[Federal Register Volume 71, Number 124 (Wednesday, June 28, 2006)]
[Proposed Rules]
[Pages 36720-36723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10136]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 748


Filing Requirements for Suspicious Activity Reports

AGENCY: National Credit Union Administration (NCUA).

[[Page 36721]]


ACTION: Notice of proposed rulemaking (NPR).

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SUMMARY: The proposed rule describes in greater detail the requirements 
for reporting and filing a Suspicious Activity Report (SAR) and 
addresses prompt notification of the board of directors of SAR filings, 
the confidentiality of reports, and liability protection. NCUA also 
proposes to change the heading for this part so it more accurately 
describes its scope. While retaining cross-references in the rule to 
the SAR form and instructions, these changes will enhance credit union 
compliance by providing greater detail in the rule on the thresholds 
and procedures for filing a SAR.

DATES: Comments must be received on or before August 28, 2006.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     NCUA Web site: http://www.ncua.gov/Regulations Regulations 
OpinionsLaws/proposed--regs/ proposed--regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on Notice of Proposed Rulemaking (Suspicious Activity 
Report)'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: Linda K. Dent, Staff Attorney, Office 
of General Counsel, at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: NCUA's policy is to review regulations 
periodically to ``update, clarify and simplify existing regulations and 
eliminate redundant and unnecessary provisions.'' Interpretive Ruling 
and Policy Statement (IRPS) 87-2, Developing and Reviewing Government 
Regulations. NCUA notifies the public about the review, which is 
conducted on a rolling basis so that a third of its regulations are 
reviewed each year. The changes in this proposed rule are the result of 
NCUA review under IRPS 87-2.

B. Proposed Changes

Suspicious Activity Report

    The proposed rule modifies Sec.  748.1(c) by describing more 
clearly the reportable activity this section covers, identifying 
important filing procedures, and highlighting record retention 
requirements. The proposal includes in the rule other key aspects of 
the SAR process including the confidentiality of the reports, and safe 
harbor information, as well as, adds a provision requiring a credit 
union to keep its board of directors promptly informed of its SAR 
reporting activity.
    While the changes expand the amount of information contained in the 
rule, they do not increase credit unions' regulatory burden. The 
changes are intended to provide fundamental information about the SAR 
process in a single location to facilitate the ability of credit unions 
to quickly access reporting and filing requirements. The board 
notification provision formalizes a common practice and, together with 
the other proposed changes, provides consistency with the SAR 
regulations established by the other Federal Financial Institutions 
Examination Counsel regulators. The changes are not intended to and do 
not eliminate the need for credit unions to review the instructions 
accompanying the SAR form and the requirements of 31 CFR part 103.18, 
which may be necessary to ensure a report is accurately and fully 
completed.

Heading

    NCUA proposes to revise the heading for part 748 to read ``Security 
Program, Report of Suspected Crimes, Suspicious Transactions, 
Catastrophic Acts and Bank Secrecy Act Compliance.'' The amended 
heading aids users of NCUA Regulations by fully describing the contents 
of part 748.
Request for Comment
    The NCUA Board is interested in receiving comments on the proposed 
amendments to part 748.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a proposed rule may have on 
a substantial number of small credit unions (those under $10 million in 
assets). This proposed rule modifies the language of a preexisting 
requirement for federally-insured credit unions to file reports of 
suspected crimes and suspicious activity. The proposed rule, therefore, 
will not have a significant economic impact on a substantial number of 
small credit unions and a regulatory flexibility analysis is not 
required.

Paperwork Reduction Act

    The Office of Management and Budget assigned 3133-0094 as the 
control number for NCUA's Form 2362. NCUA has determined that the 
proposed amendments will not increase paperwork requirements and a 
paperwork reduction analysis is not required.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, NCUA, an independent 
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies 
with the executive order. The proposed rule would not have substantial 
direct effects on the states, on the connection between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
determined that this proposed rule does not constitute a policy that 
has federalism implications for purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this proposed rule would not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 
2681 (1998).

List of Subjects in 12 CFR Part 748

    Credit unions, Suspicious Activity Report.

    By the National Credit Union Administration Board on June 22, 
2006.
Mary Rupp,
Secretary of the Board.

    For the reasons stated in the preamble, the National Credit Union 
Administration proposes to amend 12 CFR part 748 as set forth below:

PART 748--SECURITY PROGRAM, REPORT OF SUSPECTED CRIMES, SUSPICIOUS 
TRANSACTIONS, CATASTROPHIC ACTS AND BANK SECRECY ACT COMPLIANCE

    1. The authority citation for part 748 continues to read as 
follows:

     Authority: 12 U.S.C. 1766(a) and 1786(q); 31 U.S.C. 5311.

    2. Section 748.1(c) is revised to read as follows:

[[Page 36722]]

Sec.  748.1  Filing of reports.

* * * * *
    (c) Suspicious Activity Report. A credit union must file a report 
of any known or suspected crime or any suspicious transaction related 
to money laundering activity or a violation of the Bank Secrecy Act. 
For the purposes of this paragraph (c) credit union means a federally-
insured credit union and official means any member of the board of 
directors or a volunteer committee.
    (1) Reportable activity. Transaction for purposes of this paragraph 
means a deposit, withdrawal, transfer between accounts, exchange of 
currency, loan, extension of credit, purchase or sale of any stock, 
bond, share certificate, or other monetary instrument or investment 
security, or any other payment, transfer, or delivery by, through, or 
to a financial institution, by whatever means effected. A credit union 
must report any known or suspected crime or any suspicious transaction 
related to money laundering or other illegal activity, for example, 
terrorism financing, loan fraud, or embezzlement, or a violation of the 
Bank Secrecy Act by sending a completed suspicious activity report 
(SAR) to the Financial Crimes Enforcement Network (FinCEN) in the 
following circumstances:
    (i) Insider abuse involving any amount. Whenever the credit union 
detects any known or suspected federal criminal violations, or pattern 
of criminal violations, committed or attempted against the credit union 
or involving a transaction or transactions conducted through the credit 
union, where the credit union believes it was either an actual or 
potential victim of a criminal violation, or series of criminal 
violations, or that the credit union was used to facilitate a criminal 
transaction, and the credit union has a substantial basis for 
identifying one of the credit union's officials, employees, or agents 
as having committed or aided in the commission of the criminal 
violation, regardless of the amount involved in the violation;
    (ii) Transactions aggregating $5,000 or more where a suspect can be 
identified. Whenever the credit union detects any known or suspected 
federal criminal violation, or pattern of criminal violations, 
committed or attempted against the credit union or involving a 
transaction or transactions conducted through the credit union, and 
involving or aggregating $5,000 or more in funds or other assets, where 
the credit union believes it was either an actual or potential victim 
of a criminal violation, or series of criminal violations, or that the 
credit union was used to facilitate a criminal transaction, and the 
credit union has a substantial basis for identifying a possible suspect 
or group of suspects. If it is determined before filing this report 
that the identified suspect or group of suspects has used an alias, 
then information regarding the true identity of the suspect or group of 
suspects, as well as alias identifiers, such as drivers' licenses or 
social security numbers, addresses and telephone numbers, must be 
reported;
    (iii) Transactions aggregating $25,000 or more regardless of 
potential suspects. Whenever the credit union detects any known or 
suspected Federal criminal violation, or pattern of criminal 
violations, committed or attempted against the credit union or 
involving a transaction or transactions conducted through the credit 
union, involving or aggregating $25,000 or more in funds or other 
assets, where the credit union believes it was either an actual or 
potential victim of a criminal violation, or series of criminal 
violations, or that the credit union was used to facilitate a criminal 
transaction, even though the credit union has no substantial basis for 
identifying a possible suspect or group of suspects; or
    (iv) Transactions aggregating $5,000 or more that involve potential 
money laundering or violations of the Bank Secrecy Act. Any transaction 
conducted or attempted by, at or through the credit union and involving 
or aggregating $5,000 or more in funds or other assets, if the credit 
union knows, suspects, or has reason to suspect:
    (A) The transaction involves funds derived from illegal activities 
or is intended or conducted in order to hide or disguise funds or 
assets derived from illegal activities (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;
    (B) The transaction is designed to evade any regulations 
promulgated under the Bank Secrecy Act; or
    (C) The transaction has no business or apparent lawful purpose or 
is not the sort of transaction in which the particular member would 
normally be expected to engage, and the credit union knows of no 
reasonable explanation for the transaction after examining the 
available facts, including the background and possible purpose of the 
transaction.
    (v) Exceptions. A credit union is not required to file a SAR for a 
robbery or burglary committed or attempted that is reported to 
appropriate law enforcement authorities, or for lost, missing, 
counterfeit, or stolen securities and the credit union files a report 
pursuant to the reporting requirements of 17 CFR 240.17f-1.
    (2) Filing Procedures. (i) Timing. A credit union must file a SAR 
with FinCEN no later than 30 calendar days from the date the suspicious 
activity is initially detected, unless there is no identified suspect 
on the date of detection. If no suspect is identified on the date of 
detection, a credit union may use an additional 30 calendar days to 
identify a suspect before filing a SAR. In no case may a credit union 
take more than 60 days from the date it initially detects a reportable 
transaction to file a SAR. In situations involving violations requiring 
immediate attention, such as ongoing money laundering schemes, a credit 
union must immediately notify, by telephone, an appropriate law 
enforcement authority and its supervisory authority, in addition to 
filing a SAR.
    (ii) Content. A credit union must complete, fully and accurately, 
SAR form TDF 90-22.47, Suspicious Activity Report (also known as NCUA 
Form 2362) in accordance with the form's instructions and 31 CFR part 
103.18. A copy of the SAR form may be obtained from the credit union 
resources section of NCUA's Web site, http://www.ncua.gov, or the 
regulatory section of FinCEN's Web site, http://www.fincen.gov.
    (iii) Compliance. Failure to file a SAR as required by the form's 
instructions and 31 CFR part 103.18 may subject the credit union, its 
officials, employees, and agents to the assessment of civil money 
penalties or other administrative actions.
    (3) Retention of Records. A credit union must maintain a copy of 
any SAR that it files and the original or business record equivalent of 
all supporting documentation to the report for a period of five years 
from the date of the report. Supporting documentation must be 
identified and maintained by the credit union as such. Supporting 
documentation is considered a part of the filed report even though it 
should not be actually filed with the submitted report. A credit union 
must make all supporting documentation available to appropriate law 
enforcement authorities and its regulatory supervisory authority upon 
request.
    (4) Notification to board of directors. (i) Generally. The 
management of the credit union must promptly notify its board of 
directors, or a committee designated by the board of directors to 
receive such notice, of any SAR filed.
    (ii) Suspect is a director or committee member. If a credit union 
files a SAR

[[Page 36723]]

and the suspect is a director or member of a committee designated by 
the board of directors to receive notice of SAR filings, the credit 
union may not notify the suspect, pursuant to 31 U.S.C. 5318(g)(2), but 
must notify all directors who are not suspects.
    (5) Confidentiality of reports. SARs are confidential. Any credit 
union, including its officials, employees, and agents, subpoenaed or 
otherwise requested to disclose a SAR or the information in a SAR must 
decline to produce the SAR or to provide any information that would 
disclose that a SAR was prepared or filed, citing this part, applicable 
law , for example, 31 U.S.C. 5318(g), or both, and notify NCUA of the 
request.
    (6) Safe Harbor. Any credit union, including its officials, 
employees, and agents, that makes a report of suspected or known 
criminal violations and suspicious activities to law enforcement and 
financial institution supervisory authorities, including supporting 
documentation, are protected from liability for any disclosure in the 
report, or for failure to disclose the existence of the report, or 
both, to the full extent provided by 31 U.S.C. 5318(g)(3). This 
protection applies if the report is filed pursuant to this part or is 
filed on a voluntary basis.

 [FR Doc. E6-10136 Filed 6-27-06; 8:45 am]
BILLING CODE 7535-01-P