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NAFCU letter on today’s hearing: “Examining the BSA/AML Regulatory Compliance Regime”

WASHINGTON, DC (June 28, 2017) — The National Association of Federally-Insured Credit Unions (NAFCU) Vice President Brad Thaler yesterday wrote to the House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit n tomorrow’s hearing, “Examining the BSA/AML Regulatory Compliance Regime.”

In the letter, Thaler wrote, “NAFCU believes that FinCEN could minimize the burden of information collection by raising the required SAR reporting threshold. The current threshold of $5,000 was set in 1996, which today equates to approximately $8,000, due to inflation.  As more transactions cross the threshold, more SARs are filed in response.

“FinCEN should also encourage more coordination between law enforcement priorities and credit union examiners.  Many of our members have indicated that prudential examiners are too heavily focused on auditing absolute numbers of SAR filings and absolute compliance.  As an example, many of our members have experienced situations where an examiner makes a finding on a SAR based on a pure technical issue, such as a strict timing deadline, which does not truly affect the usefulness of the SAR.”

Thaler concluded, “Many credit unions are affected by these compliance burdens and must spend significant time and resources on BSA/AML compliance. NAFCU believes that FinCEN could provide opportunities for technical grants or training to assist with the cost of software or technological capabilities to reduce the number of man-hours involved.  Such a move would be in direct alignment with FinCEN’s objectives, as training and technological subsidies would enable more credit unions to have robust AML/BSA procedures in-place, thereby furthering FinCEN’s goals.”

Below please find the full text of the letter:

June 27, 2017

The Honorable Blaine Luetkemeyer                          The Honorable Lacy Clay

Chairman                                                                    Ranking Member

House Financial Services Committee                        House Financial Services Committee

Subcommittee on Financial Institutions                    Subcommittee on Financial Institutions

and Consumer Credit                                             and Consumer Credit

United States House of Representatives                 United States House of Representatives

Washington, D.C. 20515                                           Washington, D.C. 20515

Re:      Tomorrow’s hearing “Examining the BSA/AML Regulatory Compliance Regime”

Dear Chairman Luetkemeyer and Ranking Member Clay:

On behalf of the National Association of Federally-Insured Credit Unions (NAFCU), the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions, I am writing regarding the hearing entitled “Examining the BSA/AML Regulatory Compliance Regime.”

NAFCU has consistently recognized the importance of Financial Crimes Enforcement Network (FinCEN), Bank Security Act (BSA), and Anti-Money Laundering (AML) requirements in assisting in the prevention of tax evasion, money laundering and terror financing. Credit unions support efforts to combat criminal activity in the financial system.  Our members have a good working relationship with FinCEN, and they consistently inform us that the publication of periodic AML/BSA guidance is very helpful.  However, BSA requirements still remain a burden to implement, especially in the ever-growing tidal wave of new regulations since the financial crisis.  We urge the Subcommittee to continue to look for ways to provide credit unions with regulatory relief.

NAFCU believes that FinCEN could minimize the burden of information collection by raising the required SAR reporting threshold. The current threshold of $5,000 was set in 1996, which today equates to approximately $8,000, due to inflation.  As more transactions cross the threshold, more SARs are filed in response. This increased volume potentially obfuscates the activities of bad actors. Increasing the threshold and indexing it for inflation would help to prevent the frequency of SAR filings from increasing beyond a manageable level, leading to more accurate FinCEN estimates for record keeping.  We also support raising the threshold for Currency Transaction Reports (CTRs).

FinCEN should also encourage more coordination between law enforcement priorities and credit union examiners.  Many of our members have indicated that prudential examiners are too heavily focused on auditing absolute numbers of SAR filings and absolute compliance.  As an example, many of our members have experienced situations where an examiner makes a finding on a SAR based on a pure technical issue, such as a strict timing deadline, which does not truly affect the usefulness of the SAR.  Instead, NAFCU believes that FinCEN should encourage prudential examiners to conduct more holistic and systemic audits, such as reviewing a credit union’s procedures and practices.

NAFCU believes that FinCEN can take certain actions that would minimize the burden of information collection for ongoing suspicious activities while still meeting the agency’s overall objectives. We also recommend that FinCEN consider ways extend suspicious activity filing deadlines for financial institutions to ease reporting burdens, especially for ongoing activity. Concurrently, FinCEN could allow for simplified SAR “notice filings” that reference earlier, more detailed SAR reports regarding the same, ongoing activity. This will greatly reduce the number of hours spent by credit unions that continuously report on unchanging and ongoing circumstances and provide a more streamlined flow of information for law enforcement.

Many credit unions are affected by these compliance burdens and must spend significant time and resources on BSA/AML compliance. NAFCU believes that FinCEN could provide opportunities for technical grants or training to assist with the cost of software or technological capabilities to reduce the number of man-hours involved.  Such a move would be in direct alignment with FinCEN’s objectives, as training and technological subsidies would enable more credit unions to have robust AML/BSA procedures in-place, thereby furthering FinCEN’s goals.

As you are likely aware, credit unions and other financial institutions will soon be required to comply with new regulations intended to help curb illicit activity. The new regulations, promulgated by FinCEN will require credit unions to identify and verify the identity of beneficial owners of legal entity customers, such as corporations and limited liability companies. FinCEN promulgated this regulation under authority of the Bank Secrecy Act (BSA) to prevent bad actors and other criminals from obfuscating illegal activity behind shell companies.

NAFCU supports efforts, such as the draft Corporate Transparency Act from Representative Carolyn Maloney, which would help facilitate more coordination between state agencies, law enforcement, and credit unions by ensuring that credit unions have access to beneficial ownership information collected by states, relating to corporations or limited liability companies formed under state laws.

NAFCU appreciates this opportunity to provide comments on ways to improve the current BSA/AML regulatory compliance regime. We look forward to collaborating with the Subcommittee on Financial Institutions and Consumer Credit as it seeks to ease the regulatory burden on credit unions. Should you have any questions or require any additional information, please do not hesitate to contact me or Gaurav Parikh, NAFCU’s Associate Director of Legislative Affairs, at 703-842-2261.

Sincerely,

Brad Thaler

Vice President of Legislative Affairs

cc:       Members of the Subcommittee on Financial Institutions and Consumer Credit


About NAFCU

The National Association of Federally-Insured Credit Unions is the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions. NAFCU membership is direct and provides credit unions with the best in federal advocacy, education and compliance assistance. For more information on NAFCU, go to www.nafcu.org or @NAFCU on Twitter.

Contacts

Molly Safreed, msafreed@nafcu.org (NAFCU)

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