OUR POSITION

Bank Secrecy Act and Enforcement

Position

  • ICBA steadfastly opposes the mandatory collection of beneficial ownership information of legal entities regardless of risk by financial institutions and advocates instead that this information be universally collected by FinCEN at the time an entity is formed. However, financial institutions should have access to this information to assist them in performing customer due diligence.

  • ICBA strongly recommends raising Currency Transaction Reporting (CTR) and Suspicious Activity Reporting (SAR) thresholds with future increases linked to inflation to emphasize quality over quantity in reporting. Reporting should be streamlined to reduce unnecessary burden.

  • ICBA supports Bank Secrecy Act/Anti-Money Laundering (BSA/AML) reforms that will ease compliance while providing more useful data to law enforcement.

  • ICBA applauds the federal government for working to better inform bankers of what specific methods of terrorist financing and money laundering they are trying to prevent and to identify low-risk transactions and accounts to allow banks to better allocate and/or reallocate resources.

  • ICBA recommends that community banks receive compensation for their anti-money laundering and anti-terrorist financing oversight and policing activities on behalf of the federal government either through tax credits or other financial compensation or through reduced regulatory burden in other areas.

  • ICBA recommends that nonbank institutions that perform “bank-like” functions and offer comparable financial services be subject to the same AML and BSA laws and regulations as banks.

  • ICBA encourages the Office of Foreign Asset Control to streamline and simplify watch-lists of terrorists for ease of reference and application by bankers.

  • ICBA asks that FinCEN take a leadership role in combatting ransomware, synthetic IDs, and other types of fraud.

Background

Community bankers are committed to supporting balanced, effective measures that will prevent terrorists from using the financial system to fund their operations and prevent money launderers from hiding the proceeds of criminal activities.

However, Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance has increasingly burdened community banks with identifying, investigating, policing, and reporting potential criminal activity. Each year, community banks must invest more time, money, and resources to combat this threat. However, because BSA/AML requirements become outdated, community banks increasingly doubt their effectiveness in combating financial crime.

Beneficial Ownership Information Should Be Collected by a Government Agency. Beneficial ownership information should be collected and verified at the time a legal entity is formed, rather than requiring financial institutions to collect this information. In December of 2020, Congress passed the Corporate Transparency Act (“CTA”) which would require affected companies to submit beneficial ownership information directly to FinCEN at the time of formation.

However, the CTA would not relieve community banks from their collection and verification obligations. In December of 2021, FinCEN issued a Notice of Proposed Rulemaking (NPRM) to implement legal entity reporting of beneficial ownership information to FinCEN. FinCEN also plans to revise its existing customer due diligence rules, which currently include requirements for banks to collect such information.

Reporting Thresholds Must Be Updated. Suspicious activity reporting is the cornerstone of the BSA system and is a way for banks to provide leads to law enforcement. Unfortunately, in the current regulatory environment, community bankers have a strong incentive to protect themselves from examiner criticism and liability by over-filing of SARs as a defensive practice, which dilutes their value to law enforcement.

Regardless of the degree of offense, community banks are required to follow the same SAR procedure for every suspicious transaction alert. This mechanical approach makes community bankers doubtful that SARs have real value for law enforcement. Reforming the SAR process to a truly risk-based system with appropriate threshold increases would enable community banks to provide more targeted and valuable leads to law enforcement.

Similar to the CTR thresholds, SAR filing thresholds have not been adjusted since becoming effective in 1992. Reporting thresholds are significantly outdated and capture far more transactions than originally intended. The Anti-Money Laundering Act of 2020 (“AMLA”) requires the Treasury to review and determine whether the thresholds should be adjusted and, to streamline CTR and SAR requirements to reduce unnecessarily burdensome requirements.

The CTR threshold, which was set in 1970, should be raised from $10,000 to $30,000 with future increases linked to inflation. A higher threshold would produce more targeted, useful information for law enforcement.

Bank Secrecy Act Requirements Should Be Flexible and Easily Applied. ICBA encourages continued efforts by Congress, the Treasury, FinCEN, and state and federal regulators to work with industry to establish a more efficient regime and for reducing community banks’ mounting costs and regulatory burdens associated with complying with anti-money laundering and terrorist financing laws and regulations. ICBA supports FinCEN efforts to expeditiously explore ways to enhance AML effectiveness and efficiency and provide banks greater flexibility in the allocation of resources.

The federal government should continue working with the banking industry to provide additional guidance—such as best practices, questions and answers, or commentary—that is understandable, workable, and easily applied by community banks.

FinCEN should continue its investigation and adaptation of technology to assist banks with their BSA compliance requirements. ICBA also encourages the Office of Foreign Asset Control to streamline and simplify its lists for ease of reference and application by bankers.

To better combat fraud and money laundering/muling, FinCEN should consider utilizing existing FinCEN and OFAC list mechanisms and expand their efforts to include lists of known synthetic IDs and other perpetrators of fraud related to people, businesses, and organizations. Additionally, cooperation and coordination between the public and private sectors to combat ransomware and other types of fraud and crime should continue and expand.

Regulation Should Be All Inclusive. To ensure a consistent and balanced effort to combat money laundering and terrorist financing, the federal government should have consistent regulations across all financial services providers including nonbank entities. Additionally, the government should require reporting of only truly suspect transactions—and strive to balance those requirements against the need to respect customer privacy.

Compensation Should Be Provided for Anti-Money Laundering and Anti-Terrorist Financing Efforts. Community bankers are committed to supporting balanced, effective BSA/AML measures. However, for community banks, BSA compliance represents a significant expense in terms of both direct and indirect costs. BSA compliance, whatever the benefit to society at large, is a governmental, law enforcement function. As such, the costs should be borne by the government.

Communication Among Industry, Law Enforcement and the Federal Government Is Critical. Communication and cooperation are critical to an effective working partnership among the government, law enforcement, and financial institutions. Community banks seek more current information from the federal government to better understand what specific methods of terrorist financing and money laundering they are trying to prevent.

Staff Contact: Rhonda Thomas-Whitley, Steven Estep, and Susan Sullivan

Staff Contact

Rhonda Thomas-Whitley

Vice President, Regulatory Counsel

ICBA

Email

Susan Sullivan

Vice President, Congressional Relations

Washington, DC

Email

Steven Estep

Assistant Vice President, Operational Risk

Washington, DC

Email

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Related News

Task force updates AML-deficiency jurisdictions

March 11, 2022

The Financial Action Task Force—a global anti-money-laundering watchdog—updated its statements concerning jurisdictions with strategic AML, terrorist-financing, and weapons-proliferation deficiencies.

Updates: The FATF on March 4 removed Zimbabwe from its list of Jurisdictions under Increased Monitoring and added the United Arab Emirates.

Unchanged: The FATF’s list of High-Risk Jurisdictions Subject to a Call for Action remains the same with Iran and North Korea still subject to FATF countermeasures.