[Federal Register Volume 62, Number 98 (Wednesday, May 21, 1997)]
[Proposed Rules]
[Pages 27900-27909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13303]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA20
Financial Crimes Enforcement Network; Proposed Amendment to the
Bank Secrecy Act Regulations--Requirement of Money Transmitters and
Money Order and Traveler's Check Issuers, Sellers, and Redeemers To
Report Suspicious Transactions
AGENCY: Financial Crimes Enforcement Network, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN'') is
proposing to amend the Bank Secrecy Act regulations to require money
transmitters, and issuers, sellers, and redeemers, of money orders and
traveler's checks, to report suspicious transactions involving at least
$500 in funds or other assets. The proposal is a further step in the
creation of a comprehensive system (to which banks are already subject)
for the reporting of suspicious transactions by financial institutions.
Such a system is a core component of the counter-money laundering
strategy of the Department of the Treasury.
DATES: Written comments on all aspects of the proposal are welcome and
must be received on or before August 19, 1997.
ADDRESSES: Written comments should be submitted to: Office of Legal
Counsel, Financial Crimes Enforcement Network, Department of the
Treasury, 2070 Chain Bridge Road, Vienna, Virginia 22182, Attention:
NPRM--Suspicious Transaction Reporting--Money Services Businesses.
Comments also may be submitted by electronic mail to the following
Internet address: ``[email protected]'' with the caption, in
the body of the text, ``Attention: NPRM--Suspicious Transaction
Reporting--Money Services Businesses.'' For additional instructions on
the submission of comments, see SUPPLEMENTARY INFORMATION under the
heading ``Submission of Comments.''
Inspection of comments. Comments may be inspected at the Department
of the Treasury between 10:00 a.m. and 4:00 p.m., in the FinCEN reading
room, on the third floor of the Treasury Annex, 1500 Pennsylvania
Avenue, NW., Washington, DC 20220. Persons wishing to inspect the
comments submitted should request an appointment by telephoning (202)
622-0400.
FOR FURTHER INFORMATION CONTACT: Peter Djinis, Associate Director, and
Charles Klingman, Financial Institutions Policy Specialist, FinCEN, at
(703) 905-3920; Stephen R. Kroll, Legal Counsel, Joseph M. Myers,
Deputy Legal Counsel, Albert R. Zarate, Attorney-Advisor, Cynthia L.
Clark, detailed to the Office of Legal Counsel of FinCEN, and Eileen P.
Dolan, Legal Assistant, Office of Legal Counsel, FinCEN, at (703) 905-
3590.
SUPPLEMENTARY INFORMATION:
I. Introduction
This document proposes to add a new section 103.20 to 31 CFR part
103, to require (i) money transmitters, (ii) issuers, sellers, and
redeemers of money orders, and (iii) issuers, sellers, and redeemers of
traveler's checks, to report to the Department of the Treasury any
suspicious transaction relevant to a possible violation of law or
regulation. The proposal would extend to these ``money services
businesses,'' which are part of the universe of financial institutions
subject to the Bank Secrecy Act, the suspicious transaction reporting
regime to which the nation's banks,
[[Page 27901]]
thrift institutions, and credit unions have been subject since April 1,
1996.1
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\1\ The suspicious transaction reporting rules for banks are
found at 31 CFR 103.21 (which this notice of proposed rulemaking
proposes to renumber as 31 CFR 103.18). The term bank, for purposes
of the Bank Secrecy Act regulations, includes all depository
institutions. See 31 CFR 103.11(c).
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II. Background
A. Statutory Provisions
The Bank Secrecy Act, Public Law 91-508, as amended, codified at 12
U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330, authorizes
the Secretary of the Treasury, inter alia, to issue regulations
requiring financial institutions to keep records and file reports that
are determined to have a high degree of usefulness in criminal, tax,
and regulatory matters, and to implement counter-money laundering
programs and compliance procedures. Regulations implementing Title II
of the Bank Secrecy Act (codified at 31 U.S.C. 5311-5330), appear at 31
CFR part 103. The authority of the Secretary to administer the Bank
Secrecy Act has been delegated to the Director of FinCEN.
The authority to require reporting of suspicious transactions is
contained in 31 U.S.C. 5318(g). That subsection was added to the Bank
Secrecy Act by section 1517 of the Annunzio-Wylie Anti-Money Laundering
Act (the ``Annunzio-Wylie Anti-Money Laundering Act''), Title XV of the
Housing and Community Development Act of 1992, Public Law 102-550; it
was expanded by section 403 of the Money Laundering Suppression Act of
1994 (the ``Money Laundering Suppression Act''), Title IV of the Riegle
Community Development and Regulatory Improvement Act of 1994, Public
Law 103-325, to require designation of a single government recipient
for reports of suspicious transactions.
The provisions of 31 U.S.C. 5318(g) deal with the reporting of
suspicious transactions by financial institutions subject to the Bank
Secrecy Act and the protection from liability to customers of persons
who make such reports. Subsection (g)(1) states generally:
The Secretary may require any financial institution, and any
director, officer, employee, or agent of any financial institution,
to report any suspicious transaction relevant to a possible
violation of law or regulation.
Subsection (g)(2) provides further:
A financial institution, and a director, officer, employee, or
agent of any financial institution, who voluntarily reports a
suspicious transaction, or that reports a suspicious transaction
pursuant to this section or any other authority, may not notify any
person involved in the transaction that the transaction has been
reported.
Subsection (g)(3) provides that neither a financial institution,
nor any director, officer, employee, or agent
that makes a disclosure of any possible violation of law or
regulation or a disclosure pursuant to this subsection or any other
authority * * * shall * * * be liable to any person under any law or
regulation of the United States or any constitution, law, or
regulation of any State or political subdivision thereof, for such
disclosure or for any failure to notify the person involved in the
transaction or any other person of such disclosure.
Finally, subsection (g)(4) requires the Secretary of the Treasury,
``to the extent practicable and appropriate,'' to designate ``a single
officer or agency of the United States to whom such reports shall be
made.'' 2 The designated agency is in turn responsible for
referring any report of a suspicious transaction to ``any appropriate
law enforcement or supervisory agency.'' Id., at subsection (g)(4)(B).
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\2\ This designation is not to preclude the authority of
supervisory agencies to require financial institutions to submit
other reports to the same agency or another agency ``pursuant to any
other applicable provision of law.'' 31 U.S.C. 5318(g)(4)(C).
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B. Importance of Suspicious Transaction Reporting in the Treasury's
Counter-Money Laundering Program
The Congressional mandate to require reporting of suspicious
transactions recognizes two basic points that are central to Treasury's
counter-money laundering and anti-financial crime programs. First, it
is to financial institutions that money launderers must go, either
initially or eventually. Second, the officials of those institutions
are more likely than government officials to have a sense as to which
transactions appear to lack commercial justification or otherwise
cannot be explained as falling within the usual methods of legitimate
commerce. Moreover, because money laundering transactions are designed
to appear legitimate in order to avoid detection, the creation of a
meaningful system for detection and prevention of money laundering is
impossible without the cooperation of financial institutions. Indeed,
many non-banks have come increasingly to recognize the increased
pressure that money launderers have come to place upon their operations
and the need for innovative programs of training and monitoring
necessary to counter that pressure.
The reporting of suspicious transactions is also a key to the
emerging international consensus on the prevention of money laundering.
One of the central recommendations of the Financial Action Task Force--
recently updated and reissued--is that:
If financial institutions suspect that funds stem from a
criminal activity, they should be required to report promptly their
suspicions to the competent authorities.
Financial Action Task Force Annual Report (June 28,
1996),3 Annex 1 (Recommendation 15). The recommendation,
which applies equally to money services businesses as to banks, revises
the original recommendation, issued in 1990, that required institutions
to be either ``permitted or required'' to make such reports. (Emphasis
supplied.) The revised recommendation makes clear the international
consensus that a mandatory suspicious transaction reporting system is
essential to an effective counter-money laundering program.
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\3\ The FATF is an inter-governmental body whose purpose is
development and promotion of policies to combat money laundering.
Originally created by the G-7 nations, its membership now includes
Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan,
Luxembourg, the Kingdom of the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, the United
Kingdom, and the United States, as well as the European Commission
and the Gulf Cooperation Council.
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Similarly, the European Community's Directive on prevention of the
use of the financial system for the purpose of money laundering calls
for member states to
ensure that credit and financial institutions and their directors
and employees cooperate fully with the authorities responsible for
combating money laundering * * * by [in part] informing those
authorities, on their own initiative, of any fact which might be an
indication of money laundering.
EC Directive, O.J. Eur. Comm. (No. L 166) 77 (1991), Article 6.
Accord, the Model Regulations Concerning Laundering Offenses Connected
to Illicit Drug Trafficking and Related Offenses of the Organization of
American States, OEA/Ser. P. AG/Doc. 2916/92 rev. 1 (May 23, 1992),
Article 13, section 2.4 All of these documents recognize the
importance of extending the counter-money laundering controls to ``non-
traditional'' financial institutions, not simply to banks, both to
ensure fair competition in the marketplace and to
[[Page 27902]]
recognize that non-banks as well as depository institutions are an
attractive mechanism for, and are threatened by, money launderers. See,
e.g., Financial Action Task Force Annual Report, supra, Annex 1
(Recommendation 8).
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\4\ The OAS reporting requirement is linked to the provision of
the Model Regulations that institutions ``shall pay special
attention to all complex, unusual or large transactions, whether
completed or not, and to all unusual patterns of transactions, and
to insignificant but periodic transactions, which have no apparent
economic or lawful purpose.'' OAS Model Regulation, Article 13,
section 1.
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C. Suspicious Transaction Reporting by Money Services Businesses
This notice of proposed rulemaking, the second of the notices of
proposed rulemaking being published in this separate part of the
Federal Register dealing with application of the Bank Secrecy Act to
money services businesses, would generally require money transmitters,
businesses issuing, selling, or redeeming money orders, and businesses
issuing, selling, or redeeming traveler's checks, to report suspicious
transactions to the Department of the Treasury.5 Money
services businesses have not in the past been the subject of the same
concentrated attention as banks in the administration of the Bank
Secrecy Act.6 The Annunzio-Wylie Anti-Money Laundering and
Money Laundering Suppression Acts were crafted by the Congress in
significant part to give the Treasury flexible tools to deal with non-
bank institutions, and today's notices of proposed rulemaking represent
an attempt by the Department of the Treasury to design Bank Secrecy Act
rules that address the problems encountered by law enforcement agents,
regulators, and money services businesses themselves, in fighting money
laundering in this part of the financial sector. The notice and its
timing reflect both the general course of Treasury's counter-money
laundering program and specific developments that indicate the need for
immediate extension of updated and appropriately-tailored Bank Secrecy
Act rules to money services businesses, especially to money
transmitters, but also to money order and traveler's check
services.7
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\5\ Readers of the discussion that follows may wish to refer to
the Notice of Proposed Rulemaking entitled ``Amendment to the Bank
Secrecy Act Regulations--Definition and Registration of Money
Services Businesses,'' for a general description of money services
businesses in the United States.
\6\ The placement of illegally-derived currency into the
financial system and the smuggling of such currency out of the
country remain two of the most serious issues facing financial law
enforcement efforts in the United States and around the world. But
banks, in cooperation with law enforcement agencies and federal and
state banking regulators, have responded in many positive ways to
the challenges posed by money laundering. It is now far more
difficult than in the past to pass large amounts of cash directly
into the nation's banks unnoticed and far easier to identify and
isolate those banks and officials still willing to assist or ignore
money launderers.
\7\ The Congress has long-recognized the need generally to
address problems of abuse by money launderers of ``non-bank''
financial institutions. See, e.g., Permanent Subcommittee on
Investigations, Senate Comm. on Governmental Affairs, Current Trends
in Money Laundering, S. Rep. No. 123, 102d Cong., 2d Sess. (1992).
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It should be emphasized at the outset that, as in the case of the
nation's banks and securities firms, most money service business
operators and agents are completely law-abiding and as interested in
cost-effective financial law enforcement as the Treasury itself.
Money Transmitters. Since last August, a large group of money
transmitters (now 23 licensed transmitters and their approximately
3,200 agents) in the New York Metropolitan Area have been the subject
of a Geographic Targeting Order (the ``Order''), issued pursuant to 31
U.S.C. 5326 and 31 CFR 103.26, that is directed at the remission of
funds to Colombia.8 The original 60-day period of the Order
has been extended several times under the statutory rules, and the
Order is at present set to expire on June 2, 1997. The Order, first
directed against 12 money transmitters and 1,600 agents, was expanded
in October 1996 and again in April 1997.
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\8\ The Order was issued by Raymond W. Kelly, Under Secretary
(Enforcement) of the Department of the Treasury, in response to an
application from the United States Attorneys for the Eastern
District of New York, the Southern District of New York, and the
District of New Jersey, and senior officials of the Customs Service
and the Internal Revenue Service. (The statute allows such orders to
be issued either upon such a request, from an appropriate law
enforcement authority, or by the Treasury upon its own initiative.)
Issuance of an Order requires a finding, amply documented in this
case, that there is reason to believe that special reporting or
record keeping requirements are necessary to carry out the purposes,
or prevent evasions, of the Bank Secrecy Act.
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The Order requires daily reporting by agents of the 23 money
transmitters, and weekly reporting by their principals (i.e., state-
licensed money transmission companies), of information about the
senders and recipients of all money remittances of $750 or more to
Colombia paid for with currency or bearer monetary instruments, as well
as the reporting of any transactions or patterns of transactions that
appear suspicious. Special verification of identity rules for such
transactions are also imposed by the Order.
The Order was issued against a backdrop of several years of
intensive investigative work conducted by the Customs and Internal
Revenue Service-led El Dorado Task Force, which had uncovered
widespread laundering of narcotics funds within segments of the money
transmitter industry in New York. El Dorado agents have been able
repeatedly to show the complicity of money remitter agents in the
simple scheme of structuring of large cash transactions to evade the
existing Bank Secrecy Act reporting and recordkeeping obligations
applicable to such transactions, using, for example, false invoices and
fabricated identities of senders and recipients.9 One major
licensed money transmitter had itself pled guilty to money laundering
charges,10 and investigations of several other transmitters
and their agents were underway.11
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\9\ Over the years preceding the issuance of the Order, El
Dorado's ``Operation Wire Drill'' investigations led to the
conviction of 97 persons and the seizure and forfeiture of over $10
million associated with money laundering through the licensed money
transmitters.
\10\ United States v. Vigo Remittance Corp., No. 96-575 (J.S.)
(E.D.N.Y.) (July 24, 1996) (entry of plea). It is fair to note that
since its guilty plea, Vigo has sought to strengthen its Bank
Secrecy Act compliance measures significantly.
\11\ See, e.g., United States v. Remesas America Oriental, Inc.,
No. S1 96 Cr. 919 (TPG) (S.D.N.Y.).
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But a number of other factors also supported the Order's issuance.
Perhaps most strikingly, the New York area money transmitters' business
volume to Colombia was strikingly out of harmony with legitimate
demographic expectations: New York State Banking Department figures
indicated that the 12 originally targeted transmitters had been sending
approximately $1.2 billion annually to South America; about two thirds
of this amount, or approximately $800 million, went to Colombia. To
account for this figure, each of the approximately 25,500 Colombian
households in the New York area (earning an average gross annual income
of $27,000) would have had to send approximately $30,000 per year
through money transmitters to Colombia.
The Order almost immediately caused dramatic changes in the volume
and character of money transmissions, indicating a major reduction in
the amount of illicit funds moving through New York money
transmitters.12 Analysis of data generated by the Order is
ongoing, but the targeted money transmitters' business volume to
Colombia appears to have dropped approximately 30 percent. (Three of
the money transmitters subject to the Order have simply stopped sending
any funds to Colombia.) Most of the money that would in the past have
been placed abroad through the use of money transmission services
appears to have been physically removed from the New York Metropolitan
area, either for transfer through money transmitters operating in other
American cities, or for bulk smuggling out of the United States. The
change demonstrates
[[Page 27903]]
graphically both that narcotics money launderers have been extensively
abusing a segment of the relatively unsupervised money transmitter
industry, and that the underground market does respond to regulatory
and enforcement pressures.
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\12\ One money transmitter surrendered its license to the New
York State Banking Department upon being served with the Order.
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Ancillary results of the Order have also been significant. The
Treasury has observed a dramatic increase in Customs Service
interdiction and seizure activity at air and seaports, on common
carriers, and on highways--over $36 million during the first six months
of the Order's operation, a figure approximately four times higher than
for comparable periods in prior years.
Despite the Order, it is clear that a not insubstantial number of
money transmitter agents have been willing to structure transactions
beneath the Order's $750 reporting threshold, in an attempt to move
narcotics-tainted funds abroad even during a period of known
surveillance of the industry and its agents. (At the same time, at
least one money transmitter has itself worked with federal authorities
during this period to identify suspicious transactions, even those
involving its own agents.) The number of transactions in amounts below
$750 has risen sharply, and the amount of funds transferred to Colombia
in such increments appears to have almost doubled. The El Dorado Task
Force has already executed search warrants on 22 money transmitter
agents suspected of intentionally structuring transactions in violation
of the Order; all but five businesses served have closed, five people
have been indicted, and four people have already pleaded guilty. Three
additional arrest warrants are outstanding. The Task Force is
continuing to pursue investigations of this type, and the Treasury will
consider imposing civil penalties against violators who are not pursued
criminally.
The New York GTO experience is not an isolated phenomenon. The
Texas Attorney General's office began investigating so-called ``giro
Houses'' in the Houston area in the early 1990s. Giro houses are
independent money transmitters that also provide ancillary services
such as cargo shipment and long distance telephone access. Before 1991,
there were as many as 100 giro houses in Houston processing over $450
million per year in wire transfers, primarily to Colombia. The Texas
Attorney General's Office, working with the Texas Department of Banking
and the Houston office of the IRS, opened formal investigations of a
number of giro houses. These investigations, like the El Dorado Task
Force's investigations in New York, revealed a pattern of money
laundering through false invoices designed to justify the large
currency deposits at local banks.
From late 1994 through 1995 the Texas Attorney General's Office
obtained and executed 11 search warrants at Houston giro houses. Many
businesses closed while under investigation, and the overall effect of
the Texas investigations on illegitimate trade was dramatic. A recent
count of giro houses lists eight sending funds to Colombia, and the
total amount of money processed through giro houses has dropped to
approximately $10 million.
Money Order Sellers. The use by money launderers of money orders,
whether issued by the United States Postal Service or private
companies, is well-documented. As one example, a Postal Inspection
Service investigation beginning in the late 1980s and early 1990s,
whose offshoots continue to this day, revealed a multiple step scheme
in which money orders, in individual amounts of $1,000 or less, were
purchased from New York area banks and post office outlets (often in
bulk), sent abroad for negotiation or deposit, and then repatriated to
the United States for clearance or deposit into banks from which the
aggregated funds were again to be wired abroad. The scheme involved
some 99,000 money orders worth approximately $70 million that were
deposited into three bank accounts in New York and Miami; it resulted
in the 1992 guilty plea of two individuals, and the 1993 forfeiture of
approximately $2.1 million.
The ease with which money orders can be redeemed or negotiated--the
very factors that make them attractive commercially--also make them an
attractive tool for money launderers. The orders are negotiable, may be
made out to ``cash,'' and operate as virtually the equivalent of cash,
especially when backed by the credit of the Postal Service or one of
the two major commercial money order issuers that, together with the
Postal Service, dominate the money order market. Money order issuers
have made major strides in recognizing their obligations to report
suspicious activity and in designing computer systems to, e.g.,
identify suspicious sequential money order purchases, and to that
extent today's proposal recognizes those developments and makes clear
that the protective provisions of 31 U.S.C. 5318(g) (2)-(3) apply
equally to reports by money order issuers, sellers, and redeemers as to
reports by banks. Despite that fact, however, the extremely large
number of agents and other businesses that deal in money orders as
financial instruments makes the promulgation of a general suspicious
transaction reporting rule for such businesses essential.
Traveler's Checks. Traveler's checks raise the same issues as money
orders. Clearly, the requirement that traveler's checks be counter-
signed on issuance and at the time they are negotiated makes them more
difficult to abuse, but the counter-signature requirement can be evaded
by a corrupt sales agent and may have less force abroad than in the
United States. Traveler's checks are already included within the
definition of monetary instruments at 31 CFR 103.11(u)(ii), and their
potential for abuse was recognized in the 1992 amendments to the
definition of ``cash'' for purposes of the reporting of cash purchases
of goods and services valued over $10,000. See 26 U.S.C. 6050I(d)(2);
26 CFR 6050I-1(c)(1)(ii); 56 FR 57974, 57977 (Nov. 15, 1991).
Special Structural Problems Affecting Money Services Businesses. In
issuing this notice of proposed rulemaking, the Department of the
Treasury is again expressing its judgment that reporting of suspicious
transactions in a timely fashion is a component of the flexible and
cost-efficient compliance system required to prevent the use of the
nation's financial system--in this case money services businesses--for
illegal purposes. Implementation of a comprehensive counter-money
laundering strategy for money services businesses, however, raises
significant issues not present in devising counter-money laundering
strategies for banks, largely due to unique structural factors
affecting money services businesses.
First, most money services businesses operate through the medium of
independent enterprises that agree to serve as agents for the
businesses' products or services; thus the public often does not deal
directly with the businesses that issue or back the instruments, or
actually perform the services, purchased. Second, and as a corollary,
money services businesses permit performance of a specific function--
the conversion of money into a money order or traveler's check, or the
sending of money to a distant location--but generally neither offer nor
are capable of maintaining continuing account relationships. Third,
money services businesses are not subject generally to federal
regulation and are regulated, in differing degrees, by some, but not
all, states.13 Finally, and perhaps
[[Page 27904]]
most important, the rules of the Bank Secrecy Act have not been
appropriately tailored to reflect the particular operating realities,
problems, and potential for abuse of an industry that deals in sums far
below $10,000 per transaction. For all of these reasons, the
assumptions that underlay design of a suspicious transaction reporting
system for banks cannot be assumed to apply with equal force to the
money services businesses with which this notice of proposed rulemaking
deals.
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\13\ Section 407 of the Money Laundering Suppression Act, 31
U.S.C. 5311 note, states the sense of the Congress that, ``[f]or
purposes of preventing money laundering and protecting the payment
system from fraud and abuse,'' the states should ``establish uniform
laws for licensing and regulating'' the businesses which are
referred to as money services businesses in the proposed amendments
to the Bank Secrecy Act regulations published today, and ``provide
sufficient resources * * * to enforce such laws * * *.'' Section
407(c) calls for the Secretary of the Treasury to study the progress
of the states in meeting the Congressional goal and section 407(d)
requires the Secretary to report to Congress on the results of its
study and any recommendations flowing therefrom.
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Check Cashers and Currency Exchangers. Check cashers and currency
exchangers would not be subject to the suspicious transaction reporting
requirement contained in this proposed rulemaking. Because the
operations of those businesses generally involve disbursement rather
than receipt of funds, the appropriate definition of suspicious
activity involves issues not present to the same degree in the case of
money transmitters and money order and traveler's check services.
A reporting money services business is subject to this section only
with respect to transactions that involve or relate to the business
activities described in Sec. 103.11(uu) (3), (4), (5), or (6). Thus,
for example, a seller of money orders (a money services business
described in Sec. 103.11(uu)(4)) that is also a check casher (a money
services business described in Sec. 103.11(uu)(2)) is not required to
report under this section with respect to its check cashing activities
in general, although it would be required to report check cashing
activity that was part of a series of transactions that led to, for
example, the purchase of money orders if the money order purchases were
required to be reported hereunder. In addition, check cashing and
currency exchange services may be subject to the suspicious activity
rules to the extent they redeem either money orders or traveler's
checks for currency (U.S. or other) or other monetary or negotiable
instruments and hence qualify as redeemers of money orders or
traveler's checks, to whom the proposed rules do apply. See proposed
section 103.11(uu)(4), which would treat as a redeemer of money orders
and traveler's checks, respectively, any enterprise that redeems such
instruments ``in an amount greater than $500 in currency or monetary
instruments per person per day.'' 14
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\14\ In addition, of course, a business that engages in business
as a money transmitter, or in covered money order or traveler's
check services, as well as check cashing or currency exchange
services, would be subject to the suspicious transaction reporting
rules with respect to the former services, even if not to the
latter.
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Stored Value Products. As noted in the preamble to the Registration
Rule, the Department of the Treasury believes that a business that
issues or facilitates the digital transfer of electronically-stored
value 15 is a money services business covered by the Bank
Secrecy Act.16 However, it is not appropriate, given the
infancy of the use of stored value products in the United States, to
propose a rule specifically dealing with suspicious transaction
reporting by non-banks with respect to stored value products at this
time. Thus, proposed paragraph (a)(4) would exempt transactions solely
involving such products from the operation of the rule at present.
Treasury invites specific comments about the manner in which the
suspicious transaction reporting rules for money services businesses
should apply to transactions involving stored value products.
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\15\ See proposed 31 CFR 103.11(vv), which defines stored value.
\16\ It should be clearly understood that the treatment of
stored value and similar products for purposes of the operation of
31 U.S.C. 5330 and the Registration Rule is solely a matter of
federal law and cannot be taken as the expression of any view by the
Department of the Treasury on the issue whether particular money
services businesses are (or, indeed, should be) within the scope of
state laws requiring the registration of money transmitters, check
cashers, currency exchange businesses, or issuers, sellers, or
redeemers of money orders or traveler's checks.
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III. Specific Provisions 17
A. 103.11(ii)--Transaction
The definition of ``transaction'' in the Bank Secrecy Act
regulations for purposes of suspicious transaction reporting conforms
generally to the definition Congress added to 18 U.S.C. 1956 when it
criminalized money laundering in 1986. See Pub. L. 99-570, Title XIII,
1352(a), 100 Stat. 3207-18 (Oct. 27, 1986). This notice proposes to
amend that definition explicitly to include the purchase of any money
order and the payment or order for any money remittance or transfer. No
similar amendment is necessary in the case of traveler's checks, which
are already defined clearly as monetary instruments in 31 CFR
103.11(u)(ii). This definition of transaction is broad enough to cover
all activity that should be reported under the proposed rule.
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\17\ Because proposed Sec. 103.20 reflects the terms of the
reporting rule for banks, readers of this document may wish to
consult the notice of proposed rulemaking and the document
containing the final reporting rule for banks, at 60 FR 46556
(September 7, 1995) (proposed rule) and 61 FR 4326 (February 5,
1996) (final rule). The bank suspicious activity reporting rule is
found at Sec. 103.21, but proposed by this notice to be renumbered
as Sec. 103.18).
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B. 103.15--Determination by the Secretary
Section 103.20 is redesignated as section 103.15 in order to make
room in part 103 for the proposed rule and to create space for future
changes to the Bank Secrecy Act regulations.
C. 103.18--Reports by Banks of Suspicious Transactions
Section 103.21 is redesignated as section 103.18 to make room in
subpart B, ``Reports Required To Be Made,'' for the suspicious
transaction reporting requirement proposed in this notice.
D. 103.20--Reports of Suspicious Transactions, General
Proposed section 103.20 contains the rules setting forth the
obligation of certain money services businesses to file reports of
suspicious transactions involving at least $500 in funds or other
assets. Paragraph (a) contains the general statement of the obligation
to file, and a general definition of the term ``suspicious
transaction.'' It is important to recognize that transactions are
reportable under this rule and 31 U.S.C. 5318(g) whether or not they
involve currency.
The choice of a $500 threshold for suspicious transaction reporting
by reporting money services businesses reflects the judgment, discussed
more generally above, that the levels of reporting appropriate for
other financial institutions, for example, the $5,000 suspicious
activity reporting threshold for banks, are not appropriate given the
patterns of transactions prevalent in such money services businesses.
The threshold reflects FinCEN's understanding of normal transaction
levels for the businesses involved. Given the fact that one of the
purposes of suspicious transaction reporting is to identify
structuring, a higher reporting threshold would significantly limit the
effectiveness of the proposed rule, in light of the reporting levels
proposed for special currency transaction reporting by money
transmitters, in the third of the related notices of proposed
rulemaking relating to money services businesses that are being
published today.
Reporting Institutions. Any enterprise that is a money services
business,
[[Page 27905]]
within the definition proposed today, because it is a money transmitter
or an issuer, seller, or redeemer 18 of money orders or
traveler's checks (including the Postal Service), is subject to the
proposed suspicious activity reporting rule. However, banks, broker-
dealers, and casinos are not subject to the proposed rule.
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\18\ Under the definition in proposed Sec. 103.11(uu)(4), a
person is a ``redeemer'' of money orders and traveler's checks only
insofar as the instruments involved are redeemed for monetary
value--that is, for currency or monetary instruments. The taking of
the instruments in exchange for goods or services is not a
redemption for purposes of the rules proposed today.
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Reportable Transactions. The proposed rule designates three classes
of transactions as requiring reporting. The first class, described in
proposed paragraph (a)(2)(i), includes transactions involving funds
derived from illegal activity or intended or conducted in order to hide
or disguise funds or assets derived from illegal activity. The second
class, described in proposed paragraph (a)(2)(ii), involves
transactions designed, whether through structuring or other means, to
evade the requirements of the Bank Secrecy Act. The third class,
described in proposed paragraph (a)(2)(iii), involves transactions that
appear to serve no business or apparent lawful purpose, and for which
the money services business knows of no reasonable explanation after
examining the available facts relating thereto.
The operating circumstances of money services businesses,
especially the absence of account relationships, necessarily make the
standards by which transactions are to be evaluated less easy to apply
than in the case of banks in many situations. For that reason, and
given the differences in structure, operation, and regulation between
banks and money services businesses, the proposed rule contains
specific illustrations (noted below) of the sorts of transactions for
which reporting is sought within the text of the rule itself.
Paragraph (a)(2)(iii) provides the following examples (by way of
illustration, but not limitation) of such transactions:
A. The contemporaneous purchase of multiple remittances to the
same beneficiary or city by the same purchaser;
B. The purchase of multiple instruments or remittances in the
same or similar amounts by the same person;
C. A large volume of transactions, sequential invoices, or both,
directed to one correspondent from one agent (operating either
through a single or multiple offices) on a single day;
D. Patterns of remittances to the same city or correspondent
purchased at approximately the same time;
E. The deposit of large numbers of instruments, especially
sequentially-numbered instruments, into or through the same or
related bank or other financial institution accounts;
F. Patterns of instruments or remittances purchased just below
the dollar thresholds for particular Bank Secrecy Act reporting or
recordkeeping requirements;
G. Presentation for redemption or encashment of third-party
endorsed instruments, or of blocks of instruments purchased by the
party seeking redemption, in either case in sums outside of normal
commercial or personal usage;
H. Significant changes or fluctuations in volume at one or more
of the business' agents or branches;
I. Significant variations in the size of the average remittance
at a business' agents or branches; and
J. Multiple senders of remittances using the same recipient's
last name, address, or telephone number.
Of course, determinations as to whether a report is required must
be based on all the facts and circumstances relating to the transaction
and the money services customer in question. Different fact patterns
will require different types of judgments. In some cases, the
circumstances of the transaction or pattern of transactions may clearly
indicate the need to report. For example, an individual's seeking
regularly to purchase or redeem instruments in bulk, or to purchase
transmissions to multiple overseas locations, all to the same named
beneficiary should, in the absence of unique qualifying circumstances,
place the money services business on notice that a suspicious
transaction is underway. Similarly, the fact that a customer refuses to
provide information necessary for the money services business to make
reports or keep records required by 31 CFR 103 or other regulations,
provides information that a money services business determines to be
false, or seeks to change or cancel the transaction after such person
is informed of currency transaction reporting or information
verification or recordkeeping requirements relevant to the transaction
or of the money services business' intent to file a currency
transaction report with respect to the transaction, would all indicate
that a SAR-MSB should be filed. (Of course, as the proposed rule makes
clear, the money services business may not notify the customer that it
intends to file or has filed a suspicious transaction report with
respect to the customer's activity.)
Treasury ultimately must rely on creation of a working partnership
with the various types of money services business that will assist
those businesses to apply their knowledge of both their customers and
business patterns to identify and report suspicious activity. FinCEN
hopes and expects to enter into a dialogue with the money services
businesses to which this rule would apply about the manner in which a
combination of government guidance, training programs, and government-
industry information exchange can smooth the way for operation of the
new suspicious activity reporting system in as flexible and cost-
efficient a way as possible.
Treatment of Agents. 31 U.S.C. 5318(g)(1) authorizes Treasury to
require suspicious transaction reporting not only by financial
institutions but by ``any director, officer, employee, or agent of any
financial institution.'' The authorization parallels the definition of
financial institution itself in 31 U.S.C. 5312 (a)(2) and (b), and 31
CFR 103.11(n). The operating realities of money services businesses
place special importance on the relationships between the operators of
the money services businesses involved and the otherwise unrelated
businesses that, in many cases, sell the financial products involved,
in the case of money orders or traveler's checks, or that serve, in the
case of money remissions, as receivers of the funds to be transmitted.
Thus, paragraph (a)(3) places responsibility for reporting on each
money services business, as well as its agents,
regardless of whether, and the terms on which, the money services
business treats such person as an agent or independent contractor
for other purposes.
It is important to recognize that the definition of money services
business for this purpose is broader than it is for purposes of the
registration rules proposed to be added to part 103 as 31 CFR 103.41.
Thus, an agent of a money transmitter may (indeed usually will) itself
be a money services business for purposes of the reporting rule
(although not necessarily for purposes of the registration rule).
Certain patterns of suspicious dealing that may not be apparent to
a particular agent may become visible when various remission or
instrument purchase activities are aggregated by the principal
business. In other situations, a principal may, upon reviewing
transaction records, uncover an indication of patterns of suspicious
transactions at a particular agent that, unfortunately, arise because
of the cooperation of the agent with money launderers. Thus, it is
impossible to specify the particular method for reporting that will
[[Page 27906]]
comprehend all situations. The same issues arise, of course, when
headquarters or central processing facility bank compliance officials
uncover a pattern of suspicious dealing at or through a bank branch.
The allocation of principal-agent liability in particular cases,
under the governing terms of the Bank Secrecy Act, is too complex a
subject to be dealt with in this notice of proposed rulemaking.
However, the Department of the Treasury believes that at a minimum the
operators of money services businesses have a duty to know their agents
sufficiently well to be able to satisfy the reporting obligations
involved in compliance with the proposed rule. As in the case of the
rules for suspicious activity reporting by banks, the proposed rule is
intended to introduce a concept of due diligence into the reporting
procedures, and that diligence applies equally to review of the actions
of agents of money services businesses as to review of the transactions
of customers of those businesses. Treasury invites comments on:
1. Whether the rule should contain more detailed procedures or
rules dealing with the allocation of responsibility between principals
(the issuers of the money orders or traveler's checks, and the
companies actually arranging for the remission of funds) and agents;
2. Whether language should be added to the rule to make it clear
that a money services business's duty of diligence extends not only to
supervision of its agents but also to supervision of money services
businesses in the distribution chain for financial services products
that may not technically be either agents under the broad definition
used in the proposed rule or independent contractors; and
3. Whether the rule should contain more specific rules for
compliance programs that recognize the realities of the business
operations in this part of the financial sector.
Filing Procedures. Paragraph (b) sets forth the filing procedures
to be followed by money services businesses making reports of
suspicious transactions. Within 30 days after a money services business
becomes aware of a suspicious transaction, the business must report the
transaction by completing a Suspicious Activity Report-MSB
19 and filing it in a central location, to be determined by
FinCEN. The SAR-MSB will resemble the SAR now used by banks to report
suspicious transactions, and a draft form will be made available for
comment when ready.
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\19\ The term ``MSB'' is an abbreviation for ``money services
businesses'' and is used to distinguish the form from forms for
reporting by other non-bank institutions.
---------------------------------------------------------------------------
Supporting documentation relating to each SAR-MSB is to be
collected and maintained separately by the money services business and
made available to law enforcement and regulatory agencies upon request.
Special provision is made for situations requiring immediate attention,
in which case money services businesses are to telephone the
appropriate law enforcement authority in addition to filing a SAR-MSB.
Reports filed under the terms of the proposed rule will be lodged
in a central data base (on the model of the data base used to process,
analyze, and retrieve bank suspicious activity reports). Information
will be made electronically available to federal and state law
enforcement and regulatory agencies, to enhance the ability of those
agencies to carry out their mandates to fight financial crime.
Maintenance of Records. Paragraph (c) provides that filing money
services businesses must maintain copies of SAR-MSBs and the original
related documentation for a period of five years from the date of
filing. As indicated above, supporting documentation is to be made
available to FinCEN and appropriate law enforcement authorities on
request.
Safe Harbor from Civil Liability. Paragraph (d) incorporates the
terms of 31 U.S.C. 5318 (g)(2) and (g)(3). This paragraph thus
specifically prohibits persons filing SAR-MSBs from making any
disclosure, except to law enforcement and regulatory agencies, about
either the reports themselves, the information contained therein, or
the supporting documentation. The paragraph also restates the broad
protection from liability for making reports of suspicious
transactions, and for failures to disclose the fact of such reporting,
contained in the statute. The regulatory provisions do not extend the
scope of either the statutory prohibition or the statutory protection;
however, because Treasury recognizes the importance of these statutory
provisions to the overall effort to encourage meaningful reports of
suspicious transactions, they are described in the regulation in order
to remind compliance officers and others of their existence.
Auditing and Enforcement. Paragraph (e) notes that compliance with
the obligation to report suspicious transactions will be audited, and
provides that failure to comply with the rule may constitute a
violation of the Bank Secrecy Act and the Bank Secrecy Act regulations,
which may subject non-complying money services businesses to
enforcement action.
Effective Date. Finally, paragraph (f) provides that the new
suspicious activity reporting rules are effective 30 days after [the
date on which the final regulations to which this notice of proposed
rulemaking relates are published in the Federal Register].
IV. Submission of Comments
An original and four copies of any written hard copy comment (other
than one sent electronically) must be submitted. All comments will be
available for public inspection and copying, and no material in any
such comments, including the name of any person submitting comments,
will be recognized as confidential. Accordingly, material not intended
to be disclosed to the public should not be submitted.
V. Regulatory Flexibility Act
FinCEN certifies that this proposed regulation will not have a
significant economic impact on a substantial number of small entities.
The average money order sold is approximately $102, and the average
money transmission is approximately $240 within the United States and
approximately $320 outside the United States. Both of these amounts are
substantially below the $500 threshold that triggers reporting under
the proposed rule. Thus, FinCEN believes that the threshold has been
set at a level that will avoid a significant economic burden on small
entities.
VI. Paperwork Reduction Act Notices
Suspicious Activity Report for Certain Money Services Businesses.
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
part 1320, the following information concerning the collection of
information on Suspicious Activity Report--Money Services Businesses is
presented to assist those persons wishing to comment on the information
collection.
FinCEN anticipates that this proposed rule, if enacted as proposed,
would result in a total of 10,000 Suspicious Activity Report--Money
Services Businesses forms to be filed annually. This result is an
estimate, based on a projection of the size and volume of the industry.
Title: Suspicious Activity Report--Money Services Businesses
OMB Number: To be determined.
[[Page 27907]]
Description of Respondents: Money transmitters, and issuers,
sellers, and redeemers of money orders or traveler's checks, and their
agents.
Estimated Number of Respondents: 10,000.
Frequency: As required.
Estimate of Burden: Reporting average of 20 minutes per response;
recordkeeping average of 10 minutes per response.
Estimate of Total Annual Burden on Respondents: 10,000 responses.
Reporting burden estimate = 3,333 hours; recordkeeping burden estimate
= 1,667 hours. Estimated combined total of 5,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$100,000.
Estimate of Total Other Annual Costs to Respondents: None.
Type of Review: New.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
Recordkeeping Requirements of 31 CFR 103.20
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
1320, the following information concerning the collection of
information as required by 31 CFR 103.20 is presented to assist those
persons wishing to comment on the information collection.
Title: Suspicious Activity Report--Money Services Businesses.
OMB Number: 1506-0006.
Description of Respondents: Specified Money Services Businesses.
Money transmitters, and issuers, sellers, and redeemers of money orders
or traveler's checks, and their agents.
Estimated Number of Respondents: 10,000.
Frequency: As required.
Estimate of Burden: Recordkeeping average of 100 hours per Money
Service Business.
Estimate of Total Annual Burden on Respondents: Recordkeeping
burden estimate = 1,000,000 hours.
Estimate of Total Annual Cost to Respondents for Hour Burdens:
Based on $20 per hour, the total cost to the public is estimated to be
$20,000,000.
Estimate of Total Other Annual Costs to Respondents: $100 for each
report of suspicious transactions made.
Type of Review: Extension.
FinCEN specifically invites comments on the following subjects: (a)
Whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.
In addition, the Paperwork Reduction Act of 1995 requires agencies
to estimate the total annual cost burden to respondents or
recordkeepers resulting from the collection of information. Thus,
FinCEN also specifically requests comments to assist with this
estimate. In this connection, FinCEN requests commenters to identify
any additional costs associated with the completion of the form. These
comments on costs should be divided into two parts: (1) Any additional
costs associated with reporting; and (2) any additional costs
associated with recordkeeping.
VII. Executive Order 12866
The Department of the Treasury has determined that this proposed
rule is not a significant regulatory action under Executive Order
12866.
VIII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act), March 22, 1995, requires that an agency
prepare a budgetary impact statement before promulgating a rule that
includes a federal mandate that may result in expenditure by 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. FinCEN has
determined that it is not required to prepare a written statement under
section 202 and has concluded that on balance this proposal provides
the most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
List of Subjects in 31 CFR Part 103
Authority delegations (Government agencies), Banks and banking,
Currency, Investigations, Law enforcement, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
For the reasons set forth above in the preamble, 31 CFR Part 103 is
proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for Part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.
2. Section 103.11(ii)(1) is revised to read as follows:
Sec. 103.11 Meaning of terms.
* * * * *
(ii) Transaction. (1) Except as provided in paragraph (ii)(2) of
this section, transaction means a purchase, sale, loan, pledge, gift,
transfer, delivery or other disposition, and with respect to a
financial institution includes a deposit, withdrawal, transfer between
accounts, exchange of currency, loan, extension of credit, purchase or
sale of any stock, bond, certificate of deposit, or other monetary
instrument or investment security, purchase or redemption of any money
order, payment or order for any money remittance or transfer, or any
other payment, transfer, or delivery by, through, or to a financial
institution, by whatever means effected.
* * * * *
[[Page 27908]]
Secs. 103.20 and 103.21 [Redesignated as Secs. 103.15 and 103.18]
3. In Subpart B, redesignate Secs. 103.20 and 103.21 as
Secs. 103.15 and 103.18, respectively, and add new Sec. 103.20 to read
as follows:
Sec. 103.20 Reports by money services businesses of suspicious
transactions.
(a) General. (1) Every money services business, other than a bank,
a broker-dealer, or a casino, described in Sec. 103.11(uu) (3), (4),
(5), or (6) (for purposes of this section, a ``reporting money services
business''), shall file with the Treasury Department, to the extent and
in the manner required by this section, a report of any suspicious
transaction relevant to a possible violation of law or regulation. Any
money services business may also file with the Treasury Department, by
using the Suspicious Activity Report-MSB specified in paragraph (b)(1)
of this section, or otherwise, a report of any suspicious transaction
that it believes is relevant to the possible violation of any law or
regulation but whose reporting is not required by this section.
(2) A transaction requires reporting under the terms of this
section if it is conducted or attempted by, at, or through the money
services business, involves or aggregates at least $500 in funds or
other assets, and the money services business knows, suspects, or has
reason to suspect that the transaction (or a pattern of transactions of
which the transaction is a part):
(i) Involves funds derived from illegal activity or is intended or
conducted in order to hide or disguise funds or assets derived from
illegal activity (including, without limitation, the ownership, nature,
source, location, or control of such funds or assets) as part of a plan
to violate or evade any federal law or regulation or to avoid any
transaction reporting requirement under federal law or regulation;
(ii) Is designed, whether through structuring or other means, to
evade any requirements of this Part or of any other regulations
promulgated under the Bank Secrecy Act, Pub. L. 91-508, as amended,
codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-
5330; or
(iii) Serves no business or apparent lawful purpose, as, for
example, in the case of--
(A) The contemporaneous purchase of multiple remittances to the
same beneficiary or city by the same purchaser;
(B) The purchase of multiple instruments or remittances in the same
or similar amounts by the same person;
(C) A large volume of transactions, sequential invoices, or both,
directed to one correspondent from one agent (operating either through
a single or multiple offices) on a single day;
(D) Patterns of remittances to the same city or correspondent
purchased at approximately the same time;
(E) The deposit of large numbers of instruments, especially
sequentially-numbered instruments, into or through the same or related
bank or other financial institution accounts;
(F) Patterns of instruments or remittances purchased just below the
dollar thresholds for particular Bank Secrecy Act reporting or
recordkeeping requirements;
(G) Presentation for redemption or encashment of third-party
endorsed instruments or of blocks of instruments purchased by the party
seeking redemption, in either case in sums outside of normal commercial
or personal usage;
(H) Significant change or fluctuations in volume at one or more of
the business' agents or branches;
(I) Significant variations in the size of the average remittance at
a business' agents or branches;
(J) Multiple senders of remittances using the same recipient's last
name, address, or telephone number; and, in each case, the money
services business knows of no reasonable explanation for the
transaction or circumstance involved, after examining the available
facts relating thereto.
(3) The obligation to identify and properly and timely to report a
suspicious transaction rests with the money services business as well
as any agents of the money services business involved, regardless of
whether, and the terms on which, the money services business treats
such person as an agent or independent contractor for other purposes.
(4) Notwithstanding the provisions of this section, a transaction
that involves solely the issuance, or facilitation of the transfer, of
stored value or the issuance, sale, or redemption of stored value shall
not be subject to reporting under this paragraph (a), until the
promulgation of rules specifically relating to such reporting.
(b) Filing procedures--(1) What to file. A suspicious transaction
shall be reported by completing a Suspicious Activity Report-MSB
(``SAR-MSB''), and collecting and maintaining supporting documentation
as required by paragraph (c) of this section.
(2) Where to file. The SAR-MSB shall be filed with FinCEN in a
central location, to be determined by FinCEN, as indicated in the
instructions to the SAR-MSB.
(3) When to file. A reporting money services business is required
to file each SAR-MSB no later than 30 calendar days after the date of
the initial detection by the reporting money services business of facts
that may constitute a basis for filing a SAR-MSB under this section. In
situations involving violations that require immediate attention, such
as ongoing money laundering schemes, the reporting money services
business shall immediately notify by telephone an appropriate law
enforcement authority in addition to filing a SAR-MSB.
(c) Retention of records. A reporting money services business shall
maintain a copy of any SAR-MSB filed and the original or business
record equivalent of any supporting documentation for a period of five
years from the date of filing the SAR-MSB. Supporting documentation
shall be identified as such and maintained by the reporting money
services business, and shall be deemed to have been filed with the SAR-
MSB. A reporting money services business shall make all supporting
documentation available to FinCEN and any other appropriate law
enforcement agencies or supervisory agencies upon request.
(d) Confidentiality of reports; limitation of liability. No
financial institution, and no director, officer, employee, or agent of
any financial institution, who reports a suspicious transaction under
this Part, may notify any person involved in the transaction that the
transaction has been reported. Thus, any person subpoenaed or otherwise
requested to disclose a SAR-MSB or the information contained in a SAR-
MSB, except where such disclosure is requested by FinCEN or an other
appropriate law enforcement or supervisory agency, shall decline to
produce the SAR-MSB or to provide any information that would disclose
that a SAR-MSB has been prepared or filed, citing this paragraph and 31
U.S.C. 5318(g)(2), and shall notify FinCEN of any such request and its
response thereto. A reporting money services business, and any
director, officer, employee, or agent of such reporting money services
business, that makes a report pursuant to this section (whether such
report is required by this section or made voluntarily) shall be
protected from liability for any disclosure contained in, or for
failure to disclose the fact of, such report, or both, to the extent
provided by 31 U.S.C. 5318(g)(3).
(e) Compliance. Compliance with this section shall be audited by
the
[[Page 27909]]
Department of the Treasury, through FinCEN or its delegees under the
terms of the Bank Secrecy Act. Failure to satisfy the requirements of
this section may constitute a violation of the reporting rules of the
Bank Secrecy Act and of this part.
(f) Effective date. This section is effective [30 days after the
date on which the final regulations to which this notice of proposed
rulemaking relates are published in the Federal Register].
Dated: May 16, 1997.
Stanley E. Morris,
Director, Financial Crimes Enforcement Network.
[FR Doc. 97-13303 Filed 5-16-97; 4:32 pm]
BILLING CODE 4820-03-P