CUNA Comment Letter
Money Laundering - Sharing of Information
April 3, 2002
Special Information Sharing
Section 314 Comments
PO Box 1618
Vienna, VA 22183-1618
Re: Attention: Proposed Rule Special Information Sharing Section 314
Dear Sir or Madam:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed and interim final rules regarding information sharing procedures designed to deter money laundering and terrorist activities, which appeared in the Federal Register on March 4, 2002. CUNA represents more than 90 percent of our nations 10,500 state and federal credit unions.
These rules, which were issued by the Financial Crimes Enforcement Network (FinCen), a bureau of the Department of the Treasury (Treasury), implement certain provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot) Act of 2001. Specifically, the rules are designed to encourage information sharing among financial institutions and federal government law enforcement agencies to identify, prevent, and deter money laundering and terrorist activities. CUNA has identified several recommendations that we believe will facilitate information sharing as intended by Congress
Summary of CUNAs Position
- With regard to the reporting of transactions, the term transaction-- is not clearly defined and could be interpreted broadly to include individuals and entities that are only tangentially related to an institutions activities. The term transaction-- should be defined so that financial institutions should only be required to take reasonable steps to determine if an identified individual or entity is involved in an institutions activities.
- These rules should clarify that the institution will always have the time needed to conduct an adequate and thorough search.
- The rules also do not specify how long financial institutions will have to retain records regarding closed accounts and past transactions. There are already existing rules in this area, and we believe the FinCen rules should clarify that these existing requirements are not affected.
- The definition of financial institution-- for the purpose of sharing information with other financial institutions under the interim final rules may be too broad and should exclude certain entities that are not full-service financial service providers.
- Under the interim final rules, financial institutions are required to submit a certification to FinCen that the sharing of information with other institutions is in accordance with these rules. Financial institutions should not be required to verify that the entities that they share information with have also filed these certifications.
All credit unions recognize that the terrorist attacks of September 11, 2001 highlight the need for improved information sharing between financial institutions and government law enforcement agencies, as well as among financial institutions themselves. Credit unions generally support these proposed and interim final rules, which are intended to utilize the resources of FinCen to create a communication network to accomplish this goal, while ensuring that consumer privacy is not compromised.
Under the proposed rules for the sharing of information between government and financial institutions, FinCen will act on behalf of government law enforcement and will have the authority to request that a financial institution search its records for information with regard to money laundering or terrorist activities. Under the interim final rules for the sharing of information with other financial institutions, each institution must submit a certification to FinCen that the sharing is in accordance with these rules. Among other items, this includes confirmation that the institution will maintain adequate procedures to protect the security and confidentiality of the information.
Although credit unions generally support the proposed and interim final rules, there are a number of concerns that should be addressed before these rules are issued in final form. Addressing these concerns should help alleviate burden and uncertainty for financial institutions without jeopardizing the goal of improving information sharing in order to detect money laundering and terrorist activities.
With regard to the reporting of transactions, the term transaction-- is not clearly defined and could be interpreted to include individuals and entities that are only tangentially related to an institutions activities, such as payees of checks and wire transfers. Financial institutions should only be required to take reasonable measures to determine if an identified individual or entity is involved in an institutions activities and it would be helpful if FinCen were to provide examples of what would be reasonable under these circumstances.
For example, it would be reasonable to require a financial institution to review its customer or membership base to determine if the identified individual or entity has an account at the financial institution. However, it would not be reasonable to require a financial institution to review copies of all of the account holders processed checks to determine if the individual or entity is a payee of a check.
FinCen should also consider a financial institutions size and technological capabilities when determining whether a particular type of record search is reasonable. Such a search should be sufficient if it is conducted in a good faith and reasonable manner, which should at least partially be based on the size and the level of technology that is available to the institution. Spot checks by FinCen should be sufficient to determine if an institution is complying with these rules.
These rules should also clarify that the institution will always have the time needed to conduct an adequate and thorough search. The rules could either require that government law enforcement provide institutions with an adequate amount of time to conduct the search, based on the complexity of the search, or clarify that the financial institution will always have a reasonable amount of time to conduct such a search.
The rules also do not specify how long financial institutions will have to retain records regarding closed accounts and past transactions. There are already existing rules in this area. For example, 12 CFR Part 749 outlines a number of these requirements, which apply to federally insured credit unions, and are similar to those that apply to other financial institutions. We believe the FinCen rules should clarify that these existing requirements are not affected.
We also believe that the definition of financial institution-- for the purpose of sharing information with other financial institutions under the interim final rules may be too broad. Providing information to other entities that may be included under this broad definition, such as pawnbrokers and automobile dealers, could increase the potential for misuse of account information. For this reason, we recommend that the following entities be specifically excluded from the definition of financial institution-- described in 31 USC § 5312(a)(2), which is referenced in the interim final rules:
- Private bankers
- Currency exchangers
- Issuers, redeemers, or cashiers of travelers checks, checks, money orders, or similar instruments
- Insurance companies
- Dealers in precious metals, stones, or jewels
- Loan or finance companies
- Travel agencies
- Businesses engaged in vehicle sales
- Persons involved in real estate closings and settlements
- Gaming establishments
Also, the interim final rules with regard to the sharing of information among financial institutions does not indicate whether an institution is responsible for determining if the other entities that it is sharing information with have also filed the required certifications with FinCen. We urge FinCen to not add additional burden by requiring financial institutions to undertake this responsibility.
Thank you for the opportunity to comment on these proposed and interim final rules designed to deter money laundering and terrorist activities. If you or other staff have questions about our comments, please give Associate General Counsel Mary Dunn or me a call at 1-800-356-9655.
Assistant General Counsel