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How to adopt FinCEN’s proposed recordkeeping, travel rules

Jul 04, 2021

Are you ready for FinCEN’s proposal to amend the recordkeeping and travel rules under the Bank Secrecy Act? 

On October 27, 2020, in the midst of all the COVID-19 chaos, FinCEN and the Board of Governors of the Federal Reserve System issued a joint advance notice of proposed rulemaking (ANPRM) to lower the thresholds under the Recordkeeping Rule and the Travel Rule from $3,000 for funds transfers and transmittals of funds that begin or end outside the United States down to $250. Written comments on the proposed change were due on November 27, 2020.

While the proposed changes are undoubtedly intended to help law enforcement identify and address financial crimes, there is also a potential compliance burden for financial institutions that process international transfers.

Here are proposed changes and what you can do now to ensure a successful transition to any new requirements.

The current rule

On January 3, 1995, the agencies jointly issued the recordkeeping rule, which requires banks and nonbank financial institutions (NBFIs) to collect and retain information related to funds transfers and transmittals of funds in amounts of $3,000 or more. At the same time, FinCEN issued a separate rule, the travel rule, which requires banks and NBFIs to transmit information on certain funds transfers and transmittals of funds to other banks or NBFIs participating in the transfer or transmittal. The Travel Rule and the Recordkeeping Rule complement each other: The recordkeeping rule requires banks to collect and retain the information that, under the Travel Rule, must be included with transmittal orders.

The proposed rule

The proposed modification would reduce the recordkeeping threshold from $3,000 to $250 for funds transfers and transmittals of funds that begin or end outside the United States. A funds transfer or transmittal of funds would be considered to begin or end outside the United States if the bank or NBFI knows or has reason to know that the originator, originator’s financial institution, beneficiary or beneficiary’s financial institution is located in, is ordinarily resident in or is organized under the laws of a jurisdiction other than the United States. The rule would remain unchanged for domestic funds transfers.

The agencies are also proposing to expand the definition of money to include convertible virtual currency (CVC). Currently, the recordkeeping rule does not define the term money but references the definition set forth in the Uniform Commercial Code (UCC). The UCC defines money as “a medium of exchange currently authorized or adopted by a domestic or foreign government.” While this change may or may not affect your organization, it is something to keep in mind if you are already offering or are considering offering services related to virtual currency.

Potential impact and preparation

The agencies have stated that the burden of lowering the $3,000 threshold on financial institutions is low, stating some financial institutions are already collecting information on at least some of the information on some of those transactions already.

However, there are a few things you and your team can start thinking about to better position yourselves for any changes that may come down the road:

  • Consider what procedures will be needed to capture funds transfers and transmittals of funds at $250 or more that begin or end outside the United States, keeping in mind how you will determine whether a transaction is, in fact, cross-border in nature. If you use an automated surveillance monitoring system, consider what reporting capabilities are already available to help capture this information.
  • In light of new processes and procedures, plan for how employees tasked with capturing and retaining the information required under the Recordkeeping and Travel Rules receive updated training on the proposed changes.
  • Ensure sufficient resources, such as appropriate staffing levels, are available for the compliance department and BSA officer to implement the new rules.
  • Consider the changes to internal controls and quality review processes that are necessary to be in line with the new regulatory guidance and best practices.

How Wipfli can help

Taking the time now to review the full ANPRM and working to get ahead of the curve will ensure successful implementation of procedures that are compliant with the new rules. Our team knows how to help you navigate FinCEN rules while saying in compliance. To learn more, visit our web page or learn more from our team with these resources:

Author(s)

Adam B. Baker, CFSA, CAMS
Manager
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