FinCEN Proposed Rule On Cross-Border Electronic Transmittal Of Funds Reporting Requirements Draws Criticism From Banking Community

Jan 04, 2011   

In September 2010, the Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking that would increase the reporting requirements associated with cross-border electronic transmittals of funds (“CBETF”) for banks and money transmitters. In the months that have followed, numerous organizations have voiced their criticism of the proposed rule stating that the additional reporting requirements are excessive, costly, and will not have the intended effect on money laundering that FinCEN hopes.

The current rule, which is part of a larger regulatory framework that enforces the Intelligence Reform and Terrorism Prevention Act of 2004 and the Bank Secrecy Act, requires that financial institutions retain records for transfers of $3000 or more and only to report wire transfers if the transfers are deemed suspicious. However, under the Proposed Rule, banks and depository institutions which exchange international wire transfers directly with foreign financial institutions would be required to submit copies of the money transmittal order for each CBETF. Additionally, banks would be required to report the tax identification numbers on all accounts used to send or receive a CBETF. The proposed rule applies the same taxpayer identification number reporting requirement on money services businesses for all CBETF of $1000 or more. FinCEN believes the new reporting requirements will help combat money laundering and tax evasion by allowing the agency to collect information on CBETF in a centralized database which can then be linked with data from other financial intelligence sources.

The proposed taxpayer identification number reporting requirement has drawn the furor of financial institutions nationwide. On December 28, 2010, the Independent Community Bankers of America (“ICBA”) sent a letter to FinCEN calling for the suspension of the proposed rule, along with a list of criticisms and proposals for change. The ICBA believes the proposed rule creates an excessive burden on community banks because many community banks do not have the infrastructure in place to distinguish between incoming domestic and international wire transfers. The ICBA also believes the proposed rule ignores the reality that many community banks use intermediaries to process CBETF, therefore community banks would not be able to comply with the reporting requirements until their intermediaries supply the required information. Additionally, the ICBA believes the scope of the proposed rule is unclear as the rule does not directly address whether banks must report accountholders tax identification numbers for cancelled, rejected, or amended transfers.

The ICBA proposed several changes to the FinCEN proposed rule including permitting banks to transfer reporting requirements to third-party carriers and an 18 month window period for compliance with the reporting rules once a final rule is issued. If you have questions pertaining to the Bank Secrecy Act, FinCEN regulations, anti-money laundering compliance or how to ensure that your business maintains regulatory compliance at both the state and federal levels, contact Fuerst Ittleman PL at contact@fidjlaw.com.