[Federal Register Volume 77, Number 40 (Wednesday, February 29, 2012)]
[Notices]
[Pages 12367-12370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4756]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network


Agency Information Collection and Reporting Activities; 
Electronic Filing of Bank Secrecy Act (BSA) Reports; Final Notice

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Final notice.

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SUMMARY: FinCEN is adopting a requirement that all financial 
institutions subject to Bank Secrecy Act (BSA) reporting use electronic 
filing for certain reports beginning no later than July 1, 2012. FinCEN 
will consider limited hardship exemptions in certain circumstances.

DATES: Effective date is July 1, 2012.
    Inspection of comments received. If a financial institution wishes 
to review comments received in response to the September 16, 2011, 
Federal Register notice they may be inspected, between 10 a.m. and 4 
p.m., in the FinCEN reading room in Vienna, VA. Persons wishing to 
inspect the comments submitted must request an appointment with the 
Disclosure Officer by telephoning (703) 905-5034 (not a toll free 
call). Comments received in response to the above notice are not open 
for further comment. Electronic copies of the received comments may be 
reviewed at: http://www.fincen.gov/statutes_regs/bsa/bsa_data_field_comment_20111118.html.

FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Helpline at 800-
949-2732, select option 7.

SUPPLEMENTARY INFORMATION: 
    Title: Bank Secrecy Act Reporting, (31 CFR chapter X).
    Abstract: The statute generally referred to as the ``Bank Secrecy 
Act,'' Titles I and II of Public Law 91-508, as amended, codified at 12 
U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5332, authorizes 
the Secretary of the Treasury (Secretary), inter alia, to require 
financial institutions to file reports that are determined to have a 
high degree of usefulness in criminal, tax, and regulatory matters, or 
in the conduct of intelligence or counter-intelligence activities to 
protect against international terrorism, and to implement counter-money 
laundering programs.\1\ Regulations implementing Title II of the BSA 
appear at 31 CFR chapter X. The authority of the Secretary to 
administer the BSA has been delegated to the Director of FinCEN.
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    \1\ Language expanding the scope of the BSA to intelligence or 
counter-intelligence activities to protect against international 
terrorism was added by Section 358 of the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism Act of 2001 (the USA PATRIOT Act), Public Law 
107-56.
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    The Secretary was granted authority with the enactment of Title 31 
U.S.C., to require financial institutions and other persons to file 
various BSA reports. The information collected on the reports is 
required to be provided pursuant to Title 31 U.S.C., as implemented by 
FinCEN regulations found throughout 31 CFR chapter X. The information 
collected pursuant to this authority is made available to appropriate 
agencies and organizations as disclosed in FinCEN's Privacy Act System 
of Records Notice.\2\
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    \2\ FinCEN completed its triennial review of its System of 
Records Notices. Updated Notices will be published in the Federal 
Register pending the completion of the required comment period.
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    Current Action: In support of Treasury's paperless initiative and 
efforts to make government operations more efficient, FinCEN has chosen 
to mandate electronic filing of certain BSA reports effective July 1, 
2012.
    This requirement will significantly enhance the quality of FinCEN's 
electronic data, improve its analytic capabilities in supporting law 
enforcement requirements, and result in a significant reduction in real 
costs to the U.S. government and ultimately to U.S. taxpayers. 
Specifically, this action makes mandatory the electronic submission of 
all BSA reports excluding the Report of International Transportation of 
Currency or Monetary Instrument Report (CMIR).\3\ Further, the Report 
of Cash Payments Over $10,000 Received in a Trade or Business (Form 
8300) may be filed electronically, but because of statutory 
restrictions that may pertain to this report, which is required under 
both FinCEN and IRS regulations,\4\ electronic filing of Form 8300 will 
not be mandatory.
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    \3\ All CMIRs are filed with the Department of Homeland 
Security's Customs and Border Protection (CBP) at the port of entry/
exit or mailed to the Commissioner of Customs in Washington, DC. 
There are no electronic filing capabilities at the ports. A CBP 
contractor keys the data on the completed form into a data tape that 
is electronically uploaded to the BSA database. FinCEN receives no 
paper filed CMIRs.
    \4\ See 26 U.S.C. 6011(e)(2); see also 26 CFR 1.6050I-1(e)(3)(i) 
and 31 CFR 1010.330(e)(1).
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    Background: Since October 2002, FinCEN has provided financial 
institutions with the capability of electronically filing BSA reports 
through its system called BSA E-Filing. Effective August 2011, the 
system was expanded to support individuals filing the Report of Foreign 
Bank and Financial Accounts (FBAR) report. BSA E-Filing is a secure, 
web-based electronic filing system. It is a flexible solution for 
financial institutions or individuals, whether they file one BSA report 
or thousands. BSA E-Filing is a service that filers can access by using 
their existing Internet connections regardless of connection speed. In 
addition, it is designed to minimize filing errors and provide enhanced 
feedback to filing institutions or individuals, thereby providing a 
significant improvement in data quality.
    BSA E-Filing, which is provided free of charge, offers streamlined 
BSA information submission; faster routing of information to law 
enforcement; greater data security and privacy compared with paper 
forms; long-term cost savings to institutions, individuals, and the 
government; and ensures compatibility with future versions of BSA 
reports.
    In addition, BSA E-Filing offers the following features not 
available to paper filers:
     Electronic notification of submissions, receipt of 
submission, and errors, warnings, and alerts;
     Batch validation;
     Acknowledgement that a batch-filed currency transaction 
report (CTR) and/or suspicious activity report (SAR) was received;
     Feedback reports to filers;
     Faster acknowledgement to money services businesses of 
receipt of their registration;
     Ability to send and receive secure messages;
     Use of Adobe forms that allows users to create templates, 
reducing data entry but still providing for printing paper copies if 
the filer wants a paper copy for its internal review and approval 
processes;
     Ability for supervisory users to assign system roles to 
their staff; and
     Access to training materials.
    In 2010, FinCEN initiated a complete redesign and rebuilding of a 
new

[[Page 12368]]

system-of-record database that significantly enhanced FinCEN's 
technical capabilities to receive, process, share, and store BSA data. 
A significant part of this upgrade was the implementation of state-of-
the-art electronic reporting or information collection tools. As of 
December 31, 2011, over 86% of BSA reports are filed electronically 
with FinCEN.\5\
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    \5\ As of December 2011, there are over 14,500 registered E-
Filing System users.
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    As a result of the 2010 initiative, FinCEN is in the process of 
fielding a new BSA Collection, Processing, and Analytic system. The new 
system, which includes significant e-filing improvements, is designed 
to support the most efficient state-of-the-art electronic filing. The 
database will accept Extensible Markup Language (XML) based dynamic 
reports as well as certain other file formats. The XML Schema, and the 
American Standard Code for Information Interchange (ASCII) file formats 
are available,\6\ and the electronic file specifications were provided 
to filers September 8, 2011.
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    \6\ Copies of the XML and ACSII file formats may be obtained by 
contacting the BSA E-Filing Help Desk at 1-866-346-9478 (option 1) 
or via email at [email protected].
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    All filings (batch, computer-to-computer, and discrete) will be 
initiated through the BSA E-Filing System \7\ using updated 
registration and log-in procedures that correct several identified 
limitations noted in the comments received on the September 16, 2011 
Notice.\8\ Although batch and computer-to-computer filing processes 
will remain unchanged, the file format was changed to match the 
database. Batch and computer-to-computer filers will file reports based 
on the electronic file specification that was provided in September 
2011. A discrete filing (the replacement for submitting a single paper 
report) is based on Adobe LiveCycle Designer ES dynamic forms. The 
discrete function is available for all filers but is designed 
especially for small business report filers (as well as individuals). 
The discrete filing function will be accessed by logging into the BSA 
E-Filing System and entering a pre-approved user ID and password. 
During log-in to the discrete filing option, filers will be prompted 
through a series of questions.\9\
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    \7\ More information on filing methods via FinCEN's free Web-
based service may be accessed at http://bsaefiling.fincen.treas.gov/main.html.
    \8\ See 76 FR 57799.
    \9\ A series of predetermined questions was designed to 
establish the type of institution and filing in much the same manner 
as used in widely accepted income tax filing software.
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    Today's notice requiring filers to submit certain BSA reports 
electronically using the free FinCEN BSA E-Filing System will provide a 
range of benefits. Electronic filing will facilitate the rapid 
dissemination of financial and suspicious activity information in 
connection with BSA filings, making information contained in these 
filings more readily available to--and more easily searchable by--law 
enforcement, the financial regulatory community, and other users of BSA 
data. Additionally, the requirement that certain BSA reports be filed 
electronically will result in a significant reduction in the use of 
paper, producing a positive environmental impact. Further, the 
implementation of the requirement to file electronically has the 
potential to save the government a few million dollars per year through 
the reduction of expenditures associated with current paper processing, 
in particular the physical intake and sorting of incoming reports, and 
the electronic keying of reported information into the database.
    Security: Mandatory electronic filing will provide increased 
security not available with paper filings. At the present time, all 
paper reports are mailed to the IRS Enterprise Computing Center--
Detroit (ECC-D) in Detroit, Michigan, as unclassified mail with no 
special handling via the U.S. Postal Service system. On occasion, 
mailed paper reports have been delayed, and in some cases damaged 
beyond readability. A financial institution may not discover that a 
report could not be processed by ECC-D until many months after the 
report was due.\10\ The BSA E-Filing System is a secure 128-bit single 
socket layer (SSL) protected Web-based filing system. Reports received 
are acknowledged and any noted errors are reported back to the filer. 
This process provides the filer with a record that the required filing 
was received, as well as suggestions on how to improve the quality of 
their future reports. Reports originated by the filer are posted 
securely and directly to the database, thereby significantly reducing 
or eliminating the possibility of data compromise.
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    \10\ A delayed or damaged report becomes more critical if it was 
reporting suspicious activity--especially when relating to terrorist 
financing.
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    Filer Impact Assessment: On September 16, 2011,\11\ FinCEN 
published a notice proposing that BSA reports be filed electronically 
through the BSA E-File System by June 30, 2012, effective July 1, 2012. 
In response to the request for comments, FinCEN received 27 responses. 
In general, the comments supported the requirement but noted areas 
requiring further clarification from FinCEN. A significant number of 
financial institutions anticipated encountering problems in meeting the 
June date for both e-filing and incorporating the new FinCEN CTR and 
SAR formats. In response, FinCEN published a notice extending the 
deadline to implement the new reports until March 31, 2013, (see http://www.fincen.gov/whatsnew/pdf/20111220.pdf) but retained the July 1, 
2012, target date for electronic filing. As noted in several comments, 
FinCEN recognizes that mandating electronic filing may pose a challenge 
for some financial institutions. As reflected in the notice referenced 
above, for those financial institutions unable to meet the proposed 
electronic filing target date, FinCEN will consider, based upon certain 
very limited hardship exceptions, specific requests to extend the time 
to electronically file the most current paper forms for up to a year 
past the mandatory electronic filing date. Information on how financial 
institutions can make such requests is provided in a separate 
notice.\12\ In addition, FinCEN will work with appropriate industry 
regulators to minimize the impact of this change, while moving forward 
with the electronic filing requirement.
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    \11\ See 76 FR 57799, September 16, 2011.
    \12\ See http://www.fincen.gov/whatsnew/html/20120221.html.
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    Several commenters noted a time-to-file change in the CTR 
electronic filing specification for the FinCEN CTR from the current 25 
days to 15 days.\13\ FinCEN has consistently maintained a regulatory 
requirement that CTRs be filed within 15 days.\14\ Notwithstanding this 
requirement, in connection with its receipt of magnetic media files 
initiated in late 1987, and ending in December 2008, FinCEN issued 
specifications referencing a 25-day period to assist institutions 
seeking to take advantage of this filing method via a common business 
practice of submitting magnetic media files on a fixed schedule. The 
25-day period was implemented to account for physically transporting 
(shipping) the magnetic media to the ECC-D in Detroit, Michigan. FinCEN 
understands that this business practice has continued with respect to 
batch e-filing, particularly in light of public FinCEN guidance 
referencing the 25-day period.\15\ In light of the comments received 
and acknowledging that some financial

[[Page 12369]]

institutions may need to change their business processes to become 
compliant with the rules, FinCEN has determined that it will 
temporarily maintain the 25-day compliance period referenced in its 
earlier specifications until March 31, 2013. This temporary extension 
to the filing requirements should allow sufficient time for filers to 
adjust submission schedules to meet established regulatory 
requirements.
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    \13\ The FinCEN CTR filing specifications may be viewed at 
http://bsaefiling.fincen.treas.gov/news/FinCENCTRElectronicFilingRequirements.pdf. See Appendix D page 49.
    \14\ See 31 CFR 1010.306(a)(1).
    \15\ http://bsaefiling.fincen.treas.gov/FAQs.html.
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    A few commenters noted specific E-File System/Site technical 
concerns, such as difficulty with password management or field lengths. 
Several of the issues noted in these comments will be addressed by 
planned system enhancements, and others are being evaluated. Several 
commenters pointed out that their institutions filed very few BSA 
reports a year and noted that filing paper reports was their preferred 
method. In response, FinCEN would note that the discrete option of the 
BSA E-Filing System was specifically designed to accommodate the small 
volume filers. One commenter requested that FinCEN permit firms to file 
BSA reports in a hardcopy format as a contingency alternative if 
material issues arise with their respective e-filing systems or 
FinCEN's database, which would prevent firms from, among other things, 
batch filing their reports. As a response, FinCEN would note that it 
has Continuity of Operations Plans (COOP) and E-filing System back-up 
contingency plans in place to address such issues should they occur. 
Additionally, the BSA E-Filing helpdesk is available to assist BSA 
filers as necessary if technical problems are encountered. Finally, one 
commenter elected to direct comments to two earlier notices,\16\ which 
did not address mandatory electronic filing.
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    \16\ See 75 FR 63545, October 15, 2010 and 76 FR 4747, January 
26, 2011. Office of Management and Budget (OMB) approvals of the two 
notices, following FinCEN's solicitation and review of public 
comments, are as follows: FinCEN's new SAR, http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201104-1506-002, and FinCEN's new CTR, 
http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201105-1506-001. FinCEN announced the availability of technical e-filing 
specifications for the new SAR and CTR on September 8, 2011, as 
follows: http://www.fincen.gov/news_room/nr/html/20110902.html.
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Industry Impact Assessment:

    a. Depository institutions: Based on responses and updated 
information, FinCEN believes this change in filing procedures will have 
some impact on small institutions, but that the overall impact on this 
group of filers will be minimal. Most depository institutions are 
currently required to file quarterly call or thrift financial reports 
with their regulator electronically \17\ through a Web-based portal 
provided by the appropriate federal regulator. This same electronic 
connectivity may be used to file BSA reports with FinCEN by logging in 
to the BSA E-Filing System Web-based portal. As noted above for those 
financial institutions unable to meet the proposed electronic filing 
deadline, FinCEN will consider, based upon certain very limited 
hardship exceptions, specific requests to file the most current paper 
forms for up to one year but no later than July 1, 2013.\18\
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    \17\ Several commenters advised that approximately 200 very 
small financial institutions mail their report to their regulator 
who in turn posts it to the regulator's database.
    \18\ See supra note 12.
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    b. Broker-Dealers, Futures Commission Merchants (FCMs), Introducing 
Brokers in Commodities (IB-Cs), and Mutual Funds: In view of the 
comments received and the notice extending the deadline to implement 
the new reports until March 31, 2013, this change in filing procedures 
should have minimal impact on these filing institutions. This group is 
highly automated and enjoys robust electronic buying and selling 
systems with sophisticated processing and reporting systems.\19\ 
Currently the Securities and Exchange Commission (SEC) mandates 
electronic filing,\20\ as does the Commodity Futures Trading Commission 
(CFTC).\21\
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    \19\ Currently both the SEC and the CFTC require electronic 
reporting, the SEC through the EDGAR system and the CFTC through the 
NFC Windjammer and Easy File systems.
    \20\ See http://www.sec.gov/info/edgar/regoverview.htm.
    \21\ For financial institutions subject to CFTC oversight, see 
NFA Electronic Filings at http://www.nfa.futures.org/NFA-electronic-filings/index.HTML.
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    c. Insurance companies: FinCEN received no comments from this 
financial sector. In view of this, and an understanding that 
institutions in this financial sector are highly automated,\22\ FinCEN 
believes that this change in filing procedures will have minimal impact 
on these institutions.
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    \22\ See the National Insurance Producer Registry (NIPR) at 
http://www.nipr.com/. NIPR is a unique public-private partnership 
that supports the work of the states and the National Association of 
Insurance Commissioners (NAIC) in making the producer-licensing 
process more cost-effective, streamlined and uniform for the benefit 
of regulators, the insurance industry and the consumers they protect 
and serve.
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    d. Casinos and Card Clubs: \23\ FinCEN received no comments from 
this financial sector. In view of this, and an understanding that 
institutions in this financial sector are highly automated, FinCEN 
continues to believe this change in filing procedures will have minimal 
impact on these institutions.
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    \23\ Casinos and Card Clubs with gross annual gaming revenues in 
excess of $1 million (see 31 CFR 1010.100(t)(5)(ii) and (6)(ii)).
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    e. Money Services Businesses (MSBs): FinCEN received comments from 
two commenters. Both were supportive of moving to electronic filing but 
noted timing and technical issues that mirrored other commenters. The 
relief provided by delaying the implementation date of the FinCEN CTR 
and SAR to March 2013 addresses their primary concern. Information in 
trade journals and other publications, along with informal comments 
from the Internal Revenue Service's Small Business/Self Employed group, 
indicate that most filers have Internet connectivity. They routinely 
place orders for goods and services through the Internet and access 
bill paying services electronically. Information gained from a review 
of MSB filings of the CTR, SAR, and Registration of Money Services 
Business (RMSB) forms indicates that this group will be most impacted 
in the form of training needed to use the electronic E-Filing System. 
One large MSB acknowledges the significant benefits of mandatory E-
Filing. However, they note that the elimination of paper filing will 
significantly impact 25% to 30% of their small delegate population, and 
they strongly suggest that some form of paper filing remain acceptable 
for at least six months beyond the effective date of July 1, 2012, or 
for a minimum of one year from publication of the final rule. To lessen 
any impact, FinCEN will provide for hardship exceptions in case 
unforeseen situations arise and will be providing information on how to 
make requests for limited hardship exceptions in a separate notice.\24\ 
Additionally, any impact is expected to be counterbalanced by the 
benefits of e-filing to the government and ultimately to taxpayers.
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    \24\ See supra note 12.
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    f. Service Providers: There is a network of third-party service 
providers with which financial institutions may contract to provide 
electronic filing services to the BSA E-Filing System. FinCEN believes 
this group to be highly automated and many are already using the BSA E-
Filing System. FinCEN does not anticipate that this requirement will 
have an impact on this group.
    g. Small businesses: \25\ In support of small businesses, FinCEN's 
Office of Compliance will provide procedures for

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filers to request a temporary limited hardship exemption from mandatory 
E-Filing. A small business may request, and may be granted an emergency 
extension by FinCEN based upon certain very limited hardship 
exemptions.\26\
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    \25\ See the Small Business Administration's (SBA) Web site 
http://www.sba.gov/content/what-sbas-definition-small-business-concern for SBA's definition of a small business concern.
    \26\ Supra footnote 12.
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    h. Individual filers: Effective August 2011, FinCEN expanded the 
option to electronically file the Report of Foreign Bank and Financial 
Accounts (FBAR) to individuals. Individuals worldwide can sign up to 
file their individual FBARs by accessing the FinCEN E-Filing Web 
site.\27\
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    \27\ See Background section.
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    i. Other Filing Issues: One commenter noted a potential issue with 
duplicate filings that are currently required by several States. FinCEN 
will continue to address the duplicate filing issue with the States 
involved. FinCEN noted this issue in its SAR Confidentiality notice 
filing.\28\
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    \28\ See 75 FR 75598, December 3, 2010, footnote 20. Such ``dual 
filing'' requirements, regardless of whether the State authority 
examines for compliance with State laws requiring compliance with 
the BSA, are inherently inconsistent with 31 U.S.C. 5318(g)(4), 
which clearly intends that all SARs be filed to a single government 
agency designated by the Secretary of the Treasury.
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    j. Report of Cash Payments Over $10,000 Received in a Trade or 
Business (Form 8300). Although FinCEN is making electronic filing of 
the Report of Cash Payments Over $10,000 Received in a Trade or 
Business, Form 8300, available to the filing public and will encourage 
the use of electronic filing as a fast and secure means for filers to 
meet their obligations, FinCEN is not mandating the E-Filing of this 
report at this time to remain consistent with statutory restrictions 
under 26 U.S.C. 6011(e)(2) that may pertain to this report, which is 
required under both FinCEN and IRS regulations.

Paperwork Reduction Act (PRA)

    Type of Review: Review of the final notice to mandate the 
electronic filing of BSA reports. The burden associated with this 
notice is reflected below.
    Affected Public: Businesses or other for-profit and non-profit 
institutions.
    Frequency: As required.
    Estimated Burden: Effective with the FinCEN IT Modernization, there 
will be seven BSA reports.\29\ The burden for electronic filing and 
recordkeeping of each BSA report is reflected in the OMB approved 
burden \30\ for each of these reports. The non-reporting recordkeeping 
burden is reflected separately.\31\
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    \29\ FinCEN-SAR, FinCEN-CTR, Designation Of Exempt Person, CMIR, 
RMSB, Foreign Bank Account Report, and the Report of Cash Payments 
Over $10,000 Received in a Trade or Business (Form 8300).
    \30\ See OMB control numbers 1506-0065, 1506-0064, 1506-0009, 
1506-0013, 1506-0014, 1506-0018.
    \31\ See OMB control numbers 1506-0051 through 1506-0059.
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    Estimated Number of Respondents for all reports = 74,900.\32\
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    \32\ All filers subject to BSA reporting requirements excluding 
CMIR, see supra note 3.
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    Estimated Total Annual Responses for all reports = 16,172,770.
    Estimated Total Annual Burden Hours = 20,874,761.\33\
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    \33\ Includes all reporting and recordkeeping burden associated 
with filing BSA reports.
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    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number. Records required to be 
retained pursuant to the BSA must be retained for five years.

    Dated: February 22, 2012.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2012-4756 Filed 2-28-12; 8:45 am]
BILLING CODE 4810-02-P