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Senate Testimony Highlights Tensions in BSA/AML Reform Efforts as Lawmakers Consider Bipartisan Legislation
Tuesday, December 4, 2018

Representatives of the Office of the Comptroller of the Currency (“OCC”), the Financial Crimes Enforcement Network (“FinCEN”), and the Federal Bureau of Investigation (“FBI”) testified on Thursday, November 29 before the Senate Committee on Banking, Housing, and Urban Affairs (“Banking Committee”) on anti-money laundering (“AML”) issues.

The testimony highlighted some tensions between the views of the different regulators, with the OCC appearing to be supportive of providing some regulatory relief to financial institutions, while FinCEN continues to see the value of the current requirements under the Bank Secrecy Act (“BSA”). Coming on the heels of reports that a bipartisan group of Senators are working on BSA reform legislation, the testimony revealed that FinCEN at least may prove reluctant to support some of the proposed reforms.

Possible BSA/AML Reform Legislation

As reported by the American Banker on November 29, a bipartisan group of senators is working on a potential BSA reform bill. While no bill text has been released, it is expected that it may include the following provisions:

  • Raising the threshold for filing currency transaction reports (“CTRs”) to $30,000. Current FinCEN regulations require such reports for currency transactions of more than $10,000.

  • Raising the threshold for filing suspicious activity reports (“SARs”) to $10,000. Current FinCEN regulations require such reports for suspicious transactions of $5,000 or more.

  • Creating a federal requirement for companies to disclose their beneficial owners at the time of incorporation.

A push for similar reforms in the House stalled earlier this year when Democrat Carolyn Maloney (D-NY) withdrew her support because the final bill did not include the beneficial ownership requirement.

This potential for a BSA reform bill appeared to animate much of the discussion at Thursday’s Banking Committee testimony.

Banking Committee Hearing

The witnesses at Thursday’s hearing were Kenneth Blanco, Director of FinCEN, Grovetta Gardineer, OCC Senior Deputy Comptroller for Compliance and Community Affairs, and Steven D’Antuono, Chief of the FBI’s Financial Crimes Section.

Committee Chair Mike Crapo (R-Idaho) began the hearing by emphasizing the bipartisan desire to reform the BSA framework in order “to encourage the innovation necessary to combat illicit financing while also encouraging regulators to focus on more tangible threats.” Ranking Member Sherrod Brown’s (D-Ohio) opening statement signaled opposition to raising the CTR and SAR thresholds, noting that this change would lead to the elimination of “around 80% of the data available to federal law enforcement.”

The OCC and FinCEN written testimony are summarized below.

OCC Testimony

Gardineer focused both on current OCC reform initiatives and legislative recommendations. First, Gardineer noted the following ongoing initiatives at the OCC:

  • Encouraging banks with lower risk profiles to collaborate on BSA compliance. We have previously discussed this topic in an Expert Analysis article at Law360 and in a blog post.

  • Exempting certain insurance related loans from customer identification program rules.

  • Revising the Federal Financial Examination Council’s (“FFIEC”) BSA/AML examination manual to “further define the FFIEC members’ application of their risk-based approach to supervision.”

  • Seeking opportunities to provide regulatory relief to OCC-supervised banks with respect to SAR and CTR filing requirements.

  • Encouraging banks to explore new technologies to improve BSA/AML compliance. (This topic was the subject of a joint statement from the OCC, FinCEN, the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, and the National Credit Union Administration on November 30.)

Gardineer also outlined certain legislative recommendations from the OCC. The overall theme of these recommendations was an aim to reduce compliance costs and unnecessary burdens of the BSA framework. Specific proposals include:

  • Requiring FinCEN (which has rulemaking authority for most of the BSA/AML regime) to conduct regular reviews of regulations.

  • Making a technical correction to a BSA safe harbor to clarify that banks may file a SAR without exposing themselves to civil litigation.

  • Expanding the information-sharing safe harbor of PATRIOT Act section 314(b).

FinCEN Testimony

In contrast to the OCC’s testimony, FinCEN Director Blanco did not make specific legislative recommendations. The most notable piece of his testimony was his pushback against the idea of raising reporting thresholds for SAR and CTR filings. Consistent with Senator Brown’s observations, Blanco stated that data analysis suggests that significantly raising the SAR/CTR reporting thresholds could result in a substantial loss of data available to FinCEN and other federal regulators. He also emphasized the value this data provides in combatting money laundering.

Additionally, Director Blanco highlighted that FinCEN is leading an inter-agency Bank Secrecy Act Advisory Group, including an innovation working group focused on new technologies. He also noted the FinCEN Exchange, a public-private partnership that brings FinCEN, banks, and law enforcement together to share information.

In sum, the Banking Committee hearing underscored that, while lawmakers and some regulators continue to work to provide relief from certain BSA obligations, the passage of significant BSA reform legislation remains uncertain.

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