[Federal Register Volume 89, Number 119 (Thursday, June 20, 2024)]
[Notices]
[Pages 51940-51944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13590]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
Agency Information Collection Activities; Proposed Renewal;
Comment Request; Renewal Without Change of the Customer Identification
Program Regulatory Requirements for Certain Financial Institutions
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice and request for comments.
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SUMMARY: As part of its continuing effort to reduce paperwork and
respondent burden, FinCEN invites comments on the proposed renewal,
without change, of existing information collection requirements found
in Bank Secrecy Act regulations that require banks, savings
associations, credit unions, certain non-federally regulated banks and
trust companies (collectively hereinafter ``banks''), brokers-dealers,
mutual funds, futures commission merchants, and introducing brokers in
commodities, to develop and implement customer identification programs
designed to allow the financial institutions to form a reasonable
belief that they know the true identity of each of their customers.
This request for comments is made pursuant to the Paperwork Reduction
Act of 1995 (PRA).
DATES: Written comments are welcome and must be received on or before
August 19, 2024.
ADDRESSES: Comments may be submitted by any of the following methods:
Federal E-rulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. Refer to Docket Number
FINCEN-2023-0015 and Office of Management and Budget (OMB) control
numbers 1506-0022, 1506-0026, 1506-0033, and 1506-0034.
Mail: Policy Division, Financial Crimes Enforcement
Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket
[[Page 51941]]
Number FINCEN-2023-0015 and OMB control numbers 1506-0022, 1506-0026,
1506-0033, and 1506-0034.
Please submit comments by one method only. Comments will be
reviewed consistent with the PRA and applicable OMB regulations and
guidance. All comments submitted in response to this notice will become
a matter of public record. Therefore, you should submit only
information that you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT: FinCEN's Regulatory Support Section at
1-800-767-2825 or electronically at [email protected].
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Provisions
The legislative framework generally referred to as the Bank Secrecy
Act (BSA) consists of the Currency and Foreign Transactions Reporting
Act of 1970, as amended by the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act) \1\ and other legislation,
including the Anti-Money Laundering act of 2020 (AML Act).\2\ The BSA
is codified at 12 U.S.C. 1829b and 1951-1960 and 31 U.S.C. 5311-5314
and 5316-5336, and notes thereto, with implementing regulations at 31
CFR chapter X.
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\1\ USA PATRIOT Act, Public Law 107-56.
\2\ The AML Act was enacted as Division F, sections 6001-6511,
of the William M. (Mac) Thornberry National Defense Authorization
Act for Fiscal Year 2021, Public Law 116-283, 134 Stat. 3388 (NDAA).
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The BSA authorizes the Secretary of the Treasury (Secretary) to,
inter alia, require financial institutions to keep records and file
reports that are determined to have a high degree of usefulness in
criminal, tax, or regulatory matters, risk assessments or proceedings,
or in the conduct of intelligence or counter-intelligence activities to
protect against terrorism, and to implement anti-money laundering/
countering the financing of terrorism (AML/CFT) programs and compliance
procedures.\3\ The authority of the Secretary to administer the BSA has
been delegated to the Director of FinCEN.\4\
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\3\ Section 358 of the USA PATRIOT Act expanded the purpose of
the BSA by including a reference to reports and records ``that have
a high degree of usefulness in intelligence or counterintelligence
activities to protect against international terrorism.'' See 12
U.S.C. 1829b(a). Section 6101 of the AML Act further expanded the
purpose of the BSA to cover such matters as preventing money
laundering, tracking illicit funds, assessing risk, and establishing
appropriate frameworks for information sharing. See 31 U.S.C. 5311.
\4\ Treasury Order 180-01 (Jan. 14, 2020).
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31 U.S.C. 5318(l) requires the Secretary to issue regulations
prescribing minimum standards for customer identification programs
(CIPs) for financial institutions.\5\ Regulations implementing section
5318(l) are as follows: (i) banks (31 CFR 1020.220); (ii) brokers-
dealers (31 CFR 1023.220); \6\ (iii) mutual funds (31 CFR 1024.220);
\7\ and (iv) futures commission merchants and introducing brokers in
commodities (31 CFR 1026.220).\8\
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\5\ Section 5318(l)(2) prescribes that the regulations, at a
minimum, require financial institutions to implement reasonable
procedures for: (1) verifying the identity of any person seeking to
open an account, to the extent reasonable and practicable; (2)
maintaining records of the information used to verify the person's
identity, including name, address, and other identifying
information; and (3) determining whether the person appears on any
lists of known or suspected terrorists or terrorist organizations
provided to the financial institution by any government agency.
Section 5318(l)(3) further directs that the regulations take into
consideration the types of accounts maintained by financial
institutions, the methods of opening accounts, and the types of
identifying information available.
\6\ ``Broker-dealer'' means a person registered or required to
be registered as a broker or dealer with the Commission under the
Securities Exchange Act of 1934 (15 U.S.C. 77a et seq.), except
persons who register pursuant to 15 U.S.C. 78o(b)(11). 31 CFR
1023.100(b).
\7\ ``Mutual fund'' means an ``investment company'' (as the term
is defined in section 3 of the Investment Company Act (15 U.S.C.
80a-3)) that is an ``open-end company'' (as that term is defined in
section 5 of the Investment Company Act (15 U.S.C. 80a-5)) that is
registered or is required to register with the Commission under
section 8 of the Investment Company Act (15 U.S.C. 80a-8). 31 CFR
1010.100(gg).
\8\ ``Futures commissions merchants'' means any person
registered or required to be registered as a futures commission
merchant with the Commodity Futures Trading Commission (``CFTC'')
under the Commodity Exchange Act (7 U.S.C. 1 et seq.), except
persons who register pursuant to Section 4f(a)(2) of the Commodity
Exchange Act (7 U.S.C. 6f(a)(2)). 31 CFR 1026.100(f). ``Introducing
broker'' means any person registered or required to be registered as
an introducing broker with the CFTC under the Commodity Exchange Act
(7 U.S.C. 1 et seq.), except persons who register pursuant to
Section 4f(a)(2) of the Commodity Exchange Act (7 U.S.C. 6f(a)(2)).
31 CFR 1026.100(g).
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All covered financial institutions \9\ are required to implement a
CIP appropriate for its size and type of business. The CIP must include
at a minimum the following five requirements:
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\9\ The term ``covered financial institution'' applies to all
financial institutions with a CIP regulatory requirement, namely
banks, brokers-dealers, mutual funds, futures commission merchants,
and introducing brokers in commodities.
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(1) Written CIP appropriate for the financial institution's size
and type of business (if a financial institution is required to have an
AML compliance program,\10\ the CIP must be part of the written AML
compliance program); \11\
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\10\ 31 CFR 1020.210; 1023.210; 1024.210; and 1026.210.
\11\ 31 CFR 1020.220(a)(1); 1023.220(a)(1); 1024.220(a)(1); and
1026.220(a)(1).
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(2) Identity verification procedures (risk-based procedures for
verifying the identity of each customer to the extent reasonable and
practicable that enable the financial institution to form a reasonable
belief that it knows the true identity of the customer); \12\
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\12\ 31 CFR 1020.220(a)(2); 1023.220(a)(2); 1024.220(a)(2); and
1026.220(a)(2).
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(3) Recordkeeping (procedures for making and maintaining a record
of all information obtained under the CIP requirements); \13\
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\13\ 31 CFR 1020.220(a)(3); 1023.220(a)(3); 1024.220(a)(3); and
1026.220(a)(3).
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(4) Consultation of government lists (procedures to determine
whether the customer appears on any list of known or suspected
terrorists or terrorist organizations issued by any Federal government
agency and designated as such by Treasury in consultation with the
Federal functional regulators); \14\ and
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\14\ 31 CFR 1020.220(a)(4); 1023.220(a)(4); 1024.220(a)(4); and
1026.220(a)(4).
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(5) Customer notice (procedures for providing bank customers with
adequate notice that the bank is requesting information to verify their
identities).\15\
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\15\ 31 CFR 1020.220(a)(5); 1023.220(a)(5); 1024.220(a)(5); and
1026.220(a)(5).
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The CIP may also include procedures specifying when a financial
institution may rely on another financial institution to perform any of
the financial institution's CIP procedures, provided certain conditions
are met.\16\
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\16\ 31 CFR 1020.220(a)(6); 1023.220(a)(6); 1024.220(a)(6); and
1026.220(a)(6).
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II. Paperwork Reduction Act of 1995 17
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\17\ Public Law 104-13, 44 U.S.C. 3506(c)(2)(A).
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Title: Customer identification programs (CIPs) for certain
financial institutions (31 CFR 1020.220, 1023.220, 1024.220, and
1026.220).
OMB Control Numbers: 1506-0022, 1506-0026, 1506-0033, and 1506-
0034.\18\
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\18\ The CIP regulatory requirements are currently covered under
the following OMB control numbers: 1506-0022 (31 CFR 1026.220--
Customer identification programs for futures commission merchants
and introducing brokers); 1506-0026 (31 CFR 1020.220--Customer
identification programs for banks); 1506-0033 (31 CFR 1024.220--
Customer identification programs for mutual funds); and 1506-0034
(31 CFR 1023.220--Customer identification programs for brokers-
dealers).
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Form Number: Not applicable.
Abstract: FinCEN is issuing this notice to renew the OMB control
numbers for the CIP regulatory requirements for covered financial
institutions.
Affected Public: Businesses or other for-profit institutions, and
non-profit institutions.
Type of Review: Renewal without change of currently approved
information collections.
[[Page 51942]]
Frequency: As required.
Estimated Number of Respondents: 16,232 financial institutions.\19\
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\19\ Table 1 below sets forth a distribution of the types of
financial institutions covered by this notice.
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Estimated Recordkeeping Burden:
In Part 1 of this notice, FinCEN describes the distribution of the
estimated number of covered financial institutions, by type, and the
estimated number of new accounts opened per year, by type of covered
financial institution. In addition, Part 1 describes the primary
characteristics of covered financial institutions' CIP requirements. In
Part 2, FinCEN proposes for review and comment a renewal of the
calculation of the annual PRA burden that includes a scope and
methodology similar to that used in the 2020 notice to renew the OMB
control numbers associated with these information collections.\20\
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\20\ See FinCEN, Agency Information Collections 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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Part 1. Distribution of the Financial Institutions and New Accounts
Covered by This Notice
The distribution of financial institutions and new accounts opened
annually that are covered by this notice, by type of financial
institution, is as follows:
Table 1--Distribution of Financial Institutions and New Accounts Covered by This Notice, by Type of Financial
Institution
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Number of financial Number of new accounts
Type of financial institution institutions opened annually
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Banks with a Federal functional regulator (FFR)........... \a\ 9,800 \f\ 9,305,000
Banks lacking an FFR...................................... \b\ 600 \g\ 315,000
Brokers-dealers........................................... \c\ 3,478 \h\ 28,000,000
Mutual funds.............................................. \d\ 1,400 \i\ 16,150,000
Futures commission merchants and introducing brokers in \e\ 954 \j\ 557,000
commodities..............................................
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Total................................................. 16,232 54,327,000
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\a\ This estimate is based on call report data, as publicly available for download at the end of June 2023, from
the Federal Financial Institutions Examination Council (FFIEC) for certain types of banks, savings
associations, thrifts, trust companies (https://cdr.ffiec.gov/public/pws/downloadbulkdata.aspx.) and from the
NCUA for credit unions (https://www.ncua.gov/analysis/credit-union-corporate-call-report-data).
\b\ This estimate of active entries as of year-end 2023 incorporates data from both public and non-public
sources, including: Call Reports; various State banking/financial institution regulators' websites and
directories; the Federal Reserve Board of Governors' Master Account and Services database (https://federalreserve.gov/paymentsystems/master-account-and services-database-exisiting-access.htm); and data from
the OCIF (Oficina del Comisionado de Instituciones Financieras); and was derived in consultation with staff
from the Internal Revenue Service's Small Business/Self-Employed Division.
\c\ This estimate is based on a December 2023 file downloaded from data maintained by the U.S. Securities and
Exchange Commission's (SEC). SEC, Company Information About Active Broker-Dealers available at https://www.sec.gov/help/foiadocsbdfoia (accessed on Feb. 28, 2024).
\d\ This estimate is based on the number of active mutual funds as of year-end 2023, which is based on Form N-
CEN filings received by the SEC through January 20, 2023, as represented by data downloaded from SEC Open
Data. SEC, Open Data, available at https://www.sec.gov/dera/data/form-ncen-data-sets (accessed Feb. 29, 2024).
\e\ This estimate is based on the number of futures commissions merchants as of December 31, 2023, and was
obtained from data available through the Commodity Futures Trading Commission (CFTC). CFTC, Financial Data for
Futures Commission Merchants, available at https://www.cftc.gov/MarketReports/financialfcmdata/index.htm
(accessed Mar. 1, 2024). To prevent double counting in burden estimates, 35 covered financial institutions
that are also affected entities as broker-dealers were removed from the count; the count of introducing
brokers in commodities as of year-end 2023 was provided by the CFTC.
\f\ This estimate represents a lower bound of potential new accounts opened annually because it is based on
limited available data. The public is invited to provide data, studies, or estimates that might revise this
value. The current estimate is informed by consultation with staff from the National Credit Union Association
(NCUA), which estimated that there are approximately 5,300,000 new accounts opened annually by credit unions
with an FFR (based on the ten-year annual average growth rate in credit union membership computed using year
end data from 2014 to 2023, as reported by Federally insured credit unions (FICUs)). It also includes an
estimate of 4,005,000 new accounts opened annually by banks with an FFR, based on the observed number of bank-
on accounts opened in calendar year 2022, see Bank On National Data Hub: Findings from 2022 St.
Louis Fed (stlouisfed.org). This estimate does not include a number of traditional bank accounts opened
annually, but as FinCEN assumes that such a value is strictly non-zero, it requests public comment to revise.
\g\ This estimate was calculated by applying an estimated growth rate (3.8%) provided by the NCUA to the average
new members per institute derived from 2023-year end data on credit unions lacking an FFR (13,806 new members/
accounts opened annually). Applied to all banks lacking an FFR in the category (per financial institution new
members annually: ((1,353,017/98) x 0.038) equals approximately 315,000 total new members annually per: 600
banks lacking an FFR multiplied by approximately 525 new members per financial institution.
\h\ According to the SEC, there were approximately 28,000,000 new accounts opened by broker or dealers in
securities in 2023, based on forms filed with the SEC.
\i\ This estimate was derived, in consultation with SEC staff, using publicly available information from the
Investment Company Institute (ICI) Fact Book available at: https://www.ici.org/fact-book). FinCEN notes that
this estimate of new accounts per year may be overinclusive because the ICI data utilized covers all U.S.
registered funds, and not only mutual funds and exchange-traded funds. Additionally, because this estimate
reflects certain assumptions about the extent to which individuals who already invest in registered funds may
open new accounts with different funds, it may approximate with greater imprecision the underlying number of
unique new customers that are onboarded each year.
\j\ This estimate was formed in consultation with CFTC staff input based on data from the end of calendar year
2023. Because this estimate pertains to the number of new accounts opened in a one-year period, which may be
numerically distinct from the number of customers (who open such accounts), it can be treated as a potential
upper bound on the number of instances that would incur a distinct CIP compliance burden.
In connection with a variety of initiatives FinCEN is undertaking
to implement the AML Act, FinCEN intends to conduct, in the future,
additional assessments of the PRA burden associated with BSA
requirements.
Part 2. Annual PRA Burden and Cost
For all covered financial institutions, FinCEN continues estimating
the incremental annual PRA recordkeeping burden associated with
maintaining and updating the CIP (``maintenance'') at ten hours per
financial institution. This estimate covers: (a) an average of
approximately nine hours per financial
[[Page 51943]]
institution per year associated with the burden of updating the records
necessary to demonstrate compliance with CIP requirements to take into
consideration any regulatory changes and any modifications required as
a result of a financial institution making changes to the type of
accounts maintained, the methods used to open accounts, and the types
of documentary or non-documentary methods for verifying identifying
information the financial institution intends to use; and (b) an
average of approximately one hour per financial institution associated
with the burden of presenting the updated CIP to the appropriate level
of management within the financial institution and obtaining approval.
In addition, FinCEN continues estimating the incremental annual PRA
recordkeeping burden associated with providing customers with
notification of the CIP (``notification'') at one hour per financial
institution.
FinCEN also continues estimating the incremental annual PRA
recordkeeping burden associated with obtaining and verifying a
customer's identity (i.e., verification and recordkeeping requirements,
and consulting government lists) (``implementation'') at two minutes
per new account opened.
Under these assumptions, FinCEN's estimate of the annual
incremental PRA burden is 1,989,452 hours, as detailed in tables 2 and
3.\21\
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\21\ The total estimate of the annual PRA burden is the
summation of the total hourly burden of CIP maintenance (162,320),
notification (16,232) and implementation (1,810,900) as set out in
table 2 and 3, for a total of 1,989,452 hours.
Table 2--Incremental Annual Burden Associated With Updating and Maintaining the CIP and Customer Notification for All Covered Financial Institutions
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Time per financial Burden hours per step
Number of institution (hours) (hour) ------------------------------ Total
Type of financial institution financial ------------------------------ burden
institutions \22\ Maintenance Notification Maintenance Notification hours
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Banks with an FFR.............................................. 9,800 10 1 98,000 9,800 107,800
Banks lacking an FFR........................................... 600 10 1 6,000 600 6,600
Brokers-dealers................................................ 3,478 10 1 34,780 3,478 38,258
Mutual funds................................................... 1,400 10 1 14,000 1,400 15,400
Futures commission merchants and introducing brokers in 954 10 1 9,540 954 10,494
commodities...................................................
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Totals..................................................... 16,232 ............ .............. 162,320 16,232 178,552
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\22\ As set out in table 1 above.
Table 3--Incremental Annual Burden Associated With Implementing the Identity Verification, Recordkeeping, and
Consulting Government Lists Requirements for All Covered Financial Institutions
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Number of New accounts Time per new Total burden
Type of financial institution financial opened per account Total burden converted to
institutions \23\ year (minutes) in minutes hours
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Banks with an FFR............ 9,800 9,305,000 2 18,610,000 310,167
Banks lacking an FFR......... 600 315,000 2 630,000 10,500
Brokers-dealers.............. 3,478 28,000,000 2 56,000,000 933,333
Mutual funds................. 1,400 16,150,000 2 32,300,000 538,333
Futures commission merchants 954 557,000 2 1,114,000 18,567
and introducing brokers in
commodities.................
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Totals................... 16,232 54,327,000 .............. 108,654,000 1,180,900
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\23\ As set out in table 1 above.
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FinCEN is utilizing the same fully loaded composite hourly wage
rate of $106.30 utilized in other OMB control number renewals and
notices of proposed rulemakings (NPRMs) currently opened to public
review and comment.\24\
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\24\ See, e.g., FinCEN and SEC, NPRM Customer Identification
Programs for Registered Investment Advisers and Exempt Reporting
Advisers, 89 FR 44571 (May 21, 2024).
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The total estimated cost of the annual PRA burden is
$211,478,747.60, as reflected in table 4 below:
Table 4--Total Cost of Annual PRA Burden
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Hourly Hourly
Steps burden cost Total cost
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Maintaining and updating the CIP 162,320 $106.30 $17,254,616.00
Notifying customers of CIP 16,232 106.30 1,725,461.60
requirements...................
Implementing the CIP 1,810,900 106.30 192,498,670.00
(identifying and verifying
customer information,
maintaining records, and
consulting government lists)...
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[[Page 51944]]
Total cost.................. .......... ........ 211,478,747.60
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Estimated Recordkeeping Burden: The average estimated annual PRA
burden, measured in time per respondent is as follows:
a. Ten hours annually per financial institution to maintain and
update the CIP.
b. One hour annually per financial institution to provide customers
with notification of the CIP.
c. Two minutes per account opened by a financial institution to
obtain and verify a customer's identity (i.e., verification and
recordkeeping requirements, and consulting government lists).
Estimated Number of Respondents: 16,232, as set out in table 1.
Estimated Total Annual Responses:
a. 16,232 updated and board approved CIPs annually, as set out in
table 2.
b. 16,232 notifications to customers of CIP requirements, as set
out in table 2.
c. 54,327,000 new account relationships opened for which covered
financial institutions obtained and verified customer identification,
as set out in table 3.
Estimated Total Annual Recordkeeping Burden: The estimated total
annual PRA burden is 178,552 hours, as set out in table 2, plus
1,810,900 hours, as set out in table 3, for a total of 1,989,452 hours.
Estimated Total Annual Recordkeeping Cost: The estimated total
annual PRA cost is $211,478,747.60, as set out in table 4.
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 under the BSA must be retained for five years.
Request for Comments: Comments submitted in response to this notice
will be summarized and/or included in the request for OMB approval. All
comments will become a matter of public record. Comments are invited
on: (i) whether the collection of information is necessary for the
proper performance of the functions of the agency, including whether
the information shall have practical utility; (ii) the accuracy of the
agency's estimate of the burden of the collection of information; (iii)
ways to enhance the quality, utility, and clarity of the information to
be collected; (iv) 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; and (v)
estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-13590 Filed 6-18-24; 8:45 am]
BILLING CODE 4810-02-P