(May 7, 2021) State regulators must have access to the same “beneficial ownership” information that federal agencies will have under legislation adopted last year, and made available through a database, NASCUS wrote in a comment to FinCEN submitted this week.
In response to an advance notice of proposed rulemaking (ANPR) issued early last month, NASCUS wrote that to “maintain a seamless and effective oversight of the BSA/AML, FinCEN must include state regulators in the implementation of the Corporate Transparency Act (CTA) to the same extent as federal agencies.”
The CTA, adopted as part of last year’s National Defense Authorization Act (NDAA), allows that the beneficial ownership information submitted to FinCEN may be disclosed to financial institutions (including credit unions) in their compliance with BSA/AML customer due diligence (CDD) requirements. “Beneficial owners” are those individual natural persons who ultimately own or control the reporting companies.
The state system said it supports strengthening the Bank Secrecy Act/anti-money laundering (BSA/AML) framework, and will work with FinCEN as the beneficial ownership database is developed and the CTA implemented. However, NASCUS urged FinCEN to develop a database that reduces information and collection verification burden on credit unions.
“Credit unions and other financial institutions already bear a substantial BSA/AML regulatory burden to safeguard the financial system and work diligently to fulfill their responsibilities,” NASCUS wrote. “Designing the Beneficial Ownership Database in a manner that eases related customer due diligence requirements would allow financial institutions to re-allocate resources to monitoring and other BSA/AML obligations resulting in a more secure financial system.”
LINK:
Comment: Beneficial Ownership Information Reporting Requirements
(April 16, 2021) NCUA and other federal agencies are seeking feedback on how well four-year-old guidance for complying with anti-money laundering and Bank Secrecy Act (AML/BSA) requirements is working for them, according to a request for information (RFI) issued late last week.
NCUA joined with the federal banking agencies, as well as Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) in issuing the RFI. It seeks comment on the principles outlined in the 2017 interagency “Supervisory Guidance on Model Risk Management.” Comments are due June 11 (following a 60-day comment period).
According to the RFI, it is aimed at enhancing the agencies’ understanding of institutions’ practices with respect to BSA/AML and OFAC compliance and determining whether additional explanation or clarification may increase transparency, effectiveness, or efficiency.
Even though the banking agencies’ model risk management guidance (MRMG) does not apply to credit unions, the RFI nonetheless seeks input from the perspective of credit unions as well as banks.
The OCC, Fed Board, and FDIC, in consultation with NCUA and FinCEN, also issued a statement late last week to clarify that the risk management principles discussed in the model risk management guidance (MRMG) are appropriate considerations in the context of the BSA/AML statutory and regulatory requirements.
In an unrelated, but topical, development this week, the U.S. Justice Department announced the indictment of two individuals who used a now-defunct New York credit union (and others) as their cover in helping the individuals (now defendants under the federal indictment) allegedly facilitate more than $1 billion in high-risk transactions that were carried out without AML controls. In a release, the DOJ said the two defendants were charged with failure to maintain an anti-money laundering program, failure to file suspicious activity reports (SARs), and operation of an unlicensed money transmitting business (MSB).
According to the DOJ, the former New York State Employees Federal Credit Union (NYSEFCU) of New York, N.Y. – a $2 million credit union liquidated in 2017 by NCUA, citing (among other things) AML/BSA deficiencies — allowed the defendants to conduct high-risk transactions through the credit union during 2014-16. The DOJ said the defendants allegedly caused the transfer of more than $1 billion in high-risk transactions, including hundreds of millions of dollars originating from foreign jurisdictions, through NYSEFCU and other entities.
The law enforcement agency said that, contrary to their representations of being trained and well-versed in AML practices, the defendants “willfully failed to implement and maintain the requisite AML programs or conduct oversight required to detect, identify, and report suspicious transactions.
“This caused, among other things, the NYSEFCU to process more than a billion dollars in high-risk transactions,” during the individuals’ relationship with the credit union, “without ever filing a single Suspicious Activity Report, as required by law,” the DOJ said.
NASCUS, in conjunction with CUNA, each year sponsors a BSA/AML Certification School, widely viewed as the premier event of its kind for credit unions in the subject area. The event is typically held in the fall; last year’s event, in the wake of the coronavirus crisis, was held as a virtual “e-school.” The annual program helps attendees boost their status as reliable, confident authorities on all things relevant to the Bank Secrecy Act (BSA). It also offers them an opportunity to earn or recertify their BSA Compliance Specialist (BSACS) designation.
(April 9, 2021) Feedback on implementation of new laws requiring certain business entities to submit their beneficial ownership information directly to the federal financial crimes enforcement agency is being sought by Treasury’s Financial Crimes Enforcement Network (FinCEN), the agency said this week.
In an advanced notice of proposed rulemaking (ANPR), the FinCEN said it is looking at several ways in which the submission, and use, of the information would work. Under the Corporate Transparency Act (CTA), enacted as part of last year’s National Defense Authorization Act (NDAA), the beneficial ownership information submitted to FinCEN may be disclosed to financial institutions (including credit unions) in their compliance with BSA/AML customer due diligence (CDD) requirements. “Beneficial owners” are those individual natural persons who ultimately own or control the reporting companies.
The ANPR points out that the disclosures are subject to appropriate protocols to protect confidentiality. However, it seeks comment on what information should be collected and how financial institutions can access the data. For example, it asks what information should be required from a reporting company about the company’s corporate affiliates, parents, and subsidiaries, particularly given that in some cases multiple companies can be layered on top of one another in complex ownership structures? As for financial institutions, it asks how can FinCEN make beneficial ownership information available to financial institutions with CDD obligations so as to make that information most useful to those financial institutions?
Comments are due by May 5.
ANPR: Beneficial Ownership Information Reporting Requirements
(April 9, 2021) Leadership at FinCEN changes Sunday as a new acting director takes office, following the effective date today of the resignation of the most recent director.
The Treasury Department said this week that Michael Mosier, current counselor to the deputy secretary of the Treasury and a former FinCEN deputy director, will return to the agency as acting director, effective Sunday (April 11). He will be taking over for Kenneth A. Blanco, current FinCEN director, who announced late last week that he is stepping down today.
Before joining Treasury last month as the deputy secretary’s counselor, Mosier served as FinCEN’s deputy director and first digital innovation officer, the agency said in a release. Other federal law enforcement positions include associate director at Treasury’s Office of Foreign Assets Control (OFAC), deputy chief in the Department of Justice’s (DOJ) money laundering and asset recovery section. He also served in the White House National Security Council as director for transnational organized crime.
Treasury also said that AnnaLou Tirol, former associate director of FinCEN’s Strategic Operations Division, is now serving as FinCEN deputy director. Tirol joined FinCEN in 2019 as associate director of the strategic operations division, which promotes FinCEN’s strategic partnerships with government and private industry stakeholders, both domestically and internationally.
LINK:
FinCEN Announces Acting Director and New Deputy Director
(Jan. 22, 2021) Suspicious activity reporting and other anti-money laundering (AML) requirements are subjects of new frequently asked questions (FAQs) issued by NCUA, federal banking regulators and the Treasury’s Financial Crimes Enforcement Network (FinCEN) this week.
The questions were developed, the agencies said, in response to recent Bank Secrecy Act Advisory Group (BSAAG) recommendations, as described in last September’s Advance Notice of Proposed Rulemaking on Anti-Money Laundering Program Effectiveness, published by FinCEN.
According to the agencies, the FAQs clarify the regulatory requirements related to suspicious activity reporting to assist credit unions and other financial institutions with their compliance obligations. The FAQs also enable financial institutions to focus resources on activities that produce the greatest value to law enforcement agencies and other government users of Bank Secrecy Act (BSA) reporting, the agencies said.
The FAQs also address questions about maintaining accounts at the request of law enforcement, suspicious activity report (SAR) filing and the receipt of grand jury subpoenas or other law enforcement inquiries, maintaining customer relationships following the filing of an SAR, SAR filing and monitoring on negative media alerts, data fields, the SAR narrative, and SAR character limits.
The agencies said the FAQs do not alter existing BSA/AML legal or regulatory requirements and they do not establish new supervisory expectations.
LINK:
NCUA, Federal Banking Agencies, FinCEN Issue FAQs on SAR and Other AML Requirements
(Jan. 8, 2021) Small Business Administration (SBA) and Treasury Department officials will provide an overview of the new Paycheck Protection Program (PPP) features associated with the recently passed Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act during a webinar Monday (Jan. 11), at 2 p.m. ET. Registration is now open; see the link below. The presentation — co-sponsored by NCUA and the federal banking agencies — is open to all SBA lenders who participated in the SBA PPP lending program … Credit unions and banks should be alert to COVID-19 vaccine-related scams and cyberattacks, FinCEN said last week. That includes fraud, ransomware attacks, or similar types of criminal activity related to COVID-19 vaccines and their distribution, Treasury’s financial crimes unit said. The agency also provided specific instructions for filing SARs regarding suspected fraud related to COVID-19 vaccines and their distribution.
Registration for SBA/Treasury Jan. 11 (2 p.m. ET) PPP webinar
FinCEN Asks Financial Institutions to Stay Alert to COVID-19 Vaccine-Related Scams and Cyberattacks
(Dec. 23, 2020) New requirements for certain transactions involving convertible virtual currency (CVD) or digital assets with legal tender (LTDA) status were proposed by the Treasury’s financial crimes arm today, which would require financial institutions to submit reports, keep records and verify customer identifies under certain circumstances.
The proposal is meant to curb the use of virtual currencies to move illicit funds.
The Treasury’s Financial Crimes Enforcement Network (FinCEN) said its proposal would affect transactions involving assets that are held in both “hosted” wallets (those held at a credit union or bank) as well as “unhosted” wallets (those that are not hosted by a third-party financial institution).
Under the proposal by FinCEN (which is taking comments until Jan. 4), credit unions and banks would be required to file a report to the agency with certain information related to a CVD or LTDA transaction and counterparty, and to verify the identity of their customer, if a counterparty to the transaction is using an unhosted or otherwise covered wallet and the transaction is greater than $10,000.
Financial institutions would also be required to keep records of a customer’s CVC or LTDA transaction and counterparty—including verifying the identity of their customer—if a counterparty is using an unhosted or otherwise covered wallet and the transaction is greater than $3,000.
The proposal does not, FinCEN said, modify the regulatory definition of “monetary instruments” or otherwise alter existing anti-money laundering regulatory requirements applicable to monetary instruments.
LINK:
Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets
(Dec. 4, 2020) NASCUS supports making some changes to recordkeeping and travel rule regulations under rules implementing the Bank Secrecy Act (BSA) to promote calibrating the value of anti-money laundering measures with operational, compliance and expense considerations of credit unions and other institutions, NASCUS wrote in a comment letter filed Nov. 27.
In a letter to the Federal Reserve Board, NASCUS responded to a joint request for comments from the Fed and the Financial Crimes Enforcement Network (FinCEN). When the comment request was issued Oct. 23, the two agencies said they were issuing the portion of the rule concerning recordkeeping jointly because of their shared authority; the portion on travel was issued singly by FinCEN as it has sole authority over that area.
Under current rules, financial institutions must collect, retain, and transmit certain information related to funds transfers and transmittals of funds greater than $3,000, the agencies stated. Under the proposal, the applicable threshold for international transactions would drop to $250; the threshold for domestic transactions would remain the same ($3,000).
NASCUS, in its letter, wrote that lowering the threshold for fund transmittals beginning or ending outside of the U.S. will come with a cost for credit unions and other financial institutions. “For some institutions, the increased data storage requirements of capturing and preserving required information could be a significant burden, particularly as credit unions manage the economic dislocation resulting from the ongoing pandemic,” NASCUS wrote.
The association stated that the agencies should also consider that while the lower threshold applies only to transactions beginning or ending outside of the United States, for many institutions the best practice is to set data collection policies to the “lowest requirement” to ensure consistent compliance. The agencies’s proposal, NASCUS wrote, “would result in the capture and retention of significant amounts of data even for those credit unions doing only infrequent international funds transmittals,” NASCUS wrote.
In other comments, NASCUS also:
- Wrote that it supports including a specific standard for “reason to know” in the rule to mitigate the potential for confusion and uncertainty as to the standard to be met. “We would also recommend clear guidance on the obligations of all financial institutions in the chain of a funds transmission with respect to identifying cross-border transactions and compliance with the final rules,” NASCUS wrote. Under the proposal, funds transfer or transmittal of funds would be considered to begin or end outside the U.S. if a financial institution knows or has reason to know that the transmittor, transmittor’s financial institution, recipient, or recipient’s financial institution is located in, is ordinarily resident in, or is organized under the laws of a jurisdiction other than the United States or a jurisdiction within the United States.
- Urged FinCEN to continue to evaluate the BSA framework to eliminate redundant monitoring, reporting or recordkeeping requirements. “Reducing compliance burden in ‘other’ areas of the BSA would allow credit unions to reallocate resources to those areas where enhanced diligence, or more granular reporting might be needed by law enforcement,” NASCUS wrote.
(Nov. 20, 2020) The state system made several recommendations for improving anti-money laundering (AML) effectiveness in a comment letter to federal law enforcement, responding to a call for comments issued in September.
That month, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking (ANPR) seeking views on how to establish an “effective and reasonably designed” anti-money laundering program by amending its rules. FinCEN stated then that the amendments under consideration “are intended to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs.”
Specifically, FinCEN said its proposed amendments would clarify that an “effective and reasonably designed” AML program would assess and manage risk according to the institution’s own risk assessment process; provide for compliance with BSA requirements; and provide for the reporting of information with a high degree of usefulness to government authorities.
In its comment letter filed this week, NASCUS told the agency that the state system:
- Supports efforts to better harmonize expectations among regulators and credit unions as to the sufficiency of AML efforts and a credit union’s overall AML program.
- Recommends an explicit requirement for a risk assessment be limited to conducting one upon which the AML program is based and documenting the risk assessment. “FinCEN should allow institutions to determine the needed frequency of updating the risk assessment as well as the methodology and format of the risk assessment,” NASCUS wrote.
- Encourages FinCEN to publish its AML priorities, but cautioned against requiring those priorities to be incorporated into the risk assessment.
- Understands from stakeholders that the currency transaction report (CTR) exemption process is too burdensome, and said NASCUS encourages FinCEN to explore ways to ease the process for credit unions to exempt qualifying credit union members from CTR filing obligations.
- Recommends that on-going suspicious activity report (SAR) filing requirements be extended from 90-days to a 180-day or even annual filing requirement. “Covered entities would still be required to monitor the accounts and include a transaction history in the extended refiling,” NASCUS wrote. In addition, the association stated, should the nature of the transactions change, or new information become available, an SAR could be filed ahead of the 180-day (or annual) re-filing deadline.
LINK:
NASCUS comment letter: ANPR, Anti-Money Laundering Program effectiveness