produce the SAR or such other information. See 31
U.S.C. 5318(g)(2). A bank, and any director, officer, employee, or
agent of such bank, that make a report pursuant to this Sec. 103.21
shall be protected from liability for any disclosure contained, for
failure to disclosure the fact of such report, or both, to the extent
provided by 31 U.S.C. section 5318(g)(3).
(f) Compliance. Compliance with these rules shall be audited by the
Department of the Treasury or its delegees under the terms of the Bank
Secrecy Act. Failure to satisfy the requirements of this rule shall be
a violation of the reporting rules of the Bank Secrecy Act and of 31
CFR Part 103. Such failure may also violate provisions of Titles 12 and
15 of the Code of Federal Regulations. Whether or not a bank satisfies
the requirements of this reporting rule has no direct bearing on the
obligations or possible liabilities of such bank or its directors,
officers, employees, or agents, under provisions of Title 18 of the
United States Code.
Dated: August 30, 1995.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 95-22223 Filed 9-6-95; 8:45 am]
BILLING CODE 4820-03-P
