Daily Rules, Proposed Rules, and Notices of the Federal Government
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The Currency and Foreign Transactions Reporting Act of 1970, as amended by the USA PATRIOT Act of 2001 and other legislation, which legislative framework is commonly referred to as the Bank Secrecy Act (“BSA”),
The BSA was amended by the Annunzio-Wylie Anti-Money Laundering Act of 1992 (Pub. L. 102-550) (“Annunzio-Wylie”). Annunzio-Wylie authorizes the Secretary and Board of Governors of the Federal Reserve System (the “Board”) to issue joint regulations requiring insured banks to maintain records of domestic funds transfers.
The Electronic Fund Transfer Act (“EFTA”)
On January 3, 1995, FinCEN and the Board jointly issued a rule that requires banks and nonbank financial institutions to collect and retain information on certain funds transfers and transmittals of funds (“recordkeeping rule”).
The recordkeeping and travel rules provide uniform recordkeeping and transmittal requirements for financial institutions and are intended to help law enforcement and regulatory authorities detect, investigate, and prosecute money laundering and other financial crimes by preserving an information trail about persons sending and receiving funds through the funds transfer system.
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. Under the recordkeeping rule, a financial institution must retain the following information for transmittals of funds of $3,000 or more:
• If acting as a transmittor's financial institution, either the original, microfilmed, copied, or electronic record of the information received, or the following information: (a) The name and address of the transmittor; (b) the amount of the transmittal order; (c) 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.
Banks are required to maintain analogous information for funds transfers of $3,000 or more, but the rule uses different terminology to describe the parties.
Under the travel rule, a financial institution acting as the transmittor's financial institution must obtain and include in the transmittal order the following information on transmittals of funds of $3,000 or more: (a) Name and, if the payment is ordered from an account, the account number of the transmittor; (b) the address of the transmittor; (c) the amount of the transmittal order; (d) the execution date of the transmittal order; (e) the identity of the recipient's financial institution; (f) as many of the following items as are received with the transmittal order: the name and address of the recipient, the account number of the recipient, and any other specific identifier of the recipient; and (g) either the name and address or the numerical identifier of the transmittor's financial institution. 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.
The recordkeeping rule and the travel rule apply to transmittals of funds and funds transfers. A “transmittal of funds” is defined as a series of transactions beginning with the transmittor's transmittal order, made for the purpose of making payment to the recipient of the order (31 CFR 1010.100(ddd)). The term includes any transmittal order issued by the transmittor's financial institution or an intermediary financial institution intended to carry out the transmittor's transmittal order. The term transmittal of funds includes a funds transfer. A “funds transfer” is a series of transactions beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order (31 CFR 1010.100(w)). Under the current definitions, transmittals of funds and funds transfers governed by the EFTA as well as any other funds transfers that are effected through an automated clearinghouse, an automated teller machine, or a point-of-sale system, are excluded from the definitions of “transmittal of funds” and “funds transfer” under the BSA.
When the recordkeeping and travel rules were adopted, the EFTA governed only electronic funds transfers as defined in section 903(a)(7) of that Act. The term “electronic fund transfer” includes any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape, for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account (including a payroll card account). The term includes, but is not limited to, (a) Point-of-sale transfers; (b) automated teller machine transfers; (c) direct deposits or withdrawals of funds; (d) transfers initiated by phone as part of a bill-payment plan, and (e) transfers resulting from debit card transactions, whether or not initiated through an electronic terminal. The term does not include certain transfers of funds, such as those originated by check, draft, or similar paper instrument; those issued as a means of guaranteeing the payment or authorizing the acceptance of a check, draft, or similar paper instrument; or those made in the context of a purchase or sale of certain securities or commodities.
Section 1073 of the Dodd-Frank Act, signed into law on July 21, 2010, adds a new Section 919 to the EFTA, creating new protections for consumers who send remittance transfers. Authority to implement the EFTA (except for the interchange fee provisions in EFTA section 920) transferred from the Board to the Consumer Financial Protection Bureau (“CFPB”) effective July 21, 2011. On February 7, 2012, CFPB adopted a final rule to implement Section 919, with an effective date of February 7, 2013.
Existing BSA regulations exclude certain types of transactions and payment systems that are used mostly for domestic retail transactions and payments from the definitions of funds transfer and transmittal of funds. This exclusion was implemented, not by listing the individual transaction types, but by referencing the law that protected the consumers engaged in such transactions (EFTA), and the specific payment systems through which such transactions are conducted (ATM, point-of-sale, and automated clearinghouse). This method of identifying excluded transactions created a link between two statutes (and their implementing regulations) with very different goals. The BSA requires financial institutions to keep records and file reports on transmittals of funds and funds transfers (which could be either domestic or international, consumer- or business-related, retail or wholesale, cash-based or account-based) that the Secretary and the Board determine 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.
However, the recent amendments to the EFTA and the recently finalized revisions to Regulation E, which are effective February 7, 2013, will result in an expanded scope of the transactions subject to the EFTA's remittance provisions. Some of these transactions have, to date, been covered by the regulations implementing the BSA. When the changes to Regulation E become effective, these transactions—which include international funds transfers sent by consumers through banks, and cash-based or account-based transmittals of funds sent by consumers through money transmitters—will fall outside the BSA rules' definitions of “funds transfer” and “transmittal of funds” (31 CFR 1010.100(w) and 1010.100(ddd)). To avoid this result, the Board and FinCEN are proposing to amend the definitions of funds transfer and transmittal of funds under the regulations implementing the BSA to limit the exclusion of EFTA-covered transactions from the recordkeeping and travel rules.
This NPRM proposes to revise the regulations implementing the BSA by narrowing the exclusion from definitions of “funds transfer” and “transmittal of funds.” The term “funds transfer” is defined in 31 CFR 1010.100(w). The term “transmittal of funds” is defined in 31 CFR 1010.100(ddd). Both definitions state that “funds transfers governed by the Electronic Fund Transfer Act of 1978 (Title XX, Pub. L. 95-630, 92 Stat. 3728, 15 U.S.C. 1693,
To preserve the current scope of transactions subject to the recordkeeping and travel rules, FinCEN and the Board propose to amend these definitions by revising the phrase “funds transfers governed by the Electronic Fund Transfer Act of 1978” to read “electronic fund transfers as defined in section 903(7) of the Electronic Fund Transfer Act.” These revisions would limit the exclusion in these definitions to electronic fund transfers as defined in the EFTA. Any remittance transfers that are covered by section 919 of the EFTA, but do not meet the definition of electronic fund transfer, would continue to be covered by the travel and recordkeeping rules.
The Board and FinCEN believe that the proposed amendments preserve the current scope of transactions subject to the funds recordkeeping and travel rules. Nonetheless, the Board and FinCEN request comment on whether the proposed amendments change the scope of the current EFTA exclusion from the funds recordkeeping and travel rules, and thus the scope of transactions subject to those rules.
FinCEN and the Board invite comment on any and all aspects of the proposal to amend the definitions of “funds transfer” and “transmittal of funds,” in order to maintain their current scope, in view of the modifications to the EFTA's coverage.
Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. It has been determined that this proposed rule is neither an economically significant regulatory action nor a significant regulatory action for purposes of Executive Orders 13563 and 12866.
Section 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), Public Law 104-4 (March 22, 1995), requires that an agency prepare a budgetary impact statement before promulgating a rule that may result in expenditure by the state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 202 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. Since there is no change to the requirements imposed under existing regulations, FinCEN has determined that it is not required to prepare a written statement under section 202.
The Regulatory Flexibility Act (5 U.S.C. 601
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601
The collection of information requirements have been reviewed and approved by the Office of Management and Budget (“OMB”) under section 3507 of the Paperwork Reduction Act of 1995 (“PRA”) (44 U.S.C. 3507(d). (OMB Control No. 1506-0058 (recordkeeping requirements for financial institutions under § 1010.410(e) and (f)) and 1506-0059 (recordkeeping requirements for banks under § 1020.410(a)). Under the PRA, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. This proposal intends to keep the same scope of transactions subject to the requirements of the recordkeeping and travel rules as currently are subject to these requirements. With no change to the types or scope of transactions covered under the regulations, there is no impact on the burden estimates already approved under the requirements of the PRA.
Authority delegations (Government agencies), Banks and banking, Currency, Investigations, Law enforcement, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, 31 CFR part 1010 is proposed to be amended as follows:
1. The authority citation for part 1010 continues to read as follows:
12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 5316-5332; title III, secs. 311, 312, 313, 314, 319, 326, 352, Pub. L. 107-56, 115 Stat. 307.
2. Section 1010.100 is amended by:
a. Revising the last sentence of paragraph (w), and
b. Revising the last sentence of paragraph (ddd) to read as follows: