More than $10,000 c. $5000 or more d. $3,000 or more, True or . 2013-28951 Filed 12-3-13; 8:45 am]. Significant alternatives to the proposed regulation. Electronic fund transfers as defined in section 903(7) of the Electronic Fund Transfer Act (15 U.S.C. For the reasons set forth in the preamble, Parts 1010 and 1020 of Chapter X of Title 31 of the Code of Federal Regulations are proposed to be amended as follows: 1. Verification of the identity of an individual who indicates that he or she is an alien or is not a resident of the United States may be made by passport, alien identification card, or other official document evidencing nationality or residence (e.g., a foreign driver's license with indication of home address). 30. The new estimated total burden hours for OMB control number 1506-0059 would be 4,408,942 hours. However, the PRA burden does not include certain costs, such as information technology implementation costs solely resulting from the need to comply with this proposed rule. MSBs may collect and retain information on transmittals of funds as a means of ensuring compliance with the requirement to report suspicious transactions. FFIEC BSA/AML Risks Associated with Money Laundering and Terrorist The final rule covers insured banks and certain nonbank financial institutions that are engaged in funds transfers and transmittals of funds. For funds transfers subject to the requirements of this paragraph (a), each agent, agency, branch, or office located within the United States of a bank is required to retain either the original or a copy or reproduction of each of the following: In concurrence: By the Department of the Treasury. Consequently these systems can present an attractive method to disguise the source of funds derived from illegal activity. 19. Under OMB control number 1506-0059, FinCEN estimates that the recordkeeping burden per recordkeeper to maintain records of funds transfers of $3,000 or more is 100 hours a year. This document has been published in the Federal Register. 1 For transmittals of funds effected through the Federal Reserve's Fedwire funds transfer system by a domestic broker or dealers in securities, only one of the items is required to be retained, if received with the transmittal order, until such time as the bank that sends the order to the Federal Reserve Bank completes its conversion to the expa. Bank Secrecy Act (BSA) rule [31 CFR 103.33(g)]often called the"Travel" rulerequires all financial institutions to pass on certain informationto the next financial institution, in certain funds transmittals involving morethan one financial institution. For the reasons set forth in the preamble, 31 CFR part 1010 is amended as follows: 1. (iii) For each transmittal order that it accepts as a recipient's financial institution, a financial institution shall retain either the original or a microfilm, other copy, or electronic record of the transmittal order. . First, FinCEN analyzed data derived from approximately 2,000 SARs filed by money transmitters between 2016 and 2019 related to potential terrorist financing-related transmittals of funds. Consistent with the FATF guidance, in May 2019, FinCEN issued guidance advising that CVC-based transfers effectuated by a nonbank financial institution may fall within the Recordkeeping and Travel Rules, on the grounds that such transfers involve the making of a transmittal order by the senderi.e., an instruction to pay a determinable amount of money to a recipienta criterion for application of the rules. Description of Recordkeepers: Financial institutions, including banks, that are the transmittor's financial institution or an intermediary financial institution in a transmittal of funds involving CVCs or digital assets with legal tender status. [59] About the Federal Register The cost of a major terrorist attack, such as the September 11 attacks, can reach tens of billions of dollars. Register documents. FinCEN believes the primary cost of complying with the proposed rule is captured in its Paperwork Reduction Act (44 U.S.C. The mean and median dollar-value of transmittals of funds mentioned in those SARs were approximately $509 and $255, respectively. Federal Register provide legal notice to the public and judicial notice ; see also 31 U.S.C. Information Required To Be Collected, Retained, and Transmitted Under the Recordkeeping and Travel Rules, II. (x) Futures commission merchant. Duplicative, Overlapping, or Conflicting Federal Rules, v. Significant Alternatives to the Proposed Regulations, i. 1829b and 1951-1959; 31 U.S.C. Mo. On April 30, 2013, CFPB finalized its remittance transfer rule with an effective date of October 28, 2013. [54] These amendments maintain the same scope of transactions subject to the requirements of the recordkeeping and travel rules as Start Printed Page 72817existed prior to this rulemaking. 12 U.S.C. A Proposed Rule by the Financial Crimes Enforcement Network on 10/27/2020. 5311-5314 and 5316-5332; Title III, sec. 51. This site displays a prototype of a Web 2.0 version of the daily Only official editions of the If acting as an intermediary financial institution, or a recipient financial institution, either the original, microfilmed, copied, or electronic record of the received transmittal order. Funds "Travel" Regulations: Questions & Answers | FinCEN.gov Clarification of the Meaning of Money in the Recordkeeping Rule and the Travel Rule, 4. Based on Call Report data as of December 31, 2012, approximately 3,660 insured depository institutions had total domestic assets of $175 million or less. MLARS's public comment included a Start Printed Page 68009synthesis of comments from agents and prosecutors at several federal law enforcement agencies who use this information, including the Federal Bureau of Investigation (FBI), the United States Drug Enforcement Administration (DEA), the Internal Revenue Service (IRS), the United States Secret Service (USSS), and U.S. Immigration and Customs Enforcement. Estimated transactions in Bitcoin alone were approximately $366 billion dollars in 2019 and $312 billion through in 2020 through August. Financial institutions are already required to retain the address of the transmittor and recipient under the Recordkeeping Rule for transactions subject to the current threshold, and may, as a matter of their own business practices, retain the addresses of other participants in a funds transfer or transmittal of funds. As noted in the 2006 ANPRM, subsequent to 1995, the responsibilities of financial institutions under the BSA have expanded. A financial institution acting as an intermediary financial institution must include in its respective transmittal order the same data points listed above, if received from the sender.[17]. FinCEN understands that banks, including credit unions, currently engage in very few, if any, funds transfers involving CVCs. 2. In accordance with requirements of the PRA and its implementing regulations, 5 CFR part 1320, the following information concerning the collections of information are presented to assist those persons wishing to comment on the information collections. Estimated Number of Recordkeepers: 11,072 financial institutions. For instance, one public report estimated the cost of terrorism globally at $33 billion in 2018, though this cost was primarily borne outside the United States. Recipients other than established customers. Annunzio-Wylie authorizes the Secretary and the Board to issue joint regulations requiring insured banks to maintain records of domestic funds transfers. Any amount b. The information that a recipient's financial institution must retain under paragraphs (e) (1) (iii) and (e) (3) of this section shall be retrievable by the recipient's financial institution by reference to the name of the recipient. For funds transfers and transmittals of funds at or above the applicable threshold, including with respect to transactions involving CVC or digital assets with legal tender status, the originator's bank or transmittor's financial institution also would be required to include information, including all information required under the Recordkeeping Rule, in a payment or transmittal order sent by the bank or nonbank financial institution to another bank or nonbank financial institution in the payment chain. Description of Recordkeepers: Banks that are the originator's bank, the intermediary bank, or the beneficiary's bank with respect to funds transfers involving CVC or digital assets with legal tender status. For instance, if the proposed rule reduced by 0.26 percent the annual probability of a major terrorist attack with an economic impact of $30 billion, the benefits would be greater than the PRA burden costs described above. Small entities affected by the final rule. [55] (1) The name and address of the recipient; (2) The account number of the recipient; and, (3) Any other specific identifier of the recipient; and. (eee) Transmittal order. In general, the recordkeeping rule requires financial institutions to retain information on transmittals of funds of $3,000 or more and requires banks to retain information on funds transfers of $3,000 or more. Under the Recordkeeping Rule, the originator's bank or transmittor's financial institution must collect and retain the following information: (a) Name and address of the originator or transmittor; (b) the amount of the payment or transmittal order; (c) the execution date of the payment or transmittal order; (d) any payment instructions received from the originator or transmittor with the payment or transmittal order; and (e) the identity of the beneficiary's bank or recipient's financial institution. requires an agency either to provide an initial regulatory flexibility analysis with a proposed rule or certify that the proposed rule will not have a significant impact on a substantial number of small entities. (c) A record of each advice, request, or instruction given to another financial institution or other person located within or without the United States, regarding a transaction intended to result in the transfer of funds, or of currency, other monetary instruments, checks, investment securities, or credit, of more than $10,000 to a person, account or place outside the United States. The proposed rule would therefore supersede the UCC's definition of money for purposes of the Recordkeeping and Travel Rules. 599. 7. should verify the contents of the documents against a final, official regulatory information on FederalRegister.gov with the objective of The following provisions apply to transmittals of funds effected through the Federal Reserve's Fedwire funds transfer system or otherwise by a financial institution before the bank that sends the order to the Federal Reserve Bank or otherwise completes its conversion to the expanded Fedwire message format. 307; sec. 7 at 2) (filed Nov. 10, 2016). Under OMB control number 1506-0058, FinCEN estimates that the recordkeeping burden per recordkeeper to maintain records of traditional transmittals of funds of Start Printed Page 68017$3,000 or more is 16 hours a year. 1:17CR-00144, Indictment 2 (E.D. The clarifications regarding the meaning of money in the definitions of payment order and transmittal order in 31 CFR 1010.100 address urgent concerns regarding illicit finance, including the financing of international terrorism, sanctions evasion, and weapons proliferation through CVC. FinCEN is aware that the CVC industry is working on developing systems and processes to achieve full compliance with the Travel Rule as applied to virtual currency transactions as a result of the distinctive characteristics of CVCs. . When the changes to Regulation E become effective, these transactions, which include international funds transfers sent by consumers through banks and cash- or account-based transmittals of funds sent by consumers through money transmitters, would fall outside the BSA rules' definitions of funds transfer and transmittal of funds (31 CFR 1010.100(w) and 1010.100(ddd)). No. FINRA Rule 3310 sets forth minimum standards for broker-dealers' AML compliance programs. 605(b)). Information available to the Agencies indicates that malign actors are using smaller-value cross-border wire transfers to facilitate or commit terrorist financing, narcotics trafficking, and other illicit activity, and that increased recordkeeping and reporting concerning these transactions would be valuable to Start Printed Page 68008law enforcement and national security authorities. Similarly, in 2006, many money transmitters indicated that they maintained records of transfers/transmittals at approximately the $1,000 level. The Board believes it is unlikely that the final rule will have a significant economic impact on a substantial number of small entities. Written comments on this proposed rule may be submitted on or before November 27, 2020. FinCEN considered several alternatives to the proposed rule. The types of transactions covered under the rule were expanded, some of which, have been covered under the Bank Secrecy Act (BSA). headings within the legal text of Federal Register documents. 1829b and 1953(a). Total Annual Burden Hours Estimate as a Result of This Proposed Rule, https://www.federalregister.gov/d/2020-23756, MODS: Government Publishing Office metadata, http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm, Chapter X of Title 31 of the Code of Federal Regulations, https://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/National%20Terrorist%20Financing%20Risk%20Assessment%20-%2006-12-2015.pdf, https://www.justice.gov/usao-sdoh/pr/columbus-man-sentenced-80-months-prison-attempting-provide-material-support-isis;, https://www.blockchain.com/charts/estimated-transaction-volume-usd, https://home.treasury.gov/news/press-releases/sm687;, https://www.justice.gov/opa/pr/two-chinese-nationals-charged-laundering-over-100-million-cryptocurrency-exchange-hack, http://www.sec.gov/investor/alerts/ia_virtualcurrencies.pdf, https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/watch_out_for_digital_fraud.html, https://home.treasury.gov/news/press-releases/sm687, https://www.fincen.gov/sites/default/files/advisory/2019-05-03/Venezuela%20Advisory%20FINAL%20508.pdf, http://visionofhumanity.org/app/uploads/2019/11/GTI-2019web.pdf, https://comptroller.nyc.gov/wp-content/uploads/documents/impact-9-11-year-later.pdf. 10. If you are using public inspection listings for legal research, you Total Burden Resulting From Inclusion of CVC Transactions in the Recordkeeping and Travel Rules, iii. At the same Start Printed Page 72814time, FinCEN issued the travel rule, which requires banks and nonbank financial institutions to include certain information on funds transfers and transmittals of funds sent to other banks or nonbank financial institutions.[11]. As described above, the proposed amendments to the Recordkeeping Rule and Travel Rule involve a national security function. Interpretive Note to FATF Recommendation 15 at 70. The Board and FinCEN (collectively, the Agencies) are issuing this proposed rule to modify the threshold in the rule implementing the Start Printed Page 68006Bank Secrecy Act (BSA) requiring financial institutions to collect and retain information on certain funds transfers and transmittals of funds. With respect to the effect of lowering the threshold for the requirement in 31 CFR 1020.410 and 31 CFR 1010.410(e) and (f) to collect, retain, and transmit information on funds transfers and transmittals of funds that begin or end outside the United States, the Agencies in particular request comment on the following questions from financial institutions and members of the public: (1) To what extent would the proposed rule impose a burden on financial institutions, including with respect to information technology implementation costs? Accordingly, the Agencies believe that mandating the collection, retention, and transmission of information for funds transfers and transmittals of funds of at least $250 that originate or terminate outside the United States would likely lead to the preservation of information that would benefit law enforcement and national security investigations. Because of the large volume of CVC transactions, FinCEN estimates that the 530 MSBs will process five times the volume of transmittals of funds involving CVC in comparison to the number of non-CVC transactions that will be conducted by MSBs as a result of the change in the threshold. Learn more here. For that reason, FinCEN estimates that the proposed rule would add an additional 240 hours of burden per recordkeeper a year (five multiplied by the new baseline of 48 hours), although this is a conservative estimate because the recordkeeping is likely less costly for transactions involving CVCs since it is likely to be electronic and possible to automate. edition of the Federal Register. Again, based on comments received, FinCEN will consider in a final rule the extent to which the benefits of extending the scope of the changes to the thresholds of the Recordkeeping Rule and Travel Rule to include domestic transactions would exceed the burdens. Five commenters requested that the Board and FinCEN clearly state in the Final Rule that the proposed amendment does not change the current scope of the obligations of financial institutions under the recordkeeping and travel rules. Estimated Average Annual Burden Hours per Recordkeeper: The estimated average burden hours will vary depending on the number of transmittals of funds conducted by a nonbank financial institution engaged in CVC transactions. 16. 43. However, even if the proposed rule produced very small reductions in the probability of a major terrorist attack, the benefits would exceed the costs. PDF Funds Transfers Recordkeeping Overview Description of Recordkeepers: Financial institutions, including banks and credit unions, that are the transmitting or intermediary financial institution in a transmittal of funds in an amount between $250 and $3,000 that begin or end outside the United States. New Inflation Reduction Act Provisions Allow State, Local, and Tribal Governments, Non-profits, U.S. The proposed modification would . 31 U.S.C. While every effort has been made to ensure that (iii) The instruction is transmitted by the sender directly to the receiving financial institution or to an agent or communication system for transmittal to the receiving financial institution. Since 2006 there have been significant advances in technology, likely allowing small entities to comply with regulatory recordkeeping requirements at a lower cost. The FATF further states that countries may adopt a de minimis threshold of no higher than USD/EUR 1,000 for cross-border wire transfers, below which the name and account numbers of the originator and beneficiary should be collected and transmitted but need not be verified for accuracy unless there is a suspicion of money laundering or terrorist financing. The Agencies believe this action is appropriate to provide clarity concerning the application of the Recordkeeping and Travel Rules. This proposed rule would explicitly include within the requirement to transmit information on funds transfers and transmittals of funds conducted by financial institutions acting as the transmittor's financial institution or an intermediary financial institution, funds transfers and transmittals of funds transactions involving (1) CVC, or (2) any digital asset having legal tender status. Pursuant to this authority, FinCEN may require financial institutions to keep records and file reports that the Director determines have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in intelligence or counterintelligence matters to protect against international terrorism.[2]. The following two sections lay out, respectively, (A) the potential benefits to national security and law enforcement from reducing the Recordkeeping Rule and Travel Rule thresholds for funds transfers and transmittals of funds that begin or end outside the United States, and (B) the potential effect these new requirements would have on the cost and efficiency of the payments system. 32. 49. In proposing to lower the current threshold under the Recordkeeping and Travel Rules, the Agencies have specifically considered Suspicious Activity Reports (SARs) filed by money transmitters, which indicate that a substantial volume of potentially illicit funds transfers and transmittals of funds occur below the $3,000 threshold; evidence used in recent criminal prosecutions; and the views of law enforcement partners and the Financial Action Task Force (FATF)[14] 50. 4. Below is a basic illustration of a funds transfer. By order of the Board of Governors of the Federal Reserve System, November 13, 2013. What would be the Start Printed Page 68012impact on the burden if the proposed threshold change were extended to all transactions, including domestic transactions? . added a new section 919 to the EFTA, creating a comprehensive new system of consumer protections for remittance transfers sent by consumers in the United States to individuals and businesses in foreign countries. L. 114-74, 129 Stat. Will Financial Institutions be Ready for the Proposed Travel Rule The United States includes the States of the United States, the District of Columbia, the Indian lands (as that term is defined in the Indian Gaming Regulatory Act), and the Territories and Insular Possessions of the United States. publication in the future. The proposed changes to the Recordkeeping Rule and Travel Rule would apply to all financial institutions regulated under the BSA. 2 For transmittals of funds effected through the Federal Reserve's Fedwire funds transfer system by a financial institution, only one of the items is required to be included in the transmittal order, if received with the sender's transmittal order, until such time as the bank that sends the order to the Federal Reserve Bank completes its conversion to the expanded Fedwire message format. Authority delegations (Government agencies). Some of these transactions have, to date, been covered by the regulations implementing the BSA. The BSA is codified at 12 U.S.C. The proposed modification would reduce this threshold from $3,000 to $250 for funds transfers and transmittals of funds that begin or end outside the United States. This proposed rule would amend both the Recordkeeping Rule and the Travel Rule. For that reason, FinCEN estimates that the proposed rule would add an additional 24 hours of burden per recordkeeper a year. Interpretive Note to FATF Recommendation 15. It has been determined that this final rule is neither an economically significant regulatory action nor a significant regulatory action for purposes of Executive Orders 12866 and13563. Since FinCEN has authority to implement the Recordkeeping Rule and Travel Rule with respect to all respondents, FinCEN will be responsible for the entire paperwork burden associated with this information collection. More information and documentation can be found in our The regulatory definitions of money and convertible virtual currency that this rulemaking proposes to add to the definitions of payment order and transmittal order at 31 CFR 1010.100(ll) and (eee) are specific to those provisions and not intended to have any impact on, inter alia, the definition of currency in 31 CFR 1010.100(m).