The Financial Crimes Enforcement Network (“FinCEN”) has recently taken two steps in furtherance of the Trump Administration’s deregulatory agenda. In late September, FinCEN posted a notice to the Federal Register soliciting comments on a proposed “Survey of the Costs of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Compliance” to be completed by non-bank financial institutions (“NBFIs”). On October 9, FinCEN published a series of frequently asked questions (“FAQs”) aimed at clarifying the requirements around filing suspicious activity reports (“SARs”). Both actions point to an effort to ease compliance costs and align compliance efforts with law enforcement priorities.
The proposed survey seeks to collect information on the costs NBFIs incur on Bank Secrecy Act (“BSA”) compliance and what aspects of compliance are the most resource intensive. The survey specifically calls out costs associated with SARs. The survey also invites respondents to comment on areas where compliance activities have produced limited useful information.
The FAQs were produced jointly with the Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”), and the Office of the Comptroller of the Currency (“OCC”), and have the stated goal of “enabling institutions to focus resources on activities that produce the greatest value to law enforcement agencies and other authorized government users of [BSA] reporting.” As with any set of FAQs, they do not alter existing BSA laws or regulations.
The FAQs address a series of topics and, in part, diverge from guidance from the Federal Financial Institutions Examination Council (“FFIEC”). The FAQs clarify that absent additional information, the mere fact of transactions at or near the $10,000 CTR threshold does not require a SAR. Another FAQ addresses SARs related to continuing activity. Finally, the FAQs state that financial institutions may, but are not required, to document the decision to not file a SAR. This final FAQ diverges from FFIEC guidance, which states that “investigators should document conclusions including any recommendation regarding whether or not to file a SAR,” and similarly, “[b]anks should document SAR decisions, including the specific reason for filing or not filing a SAR.” Given that there is a safe harbor for filing but potential liability for not filing, it may remain a best practice to document the decision not to file a SAR when clearing an unusual activity alert.
It remains to be seen the impact the Trump Administration’s deregulatory efforts will have on BSA compliance costs, which have largely been left to financial institutions to budget and deploy in a manner intended to mitigate self-assessed risks. But these actions suggest that FinCEN is taking a serious look at the compliance burden on organizations in relation to the law enforcement benefit those efforts generate. While the above-described efforts will likely not have a substantial impact on the behavior of regulated parties, organizations should be aware that change is afoot and be prepared to adjust compliance strategies as the regulatory environment evolves.