[Federal Register Volume 86, Number 238 (Wednesday, December 15, 2021)]
[Proposed Rules]
[Pages 71201-71207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27081]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Chapter X

[Docket No. FINCEN-2021-0008]


Review of Bank Secrecy Act Regulations and Guidance

AGENCY: Financial Crimes Enforcement Network, Treasury.

ACTION: Request for information and comment.

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SUMMARY: The Financial Crimes Enforcement Network (FinCEN) is issuing 
this request for information (RFI) to solicit comment on ways to 
streamline, modernize, and update the anti-money laundering and 
countering the financing of terrorism (AML/CFT) regime of the United 
States. In particular, FinCEN seeks comment on ways to modernize risk-
based AML/CFT regulations and guidance, issued pursuant to the Bank 
Secrecy Act (BSA), so that they, on a continuing basis, protect U.S. 
national security in a cost-effective and efficient manner. This RFI 
also supports FinCEN's ongoing formal review of BSA regulations and 
guidance required pursuant to Section 6216 of the Anti-Money Laundering 
Act of 2020 (the AML Act). Section 6216 requires the Secretary of the 
Treasury (the Secretary) to solicit public comment and submit a report, 
in consultation with specified stakeholders, to Congress by January 1, 
2022, that contains the findings and determinations that result from 
the formal review, including administrative and legislative 
recommendations.

DATES: Written comments on this RFI must be received on or before 
February 14, 2022.

ADDRESSES: Comments may be submitted by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. Refer to Docket Number 
FINCEN-2021-0008.

[[Page 71202]]

     Mail: Policy Division, Financial Crimes Enforcement 
Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-
2021-0008.

FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section 
at 1-800-767-2825 or electronically at https://fincen.gov/contact.

SUPPLEMENTARY INFORMATION:

I. Scope of the RFI

    FinCEN seeks comment on ways to streamline, modernize, and update 
BSA regulations and guidance so that they, on a continuing basis, 
protect U.S. national security in a cost-effective and efficient 
manner. FinCEN is particularly interested in new and innovative 
approaches to BSA compliance that promote a risk-based approach to 
protecting the financial system from threats to national security posed 
by various forms of financial crime, including money laundering, the 
financing of terrorism and proliferation, while also providing for the 
reporting of information with a high degree of usefulness to government 
authorities. FinCEN recognizes the evolving illicit finance threat 
landscape and appreciates the important role that technology, 
innovation, and the efficient application of resources to BSA reporting 
play in promoting a risk-based approach to BSA compliance. In this 
context, the efficient application of resources can refer to the 
prioritization of resources by financial institutions to provide more 
useful information to law enforcement or other U.S. Government 
entities, including reporting highly useful information in a timely 
manner, or reducing redundancies and information of little use reported 
to law enforcement or other U.S. Government entities.
    The review of BSA regulations and guidance \1\ required by Section 
6216 of the AML Act will support these efforts by enhancing the 
protection of U.S. national security and assisting in the development, 
revision, or update of regulations that are outdated, redundant, or 
otherwise do not support an effective and risk-based AML/CFT 
framework.\2\ As described in the BSA, AML/CFT programs should, among 
other things, be reasonably designed to assure and monitor compliance 
with the BSA and be risk-based, including ensuring that financial 
institutions direct more attention and resources toward higher-risk 
customers and activities, consistent with the risk profile of the 
financial institution, rather than toward lower-risk customers and 
activities.\3\
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    \1\ FinCEN's regulations are codified at 31 CFR chapter X. For 
the purposes of this document, ``guidance'' should be interpreted 
broadly and includes, for instance, all administrative rulings, 
advisories, bulletins, fact sheets, responses to frequently asked 
questions, and notices issued by FinCEN and posted on FinCEN's 
website.
    \2\ The AML Act is Division F of the William M. (Mac) Thornberry 
National Defense Authorization Act for Fiscal Year 2021, Public Law 
116-283 (January 1, 2021). The AML Act defines the BSA as section 21 
of the Federal Deposit Insurance Act (12 U.S.C. 1829b), chapter 2 of 
title 1 of Public Law 91-508 (12 U.S.C. 1951 et seq.), and 
subchapter II of chapter 53 of title 31, United States Code. Section 
6003(1) of the AML Act.
    \3\ 31 U.S.C. 5318(h)(2)(B)(iv).
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    According to Section 6216(a), the purposes of the review are to: 
(i) Ensure the Department of the Treasury (Treasury) provides, on a 
continuing basis, for appropriate safeguards to protect the financial 
system from threats, including money laundering and the financing of 
terrorism and proliferation, to national security posed by various 
forms of financial crime; (ii) ensure that the regulations and guidance 
implementing the BSA continue to require certain reports or records 
that are highly useful in countering financial crime; and (iii) 
identify regulations and guidance that may be outdated, redundant, or 
otherwise do not promote a risk-based AML/CFT compliance regime for 
financial institutions, or that do not conform with the commitments of 
the United States to meet international standards to combat money 
laundering, financing of terrorism, serious tax fraud, or other 
financial crimes. Comments received in response to this RFI will 
support FinCEN's efforts to conduct the review required by Section 6216 
of the AML Act. Following that review, the Secretary--in consultation 
with specified stakeholders \4\--is required to make appropriate 
changes to the regulations and guidance to improve, as appropriate, the 
efficiency of those provisions, and submit a report to Congress that 
contains all findings and determinations made in carrying out the 
review, including administrative or legislative recommendations.
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    \4\ Under Section 6216(a) of the AML Act, the Secretary is 
required to consult with the Federal functional regulators, the 
Federal Financial Institutions Examination Council, the Attorney 
General, Federal law enforcement agencies, the Director of National 
Intelligence, the Secretary of Homeland Security, and the 
Commissioner of Internal Revenue. Section 6003(3) of the AML Act 
defines the term ``Federal functional regulator'' as having: (A) The 
meaning given the term in section 509 of the Gramm-Leach-Bliley Act 
(15 U.S.C. 6809); and (B) includes any Federal regulator that 
examines a financial institution for compliance with the BSA.
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II. Background

A. History of the BSA

    Enacted in 1970, the BSA is the principal U.S. law for the 
prevention of money laundering, terrorist financing and proliferation, 
and other forms of illicit financial activity. Congress has authorized 
the Secretary to administer the BSA. The Secretary has delegated to the 
Director of FinCEN the authority to implement, administer, and enforce 
compliance with the BSA and associated regulations.\5\ FinCEN is 
authorized to require financial institutions or nonfinancial trades or 
businesses to maintain procedures to ensure compliance with the BSA and 
the regulations promulgated thereunder and to guard against money 
laundering, the financing of terrorism, and other forms of illicit 
finance.\6\ Statutory amendments, most recently through the AML Act, 
have expanded the scope and range of BSA requirements and the 
complexity of FinCEN's regulations, including the types of information 
FinCEN can require financial institutions to maintain or report.
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    \5\ Treasury Order 180-01 (Jan. 14, 2020).
    \6\ 31 U.S.C. 5318(a)(2) (as amended by Section 6102(c)(2) of 
the AML Act).
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    The Money Laundering Control Act of 1986 (MLCA) \7\ and the 
Annunzio-Wylie Anti-Money Laundering Act of 1992 (Annunzio-Wylie) made 
money laundering a Federal crime, amended the BSA by strengthening 
sanctions for BSA violations,\8\ and authorized Treasury to require the 
reporting of suspicious activities.\9\ Annunzio-Wylie also authorized 
Treasury to issue regulations requiring all financial institutions, as 
defined in BSA regulations, to maintain ``minimum standards'' of an AML 
program.\10\ The USA PATRIOT Act also ushered in an expanded role for 
AML and other financial and economic measures in countering threats to 
U.S. national security and protecting the U.S. financial system. For 
example, Title III

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of the USA PATRIOT Act further amended the BSA by authorizing Treasury 
to require financial institutions to establish customer identification 
programs and by directly requiring financial institutions to maintain 
AML programs that satisfied statutorily mandated requirements.\11\
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    \7\ Public Law 99-570, 100 Stat. 3207 (Oct. 27, 1986).
    \8\ Title XV, Public Law102-550, 106 Stat. 3672 (Oct. 28, 1992), 
at sec. 1502 (authorizing proceedings to terminate federal 
depository institution and credit union charters when convicted of a 
criminal violation of the BSA), sec. 1503 (authorizing the 
termination of federal deposit insurance for federally insured, 
state-chartered depository institutions, and federal share insurance 
for federally insured, state-chartered credit unions, when convicted 
of a criminal violation of the BSA), sec. 1504 (authorizing the 
removal officers or directors of depository institutions, and 
institution-affiliated parties of federally insured credit unions, 
when such parties are found to have violated a BSA requirement).
    \9\ Id. at sec. 1517 (authorizing Treasury to require the 
reporting of suspicious transactions).
    \10\ Id.
    \11\ Public Law 107-56, 115 Stat. 272 (Oct. 26, 2001). FinCEN 
issued four interim final AML program rules on April 29, 2002 for 
financial institutions regulated by a Federal functional regulator: 
Casinos (67 FR 21110), money services businesses (67 FR 21114), 
mutual funds (67 FR 21117), and operators of credit card systems (67 
FR 21121). FinCEN's rule originally cross-referenced the regulations 
of the Federal functional regulators and provided that satisfaction 
of the appropriate Federal functional regulator's AML program rule 
requirements would be deemed to satisfy the requirements of 
Treasury's rule.
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    Most recently, the AML Act greatly expanded the express purposes of 
the BSA. In addition to requiring the filing of certain highly useful 
reports and the maintenance of certain highly useful records, the 
express purposes of the BSA now include, among other things:
    [cir] Preventing the laundering of money and the financing of 
terrorism through the establishment by financial institutions of 
reasonably designed risk-based programs to combat money laundering and 
the financing of terrorism;
    [cir] facilitating the tracking of money that has been sourced 
through criminal activity or is intended to promote criminal or 
terrorist activity; and
    [cir] assessing the money laundering, terrorism finance, tax 
evasion, and fraud risks to financial institutions, products, or 
services to--
    [ssquf] protect the financial system of the United States from 
criminal abuse; and
    [ssquf] safeguard the national security of the United States.\12\
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    \12\ 31 U.S.C. 5311 (as amended by Section 6101(a) of the AML 
Act).
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B. Regulatory Reform Initiatives Prior to the AML Act

    Numerous provisions of the AML Act codify and elaborate upon 
existing or prior Treasury initiatives on innovation, regulatory 
reform, and industry engagement, in response to evolving threats. These 
various efforts include: The BSA Advisory Group; an interagency AML 
Task Force led by Treasury's Under Secretary for Terrorism and 
Financial Intelligence; \13\ a Regulatory Reform Working Group for 
Treasury and the Federal Banking Agencies (FBAs); \14\ FinCEN Exchange; 
\15\ studying the value of BSA data; and, the FinCEN Innovation Hours 
Initiative.\16\ FinCEN has also issued final rules in recent years that 
have aimed to close AML regulatory gaps that represent vulnerabilities 
in the U.S. financial system that illicit actors could exploit.\17\ In 
addition, to fulfill its obligations under the Paperwork Reduction Act, 
FinCEN issued multiple notices soliciting input from the public in an 
effort to better understand and estimate the burden and cost of various 
BSA regulations.\18\ Many of the comments that FinCEN received are 
relevant to the formal review required under Section 6216 of the AML 
Act.
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    \13\ See Treasury, Remarks of Under Secretary David S. Cohen at 
the American Bankers Association and the American Bar Association 
Money Laundering Enforcement Conference, (Nov. 10, 2014), available 
at https://www.treasury.gov/press-center/press-releases/Pages/jl2692.aspx.
    \14\ The FBAs include the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation, the 
National Credit Union Administration, and the Office of the 
Comptroller of the Currency.
    \15\ See FinCEN, FinCEN Exchange, available at https://www.fincen.gov/resources/financial-crime-enforcement-network-exchange.
    \16\ See FinCEN, FinCEN's Innovation Hours Program, available at 
https://www.fincen.gov/resources/fincens-innovation-hours-program.
    \17\ See FinCEN, Final rule--Customer Due Diligence Requirements 
for Financial Institutions, 81 FR 29397 (May 11, 2016); see also 
FinCEN, Final rule--Customer Identification Programs, Anti-Money 
Laundering Programs, and Beneficial Ownership Requirements for Banks 
Lacking a Federal Functional Regulator, 85 FR 57129 (Sept. 15, 
2020).
    \18\ See, e.g., FinCEN, Agency Information Collection 
Activities; Proposed Renewal; Comment Request; Renewal Without 
Change of the Bank Secrecy Act Reports of Transactions in Currency 
Regulations at 31 CFR 1010.310 Through 1010.314, 31 CFR 1021.311, 
and 31 CFR 1021.313, and FinCEN Report 112--Currency Transaction 
Report, 85 FR 29022 (May 14, 2020); FinCEN, Agency Information 
Collection Activities; Proposed Renewal; Comment Request; Renewal 
Without Change of the Bank Secrecy Act Reports by Financial 
Institutions of Suspicious Transactions at 31 CFR 1020.320, 
1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, and 
1029.320, and FinCEN Report 111--Suspicious Activity Report, 85 FR 
31598 (May 26, 2020); FinCEN, Agency Information Collection 
Activities; Proposed Renewal; Comment Request; Renewal Without 
Change of Anti-Money Laundering Programs for Certain Financial 
Institutions, 85 FR 49418 (Aug. 13, 2020); and FinCEN, Agency 
Information Collection Activities; Proposed Renewal; Comment 
Request; Renewal Without Change of the Customer Identification 
Program Regulatory Requirements for Certain Financial Institutions, 
85 FR 49425 (Aug. 13, 2020).
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C. Technology and Application of the BSA

    New and innovative approaches in the financial sector in recent 
years have resulted in the development of new business models, 
products, and services, fueled in part by rapid advances in technology. 
As innovation has presented new business and other opportunities, 
illicit finance threats have also evolved and present new challenges 
for financial institutions to comply with BSA obligations. FinCEN 
recognizes the need to consider how to adapt the BSA's regulatory 
requirements to better address illicit finance threats that have 
changed considerably in scope, nature, and impact since the initial 
passage of the BSA. FinCEN also recognizes that innovation and 
technological advancements can enhance the ability of financial 
institutions to comply with their BSA obligations, making it easier to 
collect information that may be highly useful in combatting a variety 
of financial crimes, and for U.S. Government authorities to better 
analyze the information reported by financial institutions.

III. Requirements Under Section 6216 of the AML Act

A. Safeguards To Protect the Financial System From Threats

    Section 6216 of the AML Act directs FinCEN to review BSA 
regulations and guidance to ensure that Treasury provides, on a 
continuing basis, for appropriate safeguards to protect the financial 
system from threats to national security posed by various forms of 
financial crime, including money laundering and the financing of 
terrorism and proliferation.\19\ To meet this objective, FinCEN is 
soliciting input regarding financial services and related activity that 
present risk of exploitation by illicit actors or otherwise present a 
risk to the U.S. financial system but might not be addressed, in whole 
or in part, by existing regulations. At the same time, FinCEN seeks 
comment on whether these risks can be addressed by new or amended 
approaches toward AML program rule, recordkeeping, and reporting 
requirements that protect national security and safeguard the U.S. 
financial system while minimizing regulatory burden. In addition, 
FinCEN seeks comment identifying BSA regulations or guidance where the 
present safeguards do not effectively mitigate the risks they are 
intended to prevent or mitigate. Specifically, FinCEN seeks to 
understand whether AML program rule, recordkeeping, and reporting 
requirements are sufficient to prevent or mitigate the serious risks 
they are intended to address.
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    \19\ Section 6216(a)(1)(A) of the AML Act.
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    FinCEN views this objective as separate from the objective to 
identify BSA regulations and guidance that do not promote a risk-based 
approach, which is described in section C below. For this objective, 
FinCEN is soliciting input from the public regarding: (i) Threats to 
the financial system and to national security that are not adequately

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addressed by BSA regulations and guidance; and (ii) regulatory 
safeguards that FinCEN should implement via regulation or guidance to 
better protect the financial system from such threats.

B. Reports and Records That Are Highly Useful in Countering Financial 
Crime

    Section 6216 also directs FinCEN to evaluate BSA regulations and 
guidance to ensure that they continue to require certain reports or 
records that are highly useful in countering financial crimes.\20\ The 
purposes of the BSA include requiring reports or records that are 
highly useful in criminal, tax, regulatory, or intelligence matters, 
and preventing a variety of financial crime, including money laundering 
and the financing of terrorism.\21\ FinCEN is authorized to require 
financial institutions or nonfinancial trades or businesses to maintain 
procedures to ensure compliance with the BSA and the regulations 
implementing it, and to guard against money laundering, the financing 
of terrorism, and other forms of illicit finance.\22\ The BSA and 
FinCEN's implementing regulations currently require financial 
institutions, nonfinancial trades and businesses, and individuals to 
file a variety of reports, including, for example, suspicious activity 
reports (SARs), currency transaction reports (CTRs), reports of certain 
domestic coin and currency transactions (Form 8300s), and reports of 
foreign bank and financial accounts (FBARs). In addition, under 31 
U.S.C. 5326(a), if the Secretary finds that reasonable grounds exist 
for concluding that additional recordkeeping and reporting are 
necessary to carry out the purposes of the BSA or to prevent evasions 
thereof, the Secretary may issue an order requiring any domestic 
financial institution or nonfinancial trade or business or group of 
domestic financial institutions or nonfinancial trades or businesses in 
a geographic area to obtain, record, and report information concerning 
certain transactions (as the Secretary may describe in such order).
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    \20\ Section 6216(a)(1)(B) of the AML Act.
    \21\ 31 U.S.C. 5311 (as amended by Section 6101(a) of the AML 
Act).
    \22\ 31 U.S.C. 5318(a)(2) (as amended by Section 6102(c)(2) of 
the AML Act).
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    The second objective of Section 6216 essentially poses two 
questions. First, are the reports or records that are currently 
required to be filed or maintained highly useful in countering 
financial crime? Second, are there any reports or records that are not 
currently required to be filed or maintained that, if required, would 
be highly useful in countering financial crime? This objective also 
poses similar questions with respect to the BSA's numerous 
recordkeeping requirements--namely, whether the current requirements 
mandate any recordkeeping that is not highly useful in countering 
financial crime, and whether different or additional recordkeeping 
would be highly useful in countering financial crime.

C. Identify BSA Regulations and Guidance That May Be Outdated, 
Redundant, or Do Not Promote a Risk-Based AML/CFT Regime for Financial 
Institutions

    Section 6216 also requires FinCEN to evaluate BSA regulations and 
guidance that may be outdated, redundant, or otherwise do not promote a 
risk-based AML and CFT compliance regime for financial 
institutions.\23\
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    \23\ Section 6216(a)(1)(C)(i) of the AML Act.
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    FinCEN considers outdated regulations for the purposes of this RFI 
to include regulations that: (i) No longer promote the maintenance of 
risk-based safeguards that adequately address the regulation's original 
purpose; or (ii) are no longer useful or appropriate. That is, if 
reports filed consistent with a regulation no longer provides highly 
useful information to the government, or if a regulation once 
appropriately addressed a significant risk but no longer does so, that 
regulation is outdated. Outdated regulations would also include 
regulations that do not promote a risk-based approach to AML/CFT 
compliance by failing to take into account innovation or technological 
advancements in the financial system, or are obsolete in light of 
subsequent statutory or regulatory changes.
    FinCEN considers redundant regulations for the purpose of this RFI 
to include BSA regulations that: (i) Impose requirements on regulated 
entities that are identical to, or significantly overlap with, the 
requirements imposed by other BSA regulations; or (ii) were issued 
under a different statutory authority, but for which it is not possible 
to comply with both mandates by taking one set of actions. Regulations 
imposing such requirements will not be considered redundant to the 
extent that fully satisfying one requirement under one framework fully 
satisfies the other requirement as well.
    Regulations Failing to Promote a Risk-Based Approach: FinCEN looked 
at several sources to determine how BSA regulations and guidance might 
fail to promote a risk-based AML/CFT regime for financial institutions, 
for the purpose of this RFI, including the 2018 National Money 
Laundering Risk Assessment (NMLRA),\24\ FinCEN's AML/CFT National 
Priorities,\25\ and guidance from the Financial Action Task Force 
(FATF),\26\ the international standard-setting body on combatting money 
laundering and the financing of terrorism and proliferation. The NMLRA 
in particular provides definitions of several key concepts that can 
offer helpful clarification in connection with the Section 6216 review:
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    \24\ See Treasury, National Money Laundering Risk Assessment, 
(Dec. 20, 2018), at page 6, available at https://home.treasury.gov/system/files/136/2018NMLRA_12-18.pdf; see also Treasury, National 
Terrorist Financing Risk Assessment, (Dec. 20, 2018), available at 
https://home.treasury.gov/system/files/136/2018ntfra_12182018.pdf; 
see also Treasury, National Proliferation Financing Risk Assessment, 
(Dec. 20, 2018), available at https://home.treasury.gov/system/files/136/2018npfra_12_18.pdf.
    \25\ FinCEN, Anti-Money Laundering and Countering the Financing 
of Terrorism Priorities, (June 30, 2021), available at https://www.fincen.gov/sites/default/files/shared/AML_CFT%20Priorities%20(June%2030%2C%202021).pdf.
    \26\ The FATF is a member-led taskforce established in 1989 by 
the Group of 7 (G7). Today it has 39 members, and more than 200 
jurisdictions have committed to implementing the FATF standards and 
are assessed against them by the FATF and/or one of nine FATF-style 
regional bodies. Through its membership in the G7 and the Group of 
20 (G20), the United States has also signed onto numerous G7 and G20 
commitments to effectively implement the FATF standards. In 2013, 
2019 and 2021, FATF issued guidelines and standards for the 
assessment of systemic exposures to the risks of money laundering, 
terrorist financing, and proliferation financing. According to these 
guidelines, a systemic risk assessment is the result of a process, 
based on a methodology agreed by those parties involved, that 
attempts to identify, analyze, and understand the combination of 
vulnerabilities, threats, and consequences affecting a regulated 
subject, event, or activity. See FATF, Guidance on National Money 
Laundering and Terrorist Financing Risk Assessment, (Feb. 2013), at 
page 6, Introduction and Terminology, Section 1.3-Key concepts and 
terms relevant to a money laundering risk assessment, available at 
https://www.fatf-gafi.org/media/fatf/content/images/national_ml_tf_risk_assessment.pdf; see also FATF, Guidance on 
Terrorist Financing Risk Assessment, (Mar. 2019), at pages 7-9 for 
terminology relevant to a terrorist financing risk assessment, 
available at https://www.fatf-gafi.org/media/fatf/documents/reports/Terrorist-Financing-Risk-Assessment-Guidance.pdf; see also FATF, 
Guidance on Proliferation Risk Assessment and Mitigation, (June 
2021), at pages 9-10 for key terminology, available at https://
www.fatf-gafi.org/media/fatf/documents/reports/Guidance-Proliferation-Financing-Risk-Assessment-Mitigation.pdf.
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    Threat: The NMLRA uses this term for predicate crimes associated 
with money laundering.\27\ The NMLRA deems the environment in which 
predicate offenses are committed and criminal proceeds generated as 
being relevant to understanding why, in some cases, specific crimes are 
associated with specific money laundering methods.
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    \27\ These predicate crimes are enumerated at 18 U.S.C. 
1956(c)(7).

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    Vulnerability: The NMLRA uses this term for circumstances or 
situations that facilitate or create the opportunity for money 
laundering. A vulnerability may relate to a specific financial sector 
or product, or a weakness in regulation, supervision, or enforcement. A 
vulnerability may also reflect unique circumstances pursuant to which 
it may be difficult to distinguish legal from illegal activity. The 
methods that allow for the most amount of money to be laundered most 
effectively or most quickly present the greatest potential 
vulnerabilities.
    Risk: The NMLRA conceives of risk as a function of threat and 
vulnerability. Risk represents a synthesis, taking into consideration 
the effect of mitigating measures including regulation, supervision, 
and enforcement.
    The NMLRA also informed Treasury's 2020 National Strategy for 
Combating Terrorist and Other Illicit Financing in considering 
approaches to risk. According to that strategy, a risk-based approach 
in the context of AML/CFT means allocating resources and implementing 
measures to prevent or mitigate illicit finance in a way that takes 
into account identified and well understood risks.\28\ Further, in 2019 
FinCEN and the FBAs issued a Joint Statement on Risk-Focused BSA/AML 
Supervision noting that risk-based compliance programs enable the 
allocation of compliance resources commensurate with risk.\29\ The goal 
of the risk-based approach is to establish and maintain AML/CFT 
programs proportionate to the risk present in financial institutions 
based on customers and activities. It focuses available resources in 
the areas of highest risk in order to have the greatest impact, while 
reducing the resources devoted to activities carrying lower risk. For 
purposes of this RFI, when attempting to identify regulations and 
guidance that do not promote a risk-based AML/CFT regime for financial 
institutions, commenters are encouraged to identify regulations and 
guidance that discourage or hinder financial institutions from using or 
allocating resources commensurate with risk.
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    \28\ See Treasury, 2020 National Strategy for Combating 
Terrorist and Other Illicit Financing, at pages 6-7, available at 
https://home.treasury.gov/system/files/136/National-Strategy-to-Counter-Illicit-Financev2.pdf; see also FATF, FATF Recommendations: 
International Standards on Combatting Money Laundering and the 
Financing of Terrorism & Proliferation, (updated Oct. 2021), page 
31, Interpretive Note for FATF Recommendation 1 (describing the 
risk-based approach), available at http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATFRecommendations2012.pdf.
    \29\ See FinCEN, Joint Statement on Risk Focused Bank Secrecy 
Act Anti Money Laundering Supervision, (July 22, 2019), available at 
https://www.fincen.gov/sites/default/files/2019-10/JointStatementonRisk-FocusedBankSecrecyAct-Anti-MoneyLaunderingSupervisionFINAL1.pdf.
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D. Identify BSA Regulations and Guidance That Do Not Conform With 
International Standards To Combat Financial Crime

    Section 6216 requires FinCEN to identify regulations and guidance 
that do not conform to commitments of the United States to meet 
international standards to combat money laundering, financing of 
terrorism, serious tax fraud, or other financial crimes.\30\ Preeminent 
among such standards are the FATF Recommendations that promote 
effective implementation of legal, regulatory and operational measures 
for combating money laundering, terrorist financing, and other related 
threats to the integrity of the international financial system.\31\ 
FATF monitors countries' progress in implementing the FATF standards 
through mutual evaluations; reviews money laundering and terrorist 
financing techniques and counter-measures; and promotes the adoption 
and implementation of the FATF standards globally.\32\ Given their 
international recognition as standards for AML, CFT, and countering the 
financing of proliferation, the FATF Recommendations will factor into 
how Treasury approaches meeting this objective under Section 6216.
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    \30\ Section 6216(a)(1)(C)(ii) of the AML Act.
    \31\ See FATF, FATF Recommendations,--International Standards on 
Combatting Money Laundering and the Financing of Terrorism & 
Proliferation (``FATF Recommendations''), (updated Oct. 2021), at 
page 7, available at https://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATFRecommendations2012.pdf
    \32\ See FATF, FATF Recommendations, at page 8.
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    FATF published its most recent mutual evaluation of the United 
States in December 2016 \33\ and, in March 2020, issued a follow-up 
report.\34\ The purpose of this third follow-up report was to assess 
the United States' progress in addressing certain technical compliance 
deficiencies identified in the 2016 Mutual Evaluation Report, most 
notably relating to customer due diligence obligations, and to analyze 
the United States' progress in implementing new requirements relating 
to FATF Recommendations that have changed since the end of the 2016 
Mutual Evaluation.
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    \33\ See FATF, Anti-money laundering and counter-terrorist 
financing measures--United States, Fourth Round Mutual Evaluation 
Report, (2016), available at http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-united-states-2016.html.
    \34\ See FATF, Anti-money laundering and counter-terrorist 
financing measures--United States, 3rd Enhanced Follow-up Report & 
Technical Compliance Re-Rating, (2020), available at https://www.fatf-gafi.org/media/fatf/documents/reports/fur/Follow-Up-Report-United-States-March-2020.pdf.
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E. Make Changes to BSA Regulations and Guidance To Improve Efficiency

    Finally, Section 6216 requires FinCEN to make changes, as 
appropriate, to regulations and guidance to improve the efficiency of 
those provisions.\35\ FinCEN is asking the public to identify specific 
changes to BSA regulations and guidance that would make them more 
efficient. Efficiency in this context can refer to financial 
institutions focusing resources on providing information that is more 
useful to law enforcement, reporting highly useful information in a 
timely manner, or reducing redundancies and information of little use 
to law enforcement. As part of this process, FinCEN requests comment on 
regulations and guidance that do not support timely and cost-effective 
compliance with BSA obligations that produces highly useful information 
for law enforcement or U.S. Government entities.
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    \35\ Section 6216(a)(2) of the AML Act.
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IV. Questions for Comment

A. Safeguards To Protect the Financial System From Threats

    1. The objective of Section 6216(a)(1)(A) of the AML Act is to 
ensure that Treasury provides, on a continuing basis, for appropriate 
safeguards to protect the financial system from threats to national 
security posed by various forms of financial crime. Are there any 
threats, vulnerabilities, or risks that you think Treasury is unaware 
of, or that you think Treasury is not responding to with sufficient and 
appropriate safeguards? If so, please identify the threats, along with 
any suggestions you have for how Treasury might better identify and 
respond to them, including any safeguards that Treasury should 
implement.
    2. Do AML program requirements for financial institutions 
sufficiently address the threats, vulnerabilities, and risks faced by 
the U.S. financial system? If not, what changes do you recommend to 
ensure that AML program requirements adequately and effectively 
safeguard U.S. national security?

B. Reports and Records That Are Highly Useful in Countering Financial 
Crime

    3. Are there BSA reporting or recordkeeping requirements that you 
believe do not provide information that is highly useful in countering 
financial crimes? If so, what reports or records, and why? Conversely, 
are there reports

[[Page 71206]]

or records not currently required that would be highly useful? If so, 
what reports and records, and why?
    4. Are there specific changes to BSA reporting or recordkeeping 
requirements that would provide information that is more useful to law 
enforcement in countering financial crimes or allow financial 
institutions to better understand what information to report? If so, 
which reports or records, and what changes do you recommend?
    5. How can FinCEN ensure that BSA reporting and recordkeeping 
requirements are highly useful in countering financial crimes on a 
continuing basis? For example, should FinCEN conduct certain studies or 
analyze certain data on a regular basis to ensure BSA reports and 
records continue to be highly useful in countering financial crimes?
    6. Should FinCEN consider certain regular or automatic updates to 
specific BSA regulations to ensure the reports or records they require 
continue to be highly useful in countering financial crimes? For 
example, should FinCEN more regularly update certain BSA reports' 
fields based on frequency of use, terms included, or other relevant 
factors and trends identified? What other events might necessitate such 
updates?
    7. Would automatically updating certain BSA reporting or 
recordkeeping requirements streamline or reduce the potential 
compliance burden without sacrificing the usefulness of the required 
BSA reports and records in countering financial crimes? If so, what 
other requirements might benefit from automatic updates? For example, 
should automatic updates to dollar thresholds for certain BSA reports 
and records occur to account for inflation adjustments? What other 
circumstances might necessitate automatic updates?
    8. Should FinCEN consider periodic adjustments, such as customized 
thresholds, to BSA regulations and guidance to account for changes in 
risk, such as changes in geographic risk? What circumstances might 
necessitate customized thresholds and why?

C. Identify BSA Regulations and Guidance That May Be Outdated, 
Redundant, or Do Not Promote a Risk-Based AML/CFT Regime for Financial 
Institutions

i. Outdated Regulations
    9. Are there BSA regulations or guidance that do not promote risk-
based safeguards or that no longer fulfill their original purpose? If 
so, which regulations or guidance, and what changes do you recommend?
    10. Are there BSA regulations or guidance that are obsolete or no 
longer provide useful information to the government? Alternatively, are 
there any BSA regulations or guidance that target risks that no longer 
exists? If so, which regulations or guidance, and what changes do you 
recommend?
    11. Are there any BSA regulations or guidance that are obsolete 
because of changes in compliance business practices and/or 
technological innovation in the financial system or elsewhere? If so, 
how should FinCEN address this?
    12. Do FinCEN's regulations and guidance sufficiently allow 
financial institutions to incorporate innovative and technological 
approaches to BSA compliance? If not, how can FinCEN facilitate greater 
use of these tools, while ensuring that appropriate safeguards are in 
place and highly useful information continues to be reported to 
government authorities?
ii. Redundant Regulations
    13. Are there BSA regulations that impose requirements identical to 
or significantly overlapping with requirements imposed by other BSA 
regulations? If so, which BSA regulations, and what amendments do you 
recommend?
    14. Are there BSA regulations that impose requirements that are 
identical to or significantly overlap with requirements imposed under 
another regulatory regime? If so, which BSA regulations, and which 
other regulatory framework?
    15. Are there other provisions under the AML Act, or the BSA as 
amended by the AML Act, that you think will assist in eliminating 
redundant BSA regulations and guidance? If so, which sections of the 
AML Act or amended BSA, and why?
iii. Other Regulations That Do Not Promote a Risk-Based Regime
    16. Do any BSA regulations or guidance require or encourage 
resources be allocated inefficiently based on the level of risk that 
the regulations or guidance are intended to prevent or mitigate? If so, 
which regulations or guidance, and what changes would you recommend 
FinCEN make?
    17. Aside from any issues mentioned in response to the questions 
above, are there other BSA regulations or guidance that do not promote 
a risk-based approach? If so, which regulations or guidance, how do 
they fail to promote a risk-based regime, and what changes would you 
recommend FinCEN make? Please distinguish as clearly as possible 
between issues that result from the content of a regulation or 
guidance, and issues that result from compliance supervision, 
examinations, or audits.
    18. How else can FinCEN reaffirm that BSA regulations and guidance 
are intended to foster a risk-based approach?
    19. Are there BSA regulations or guidance for which applying a 
risk-based approach is challenging? If so, which regulations or 
guidance, what are the challenges, and how might FinCEN reduce or 
eliminate those challenges?
    20. Are there BSA regulations or guidance that are highly effective 
at promoting a risk-based approach such that they should be used as a 
model for other BSA regulations and guidance? If so, which regulations 
or guidance, and why?

D. Identify BSA Regulations and Guidance That Do Not Conform With 
International Standards To Combat Financial Crime

    21. Do any BSA regulations or guidance fail to conform with U.S. 
commitments to meet international standards, or do not fully implement 
international standards, including the FATF Recommendations? If so, 
which regulations or guidance, and why?
    22. Which deficiencies identified in the FATF's 2016 U.S. Mutual 
Evaluation Report and addressed in the third Follow-Up Report most 
significantly prevent the United States from fully implementing an 
effective and risk-based approach? What changes to regulations or 
guidance would you recommend to address the deficiencies identified?

E. Identify Changes to BSA Regulations and Guidance To Improve 
Efficiency

    23. Are there BSA regulations or guidance that should be amended to 
improve their efficiency? If so, which regulations or guidance, and 
what amendments do you recommend?
    24. Are there BSA regulations or guidance that are unclear or are 
overly burdensome in comparison to the risk posed? If so, which 
regulations or guidance? To what do you attribute the additional 
burden, and in what way (if any) is the burden excessive compared to 
the benefits of the regulation? Could the burden be reduced without 
making the regulations or guidance less effective? If so, how?
    25. Aside from any regulations or guidance identified in response 
to previous questions, are there any BSA regulations or guidance with 
which you believe compliance provides minimal or no benefit to the 
government, thus making any compliance burden excessive? If so, which 
regulations or

[[Page 71207]]

guidance, and would you propose to amend or repeal them? If amend, how? 
And if repeal, why repeal rather than amend?
    26. In what ways could BSA regulations or guidance be more 
efficient in light of innovative approaches and new technologies. For 
should any BSA regulations or guidance account for technological 
advancements, such as digital identification, machine learning, and 
artificial intelligence? If so, how?

V. Conclusion

    Conducting the formal review required under Section 6216 of the AML 
Act will assist FinCEN in modernizing and streamlining BSA regulations 
and guidance to ensure that they continue to: (i) Support the purposes 
and goals of the BSA and the AML Act, and (ii) safeguard the U.S. 
financial system. The formal review will also allow FinCEN to identify 
and, as appropriate, revise regulations and guidance that do not 
promote a risk-based AML/CFT regime for financial institutions, are not 
in conformity with international standards, or are outdated, redundant, 
or inefficient. In addition, the formal review will assist FinCEN in 
identifying recommendations for administrative and legislative changes 
to BSA regulations and guidance. FinCEN seeks input from the public on 
the questions set forth above, including from regulated parties; state, 
local, and Tribal governments; law enforcement; regulators; other 
consumers of BSA data; and any other interested parties. We encourage 
all interested parties to provide their views.

Himamauli Das,
Acting Director, Financial Crimes Enforcement Network.
[FR Doc. 2021-27081 Filed 12-14-21; 8:45 am]
BILLING CODE 4810-02-P