Frequently Asked Questions Regarding Suspicious Activity Reporting Requirements
Financial Crimes Enforcement Network
NASCUS Legislative and Regulatory Affairs
October 9, 2025
The Financial Crimes Enforcement Network (FinCEN), together with the other federal banking agencies, has issued an FAQ regarding Suspicious Activity Reporting Requirements. The FAQ consists of four questions with a stated goal of “ensuring financial institutions are not needlessly expending resources on efforts that do not provide law enforcement and national security agencies with the critical information they need to detect, combat, and deter criminal activity.”
The questions address:
- Whether a SAR is required when there may be structuring to avoid the $10,000 CTR reporting threshold, stating: “The mere presence of a transaction or series of transactions, at or near the $10,000 CTR threshold is not information sufficient to require the filing of a SAR.” Rather, a SAR is only required “if the institution knows, suspects, or has reason to suspect” a series of transactions are “designed to evade” CTR filings. It further explains where the lines may be drawn when determining whether to file.
- As it relates to continuing activity reviews: FinCEN recognizes these are a “burden” and states that a separate review of a customer or account following the filing of a SAR to determine whether suspicious activity continued is not required. Financial institutions instead “may rely on risk-based internal policies, procedures, and controls to monitor and report suspicious activity as appropriate, provided those internal policies, procedures, and controls are reasonably designed to identify and report such activity.”
- Question three of the FAQ provides a timeframe for filing any continuing SARs.
- The fourth question clarifies if a financial institution decides to not file a SAR, there is not a requirement to document this. It is important to note, financial institutions may continue to document when they decide not to file a SAR.
Summary: NCUA Proposed Rule (FCUs Only); Derivatives Part 703
Prepared by NASCUS Legislative & Regulatory Affairs Department
November 2020
NCUA has proposed changes to Subpart B of Part 703, NCUA’s derivatives rule for federal credit unions (FCU).NCUA first approved derivatives for FCUs in 2014. NCUA’s derivatives rule only applies to FCUs. Federally insured state credit unions (FISCUs) are currently only required to notify NCUA if they intend to use derivatives pursuant to state law. See 741.219.
NCUA now proposed to eliminate the requirement that FISCUs notify NCUA 30-days prior to engaging in derivatives transactions and replace it with a requirement that FISCUs notify NCUA within 5 days after HAVING ENGAGED in a derivatives transaction.
The proposed changes for FCUs would:
- Eliminate the pre-approval process for FCUs that are “complex” (assets of $500m+) with a Management CAMEL component rating of “1” or “2”
- Eliminate the interim approval step for non-“complex” credit unions
- Eliminate the specific product permissibility and replace it with mandatory characteristics
- Eliminate the regulatory limits on the amount of derivatives
The proposed rule may be read here. Comments are due to NCUA December 28, 2020.
Summary
NCUA’s current derivatives rule is intentionally prescriptive. In 2014, NCUA felt FCUs lacked the experience to use derivatives and NCUA lacked the expertise to administer a derivatives rule. As NCUA provides FCUs with greater flexibility, it stresses that FCUs must maintain strong prudential controls, including appropriate risk management by experienced staff, as well as suitable policies, procedures, and management oversight.
FISCUs – § 741.219
NCUA’s current rule DOES NOT limit or otherwise affect FISCU derivatives authority. NCUA’s rule only requires FISCUs give NCUA notice of the intent to engage in derivatives transactions 30-days prior. NCUA now proposes amending Part 741.219(b) to simply require notice within 5 days AFTER a FISCU enters into its first derivatives transaction.
(b) Any credit union which is insured pursuant to title II of the Act must notify the applicable NCUA Regional Director in writing within five business days after entering into its first Derivatives transaction. Such transactions do not include those included in § 703.14 of this chapter.
FCU Changes
Loan Pipeline Management & “Put Options” – Part 701(21)(i)
NCUA allows FCUs to use Put Options as a form of loan pipeline management. NCUA is moving this authority from § 701.21(i) to consolidate it with other pipeline management authorities in a revised § 701.14(k). NCUA is not changing the FCU authority in existing § 701.21(i) other than to relocate it.
Mutual Funds – § 703.100
The current rule prevents FCUs from investing in registered investment companies or collective investment funds where the prospectus of the company or fund permit the investment portfolio to contain Derivatives. NCUA now proposes to allow FCUs to invest in mutual funds that engage in derivatives for the purpose of managing to manage IRR. In the Supplemental material, NCUA stresses that FCUs may not invest in mutual funds that engage in derivatives that do not manage IRR.
Definitions – § 703.102
NCUA is proposing making changes to several definitions, adding several definitions, and deleting some others. Specifically, NCUA is making revisions to the following defined terms (see page 68489 of the proposal):
- Counterparty
- Interest Rate Risk
- Margin
- Master Service Agreement
- Net Economic Value
- Senior Executive Officer
- Threshold Amount
- Trade Date
In addition, NCUA will the following definitions (see page 68490 of the proposal):
- Domestic Counterparty – to be defined as a counterparty domiciled in the United States. The proposal would only allow FCUs to enter into derivatives transactions with Domestic Counterparties.
- Domestic Interest Rates – to be defined as interest rates derived in the United States and are U.S. dollar denominated.
- Earnings at Risk – to be defined as the changes to earnings, typically in the short term, caused by changes in interest rates. This type of modeling would be required for an FCU’s asset/ liability risk management under the proposal.
- Written Options – to be defined as options where compensation has been received and the purchaser has the right, not obligation, to exercise the option on a future date. The proposed rule would prohibit Written Options for FCUs.
NCUA would eliminate the following existing definitions in a new rule:
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Requirements/Characteristics of Permissible Interest Rate Derivatives – § 703.103
NCUA will replace existing § 703.102, Permissible Derivatives with the new proposed § 703.103 titled ‘‘Requirements related to the characteristics of permissible interest rate Derivatives.’’ This new section will replace prescriptive prohibitions with principle-based characteristics such as:
- Denominated in U.S. dollars
- Based off Domestic Interest Rates or dollar-denominated London Interbank Offered Rate (LIBOR)
- A contract maturity equal to or less than 15 years, as of the Trade Date
- Not used to create Structured Liability Offerings for members of nonmembers
FCUs could enter into derivatives transactions that meet those characteristics. In addition, FCUs would be allowed to participate in:
- interest rate swaps
- basis swaps
- purchased interest rate caps
- purchased interest rate floors
- S. Treasury note futures
NCUA would eliminate the following requirements:
- forward start date limitations
- fluctuating notional amount limitations
- restriction on leveraged derivatives
- meeting the definition of derivative under GAAP
NCUA is retaining the prohibition against Written Options, but seeks comments on whether FCUs should be allowed to engage in Written Options for managing IRR.
Requirements for Counterparty Agreements, Collateral and Margining – § 703.104
Revising the requirements for counterparty agreements, collateral and margining, NCUA is proposing to require FCUs have an executed Master Services Agreement with a Domestic Counterparty that must be reviewed by counsel with relevant expertise in similar types of transactions. FCUs would also be required to use contracted Margin requirements with a maximum Margin threshold amount of $250k and accept only U.S. dollars, S. Treasuries; GSE or US government agency debt, GSE residential mortgage-backed security pass-through securities, or S. government agency residential mortgage-backed security pass-through securities as collateral.
Reporting Requirements – § 703.105
NCUA currently requires FCUs provide their board of directors, senior executives a comprehensive derivatives report. Under the proposal, NCUAS would retain the requirements for quarterly reporting to the FCU’s board and monthly reporting to executive management. NCUA is also retaining the requirements outlining what must be included in these reports.
Operational Support Requirements, Required Experience & Competencies – § 703.106(a)
NCUA will retain the current rule’s competency requirements, including:
- Prior to engaging in derivatives, FCU’s board must obtain training
- Senior executive officers must have knowledge and ability to supervise the program
- The FCU’s board must be briefed annually on the program
The briefing requirement replaces an ongoing annually training requirement.
Operational Support Requirements; Required Review and Internal Controls Structure – § 703.106(b)
NCUA is retaining the requirement that an FCU identify and document the circumstances that lead to the decision to execute a transaction, specify the strategy the credit union will employ, and demonstrate the economic effectiveness of the transaction. NCUA is proposing to reduce the number of required internal controls reviews an FCU must conduct from at least once each year for the first 2 years to just 1 review in the first year.
The Board is retaining the current rule’s requirement that any FCU engaging in derivatives must obtain an annual financial statement audit and account for all transactions consistent with GAAP. NCUA also proposes adding a requirement for a a liquidity review.
External Service Providers – § 703.107
FCUs will be able to use External Service Providers (ESPs). FCUs will be able to use the ESPs provided the ESP does not:
- Act as a counterparty to any Derivatives transactions that involve the FCU
- Act as a principal or agent in any Derivatives transactions that involve the FCU
- Have discretionary authority to execute any of the FCU’s Derivatives transactions
FCUs will be required to document the role of the ESPs in the FCU’s policies and procedures. NCUA also stresses that an FCU’s use of ESPs does not alleviate the credit union of its responsibility to employ qualified personnel in accordance with the operational support requirements of the proposed rule.
Notification and Application Requirements – § 703.108
NCUA proposes eliminating the application process for FCUs with at least $500m in assets and a CAMEL Management component rating of 1 or 2. FCUs would be required to provide the applicable RD a written notification within five business days after entering into its first Derivative transaction.
Regulatory Violation or Unsafe and Unsound Condition – § 703.109
If an FCU no longer meets requirements of the rule, the FCU must immediately stop entering into any new derivative transactions.
Summary: Proposed rule, Risk Based Net Worth – COVID 19 Relief; Complex credit union threshold (Part 702)
Prepared by NASCUS Legislative & Regulatory Affairs Department
February 2021
NCUA is proposing to raise the asset threshold for defining a credit union as “complex” for purposes of being subject to risk-based net worth (RBNW) requirement in § 702 of the NCUA’s regulations. The proposal would amend § 702 to apply the RBNW to FICUs with quarter-end assets that exceed $500 million.
The proposed rule may be read here. Comments are due to NCUA 30 days after publication.
Summary
Currently, the NCUA defines a credit union as complex and subject to the RBNW requirement only if the credit union has quarter-end assets that exceed $50 million and its risk-based net worth requirement exceeds 6%. NCUA has also issued rules to create a risk-based capital (RBC) requirement for larger complex credit unions with assets over $500 million which will become effective on January 1, 2022. However, until that effective date in 2022, the RBC rules still apply to credit unions with only $50 million in assets.
NCUA now proposes amending § 702.103 to raise the RBNW threshold to $500 million to match the RBC threshold. NCUA notes that even with the raised RBNW threshold, 81.6% of FICU assets would be classified as complex. In terms of relief, NCUA notes that increasing complexity threshold to $500 million would provide potential relief to 1,737 FICUs. In addition, there are 94 complex credit unions with assets totaling $66 billion which are required to hold capital above 7% to be well capitalized based on their risk-based net worth requirement. Of the 94 credit unions, 67 have assets less than $500 million and would no longer be required to hold more capital to remain well capitalized. This would allow those credit union redeploy their capital to assist their members.
Summary: NCUA Proposed Rule BSA Part 748
Prepared by NASCUS Legislative & Regulatory Affairs Department
January 2021
NCUA is proposing to provide, on a case-by-case basis, exemptions from SAR filing requirements to federally insured credit unions (FICUs) that develop innovative solutions to meet their BSA/AML compliance obligations.
The proposed rule may be read here. Comments are due to NCUA (30 days from publication).
Summary
Since 1985, NCUA’s rules have required FICUs to report potential violations of law arising from transactions through the institution. In 1992, Congress made the reporting of possible criminal violations part of the BSA. In 1996 FinCEN issued its SAR reporting regulations and NCUA then amended its regulations to incorporate FinCEN’s regulations into NCUA’s rules. NCUA and FinCEN’s regulations are substantially similar but not identical. FICUs must comply with both regulations.
Both the NCUA and FinCEN require FICUs file SARs relating to money laundering and transactions that are designed to evade the reporting requirements of the BSA and to maintain the confidentiality of those filings. Both regulations also provide:
- that SARs are not required for a robbery or burglary committed or attempted that is reported to appropriate law enforcement authorities
- recordkeeping requirements for SARs and supporting documentation
- that supporting documentation shall be deemed to have been filed with the SAR
- that supporting documentation shall be made available to appropriate law enforcement agencies upon request
- a safe harbor from liability to any FICU and any of its officials, employees, or agents that make a voluntary disclosure of any possible violation of law or regulation to a government agency or file a SAR pursuant to the regulations
However, the NCUA’s regulations cover a broader range of transactions (e.g., insider abuse at any dollar amount) and require FICUs promptly notify their board of directors when a SAR has been filed.
Innovation in Compliance and Regulatory Flexibility
In 2018, the NCUA, FinCEN, and the other federal banking agencies issued a statement encouraging financial institutions to take innovative approaches to meet their BSA/anti-money laundering (BSA/AML) compliance obligations. Types of innovative approaches that have developed include:
- automated form population using natural language processing, transaction data, and customer due diligence information
- automated or limited investigation processes depending on the complexity and risk of a particular transaction and appropriate safeguards
- enhanced monitoring processes using more and better data, optical scanning, artificial intelligence, or machine learning capabilities.
Industry has requested exemptive relief to explore innovation related to issues such as:
- SAR investigation & timing
- SAR disclosures and sharing
- Ongoing activity and related continued SAR filings
- Outsourcing SAR production
- The role of credit unions’ agents
- Using shared facilities, utilities, and data & use & sharing of “de-identified” data
Proposed Rule
The proposal would add a provision to § 748.1 allowing NCUA to exempt a FICU from the requirements of that section. Exemptions may be:
- conditional or unconditional
- apply to particular persons, or to classes of persons
- apply to transactions or classes of transactions
When evaluating exemption requests, NCUA will determine whether the exemption is consistent with the purposes of the BSA (seeking FinCEN’s determination as well), with safe & sound practices, & may consider other factors as appropriate. In addition, NCUA:
- will seek FinCEN’s concurrence regarding any exemption requests that involve the filing of SARs required by FinCEN’s rules
- may consult with the other state and federal banking agencies
- may grant an exemption for a specified time period
- may revoke previously granted exemptions if circumstances change
Although NCUA will have obtained FinCEN’s concurrence, the FICU will still need an exemption from FinCEN as well for FinCEN’s SAR rules. NCUA exemptions would not relieve a FICU from the obligation to comply with FinCEN’s SAR regulation.
NCUA will grant exemptions to its stand-alone BSA related requirements.
Final Rule Summary: Role of Supervisory Guidance (Part 791, Subpart D)
Prepared by NASCUS Legislative & Regulatory Affairs Department
February 2021
NCUA has finalized a rule codifying the Interagency Statement Clarifying the Role of Supervisory Guidance issued by the federal agencies (FAs) in September 2018 that reiterates the federal banking agencies’ commitment to the principle that supervisory guidance does not carry the full force and effect of law and does not create binding obligations for financial institutions.
NCUA issues the final rule in conjunction with the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve (the Board), the Office of Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (Bureau) finalizing a similar rule for their regulated entities.
By incorporating the 2018 Statement into Part 791 Subpart D, NCUA codifies the principles of the Statement and makes them binding upon the agency and NCUA examiners. The new rule applies to NCUA interactions with FISCUs but is not binding on state examiners.
The provisions of this rule become effective March 5, 2021.
Summary
The 2018 Statement is now codified in Part 791 Subpart D of NCUA’s Rules and Regulations. The rule binds NCUA to the principles of the 2018 Statement as revised by the 2020 proposal. NCUA will not treat covered guidance as binding rules, and will:
- limit the use of numerical thresholds in guidance;
- reduce the issuance of multiple supervisory guidance on the same topic;
- make the role of supervisory guidance clear to examiners & credit unions; and
- encourage credit unions to discuss their concerns about supervisory guidance with their agency contact.
Interim Final Rule Summary: Central Liquidity Facility (Part 725)
Prepared by NASCUS Legislative & Regulatory Affairs Department
March 2021
NCUA issued an Interim Final Rule (IFR) extending enhancements to the Central Liquidity Facility (CLF) first enacted in 2020 in response to the pandemic.
The Interim Final Rule may be read here. Comments are due to May 24, 2021. The rule took effect on March 24, 2021.
Summary
The Cares Act, passed in response to the COVID 19 pandemic, made several changes to the CLF to enhance credit union liquidity options during the crisis. As a result, NCUA approved an IFR (April 16, 2020) to implement those changes and make other enhancements to the CLF. The changes related to the CARES Act were scheduled to sunset on December 31, 2020. However, the Consolidated Appropriations Act (CAA) extended the sunset date of the CLF enhancements in the CARES Act to December 31, 2021. NCUA is now cohering its regulations to the CAA extension.
- The CARES Act temporarily amended the definition of “Liquidity need” by removing the words “primarily serving natural persons.” This allowed corporate credit unions to access the CLF for their own liquidity needs. This change was to sunset on December 31, 2020. The CAA extended this provision in the CARES Act until December 31, 2021.
This IFR makes a corresponding change to § 725.2(i). - The CARES gave NCUA discretion to amend the Agent membership requirement that a corporate credit union subscribe to CLF capital stock on behalf of all of the corporate’s natural person credit union members regardless of whether all of those members want access to the CLF. In response, NCUA allowed corporates to only subscribe to stock on behalf of those natural person credit union members seeking access to the facility.
This provision was scheduled to sunset in accordance with the CARES Act on December 31, 2020 but was extended to December 31, 2021 by the CAA. Therefore, the IFR now amends § 725.4(ii) to reflect that change. Furthermore, after December 31, 2021, corporates now have until January 1, 2023 to either:- Purchase Facility stock for all of its member credit unions; or
- Terminate its membership in the Facility
- As noted above, the CARES Act allows CLF Agents to borrow for their own liquidity needs. To implement authorized Agent borrowing, the April 2020 NCUA Interim Final Rule amended § 725.4 to clarify that an Agent member borrowing from the CLF for its own liquidity needs must first subscribe to the capital stock of the Facility in an amount equal to ½% of its own paid-in and unimpaired capital and surplus. The new sunset date of these provisions is December 31, 2021.
This IFR reaffirms that upon the December 31, 2021 sunset of this provision, an agent:- May not request any additional CLF advances for its own liquidity needs; and
- Must continue to follow the terms of the CLF advance agreement
- In the April 2020 Interim Final Rule, the Board amended the waiting period for a credit union to terminate its membership in the CLF until January 1, 2022. These changes temporarily permitted a credit union to withdraw from membership in the CLF after notifying the NCUA Board in writing on the sooner of:
- Six months from the date of its written notice to the NCUA Board; or
- December 31, 2020. Further, any credit union that remained a member after December 31, 2020, was permitted to withdraw from membership immediately upon notifying the Board in writing of its intent to do so.
NCUA is now making several conforming amendments to this section to address the extension of the CLF provisions in the CARES Act by the CAA.
- Any credit union that joined the CLF between April 29, 2020 and December 31, 2022 may immediately withdraw from membership upon notifying the Board in writing of its intent to do so.
- Credit unions that join the CLF between January 1, 2021 and December 31, 2021, regardless of percentage amount of stock subscription, may withdraw from membership in the Facility after notifying the NCUA Board in writing on the sooner of:
- 6 months from the date of its written notice to the NCUA Board; or
- December 31, 2021.
Any credit union that joins the CLF between January 1, 2021 and December 31, 2021, and remains a member after December 31, 2021, may immediately withdraw from membership upon notifying the Board in writing of its intent to do so until December 31, 2022. On January 1, 2023, the immediate withdrawal period will cease, and all members will be subject to the termination provisions in effect before April 29, 2020.
CARES Act provisions extended by the CAA but not included in the IFR
The CARES Act included two additional amendments to the FCU Act that were also extended by the CAA but are not included in the IFR because they did not require NCUA rulemaking to implement. However, both provisions are extended until December 31, 2021. The 2 additional provisions of the CARES Act:
- Increased the multiplier from “12x” to “16x;” and
- Provided more clarity about the purposes for which the NCUA Board can approve liquidity-need requests by removing the phrase “the Board shall not approve an application for credit the intent of which is to expand credit union portfolios.”