Comment letter: Proposed Rule: Bank Secrecy Act – RIN 3133–AF25

February 22, 2021

Melane Conyers-Ausbrooks
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314

Re: NASCUS Comments on Proposed Rule: Bank Secrecy Act – RIN 3133–AF25


Dear Secretary Conyers-Ausbrooks:

The National Association of State Credit Union Supervisors (NASCUS)[1] submits the following comments in response to the National Credit Union Administration’s (NCUA’s) notice of proposed rulemaking RIN 3133-AF25, Proposed Rule: Bank Secrecy Act.[2] When finalized, the rule would provide NCUA leeway to grant federally insured credit unions (FICUs) exemptions from NCUA rules implementing Suspicious Activity Report (SAR) filing requirements. Establishing NCUA exemptive authority for SAR filing requirements would support the laudable objectives of encouraging credit union development of innovative solutions for Bank Secrecy Act (BSA) compliance and aligning NCUA’s rules and authority with that of the Financial Crimes Enforcement Network (FinCEN) with respect to granting exemptions pursuant to NCUA’s corresponding regulations.

NASCUS supports this proposed rulemaking. Emphasizing substantive SAR results over procedural compliance will result in SAR data that is potentially of greater use to law enforcement and national security stakeholders and is consistent with the intent and spirit of the BSA. Providing exemptions from certain SAR requirements will facilitate credit unions’ ability to allocate resources to innovative technologies, monitoring and investigation.

In our comments that follow, NASCUS makes several recommendations for minor changes to the proposal. We believe these changes will improve the clarity of the rule and further reduce regulatory burden. Our recommendations respond directly to NCUA’s request for comments on changes needed to the exemption process including “additional detail” necessary for the rule to be effective.[3]

Request for an Exemption for a Class of FICUs

NCUA should clarify that a coalition or class of credit unions may apply for an exemption together or have a third-party prepare an application on their behalf. As proposed, the exemption process requires a FICU submit a written request to NCUA.[4] While nothing in the proposal explicitly prohibits credit unions acting on concert with respect to an exemption, only “classes of persons” and “classes of transactions” are specifically referenced.

To mitigate stakeholder uncertainty, the final rule should make clear that “classes” or “select groups” of credit unions may apply, or have a third party apply on their behalf, for an exemption for certain SAR filings. As credit union further develop innovative solutions to the BSA, it is foreseeable that some of those solutions might involve collaboration through credit union service organizations (CUSOs) or other affiliated credit union organizations such a shared branches or shared service centers. In addition to CUSOs and shared facilities, some credit unions may share BSA compliance resources while others provide back office support to their more modestly sized peers.

Clarifying that collaborating credit unions may submit a single request, or have a single request submitted on their behalf, is an important and beneficial change to the proposal that would further support and encourage innovation and collaboration in BSA compliance. NCUA should also address the effect of exemptions on the array of credit union collaborative efforts.

Specify to Which NCUA Office to Send a Request for Exemption

The proposal does not specify to which NCUA Office requests for an exemption should be submitted. In other NCUA rules, the Regional Directors is designated as the recipient of regulatorily required submissions. For example, FICUs are to submit merger proposals to the Regional Director.[5] Federal credit unions are instructed to seek an occupancy of abandoned premises waiver from the Regional office.[6]

To minimize confusion, NASCUS recommends the final rule specify to which NCUA office the request for a BSA exemption be sent.

Role of State Regulator

The proposed rule states “The NCUA also may consult with the other state and federal banking agencies and consider comments before granting any exemption.”[7] Given that state regulators conduct the majority of BSA examinations in federally insured state credit unions (FISCUs) upon which NCUA relies for assessing compliance, the proposal should commit NCUA to consulting with the appropriate state regulator when evaluating a request for an exemption.

To avoid confusion for FISCUs and mitigate opportunities for miscommunication between NCUA and state regulators, proposed 748.1(c)(7) be amended to add new subsection (iii) to state that when administering exemptions for FISCUs NCUA shall consult and coordinate with the prudential state regulator.

Reducing Regulatory Burden

As NCUA notes in the Supplemental Material for the proposed rule, NCUA regulations overlap with those of the FinCEN, incorporating within existing Part 748.1 both FinCEN’s rules as well as discretionary NCUA SAR related rules. To further add to potential confusion for FICUs, NCUA has also layered guidance atop the regulatory framework adding additional “requirements” not found in rule. For example, the state system has long asked NCUA to modify the agency’s stance that a credit union’s board be notified at least monthly of SAR filings.[8] Adding to the confusion, NCUA has recently finalized a rule on the Role of Supervisory Guidance that calls into question whether FICUs must notify their boards monthly and consequently whether monthly notification is eligible for exemption.[9]

NCUA can substantially enhance the effectiveness of the proposal and reduce regulatory burden by either reorganizing Part 748.1(c) to distinguish between FinCEN mandated rules that would require FinCEN’s granting of a parallel exemption and NCUA discretionary rules for which NCUA might consult FinCEN but has the final determination with respect to exemptions. NCUA should also take steps to clearly identify what “standards” borne of guidance are binding, and therefore eligible for exemption, and which are solely illustrative.

Finally, the final rule should provide more clarification as to what will happen upon expiration of an exemption. For example, for an activity that occurs during an exemptive period but in close proximity to the expiration of the exemption, when does traditional 30-day and 90-day reporting requirements toll?

We commend NCUA for undertaking this rulemaking to support innovative technologies and processes for SAR monitoring and filing. NASCUS and state regulators remain committed to working with stakeholders and with NCUA to ensure the credit union system is protected from bad actors that would seek to exploit that system in furtherance of criminal enterprise. As noted above, we strongly encourage NCUA to consider how the exemption process will be implemented within the context of affiliated or collaborating credit unions such as in shared branches or services centers, centralized CUSO compliance, and shared back office situations. We are happy to discuss our recommendations further at your convenience.



– signature redacted for electronic publication –

Brian Knight

Executive Vice President & General Counsel


[1] NASCUS is the professional association of the nation’s 45 state credit union regulatory agencies that charter and supervise over 2,000 state credit unions. NASCUS membership includes state regulatory agencies, state chartered and federally chartered credit unions, and other important stakeholders in the state system. State chartered credit unions hold nearly half the $1.76 trillion assets in the credit union system and are proud to represent nearly half of the 123 million credit union members.

[2] “Bank Secrecy Act” 85 Fed. Reg. 6586 (January 22, 2021).

[3] Id. at 6588.

[4] See proposed § 748.1(c)(7)(i), 85 Fed. Reg. 6589 (January 22, 2021).

[5] 12 CFR 708b.104(a).

[6] 12 CFR §701.36(d)(4).

[7] See proposed § 748.1(c)(7)(i), 85 Fed. Reg. 6589 (January 22, 2021).

[8] See NCUA Regulatory Alert 06-RS07 Final Rule Part 748 Filing Requirements for Suspicious Activity Reports (December 2006).

[9] “Role of Supervisory Guidance” 86 Fed. Reg. 7949 (February 3, 2021).