NASCUS Comments on Review of Bank Secrecy Act Regulations and Guidance

February 14, 2022                                           

Policy Division
Financial Crimes Enforcement Network
P.O. Box 39 Vienna, VA 22183

Re: NASCUS Comments – Docket Number FINCEN-2021-0008; Request for Information – Review of Bank Secrecy Act Regulations and Guidance

Dear Acting Director Das:

The National Association of State Credit Union Supervisors (NASCUS)[1] submits this letter in response to the Financial Crimes Enforcement Network’s (FinCEN) request for information and comments on Docket Number FinCEN 2001-0008: Review of Bank Secrecy Act Regulations and Guidance.[2] FinCEN seeks comments on ways to modernize, streamline, and update the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) (BSA/AML) 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 ways to promote innovation that supports a risk-based approach to protecting the financial system. The RFI supports FinCEN’s ongoing formal review of BSA/AML regulations and guidance required pursuant to § 6216 of the Anti-Money Laundering Act of 2020.[3]

NASCUS supports strengthening the BSA/AML frameworks that safeguard the credit union system and the broader financial services system from being exploited by bad actors in furtherance of their illicit activities. We commend FinCEN for engaging stakeholders and soliciting input on ways to improve and enhance the BSA/AML. NASCUS also acknowledges and welcomes FinCEN’s outreach to state regulators for their perspectives regarding pending BSA/AML rulemaking.

The credit union system is diverse with a wide range of institutions of varying asset sizes and complexity. There are hundreds of large and complex credit unions, however, a majority of the nation’s credit unions have less than $100 million in assets. Re-calibrating the BSA/AML would benefit credit unions of all sizes and allow more modest-sized institutions to focus their limited resources on identifying illicit transactions. In addition to reducing burdens on credit unions, streamlining and re-calibrating regulation and guidance would also reduce the burden on the supervisory agencies responsible for examining credit unions for compliance with the BSA/AML.

Suspicious Activity Reporting

The requirement that Suspicious Activity Reports (SARs) be filed on a continuing basis every 90-days while the activity is ongoing can be time-consuming and labor intensive. Substantial efficiencies in the BSA/AML could be achieved by reconsidering the value of the ongoing SAR filing obligations. The sheer volume of repeat SAR filing can unduly strain a credit union’s BSA/AML program.[4] The burden of the 90-day repetitive filing requirement seems to outweigh the surveillance benefit to FinCEN and other SAR data stakeholders. NASCUS recommends that FinCEN consider whether 90-day continued filing is the most efficient and effective allocation of a credit union’s BSA/AML program resources.[5]

Currency Transaction Reporting

Financial institutions are required to file a report of each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to such financial institution which involves a transaction in currency of more than $10,000, except as otherwise provided. Eliminating the need to file reports on transactions of little interest to law enforcement would allow covered entities to reallocate compliance resources to identify illicit transactions. We recommend FinCEN explore expanding and simplifying the CTR exemption process and clarifying and simplifying the filing of CTRs related to the transport of cash to, and from, financial institutions by armored car.[6]

1. Exemptions

While Phase I and Phase II exemptions are intended to reduce filings on routine transactions, a high number of CTR filings still relate to non-suspicious business transactions. FinCEN should expand CTR exemptions to allow financial institutions to exempt long-time business customers from CTR filings after the financial institution has satisfied itself it understands the business accounts activity and source(s) of funds. In addition, the process for applying for and maintaining an exemption on a business account should be simplified to provide for ease of administration by the financial institution.

2. Armored Car Services

FinCEN should clarify and simplify CTR filing requirements related to armored car services. If the armored car servicer is a registered money services business (MSB), the armored service typically files the CTR on behalf of the financial institution when the cash is picked up from the financial institution’s customers. There has been confusion in some cases as to whether the financial institution also needs to file a CTR on the same transaction for which the armored car service filed a CTR. There has also been confusion as to whether the financial institution must file a CTR on the armored car service/MSB. In clarifying the filing responsibilities, it would also be helpful if FinCEN addressed whether electronic settlement by the armored car service with the financial institution affects filing obligations.

Section 314(b) Information Sharing

Section 314(b) of the USA PATRIOT Act provides a safe harbor allowing financial institutions to share information with each other regarding individuals and entities suspected of possible money laundering. Financial institutions seeking to avail themselves of § 314(b) protections must comply with FinCEN’s implementing regulations, including notifying FinCEN and verifying that the other financial institution has also submitted a notice to FinCEN of its intent to participate in § 314(b) information sharing. In 2020, FinCEN expanded the scope of 314(b) sharing by revising previous interpretations of the safe harbor to allow information sharing related to terrorist financing or money laundering even absent an underlying predicate transaction.[7] While FinCEN’s revised interpretation of the scope of 314(b) was an improvement, further expansion of the information sharing safe harbor would vastly improve the BSA/AML framework.

Rather than require each participating institution to affirmatively opt-in and verify that a peer institution has opted in, FinCEN should establish a presumption that covered entities are within the safe harbor unless they have opted out of sharing information. This would allow institutions to rapidly investigate suspicious transactions by seeking additional information on their members from other financial institutions. It would also allow financial institutions to alert their peers to suspicious activities of a joint member/customer of which a peer might be unaware.

BSA Expectations Regarding Marijuana-Related Businesses

We encourage FinCEN to issue updated guidance on banking state-licensed marijuana businesses. The guidance issued in 2014 provides a basic framework but leaves several key questions unanswered.[8] In particular, greater clarity is needed regarding the due diligence needed for ancillary businesses as noted in footnote 7 of the 2014 guidance. Absent a formal definition of an ancillary business, financial institutions and examiners are left to substitute their own judgments on what threshold of financial interaction between a plant-touching marijuana business and service provider rises to the level of ancillary relationship. The uncertain definition of an ancillary business leads to inconsistent monitoring, reporting, and supervision.

Ongoing Consultation with State Regulators

State regulators play an important role in the administration of the BSA/AML, conducting an overwhelming majority of the BSA/AML examinations in the 1,975 state credit unions nationwide. It is the Reports of Examinations prepared by the state regulatory agencies upon which the federal regulator and FinCEN rely to identify shortcomings in BSA/AML compliance in the state credit union system. To maintain a seamless and effective oversight of the BSA/AML, FinCEN should continue to ensure state regulators are included in the formulation of related regulations and guidance to the same extent as their federal counterparts.

NASCUS appreciates the opportunity to offer comments in response to FinCEN’s Request for Information. A more efficient BSA/AML framework reduces burdens on both financial institutions and the regulatory agencies tasked with supervising compliance, freeing resources of the former for use in identifying bad actors and resources of the latter for identifying material risks to the financial system. NASCUS and the state credit union remain committed to working with FinCEN to ensure the credit union system does its part to safeguard the financial sector from abuse. We believe these recommendations will enhance BSA/AML and strengthen system safeguards. Please do not hesitate to contact NASCUS to discuss our comments further.

Brian Knight
President and CEO

[1] NASCUS is the professional association of the nation’s 45 state credit union regulatory agencies that charter and supervises over 1,900 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 over half of the $2.2 trillion assets in the credit union system and are proud to represent nearly half of the 128.6 million credit union members.

[2] “Review of Bank Secrecy Act Regulations and Guidance” 86 Fed. Reg. 71201 (December 15, 2021).

[3] Division F of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Public Law 116–283 (January 1, 2021).

[4] The statutes under which credit unions are chartered generally impose significant restrictions and burdens on the termination of membership.  As a result, many credit unions do not have the ability to mitigate ongoing filing obligations by terminating the banking relationship with the party engaging in the suspicious transactions.

[5] Eliminating the 90-day ongoing filing requirement is particularly fruitless with respect to SAR Limited filings which by their very nature do not involve suspicious activity.

[6] We understand many stakeholders believe the filing threshold for Currency Transaction Reports (CTRs) should be increased. While this idea has merit, NASCUS will focus its comments on the CTR exemption process and the armored car redundancy.

[7] See FinCEN: Section 314(b) Fact Sheet (

[8] “BSA Expectations Regarding Marijuana-Related Businesses” Fin-2014-G001, February 14, 2014.