CUNA Regulatory Comment Call


July 5, 2006

ANPR ON LOWERING OR ELIMINATING THRESHOLD FOR BSA RECORDKEEPING RULE FOR WIRES

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; or e-mail them to Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004. For a copy of this Advance Notice of Proposed Rulemaking, you may access it on the Internet at the following address: ( http://www.federalreserve.gov/boarddocs/press/bcreg/2006/20060616/attachment.pdf)

BACKGROUND

In 1995, a recordkeeping rule was issued that requires financial institutions to collect and retain information on funds transfers and transmittals of funds in amounts of $3,000 or more. FinCEN also issued the “travel rule”, which requires financial institutions to transmit the information on funds transfers to other financial institutions, and have the information “travel” with the transfer request.

Financial institutions must collect and retain the following information on funds transfers:

  1. Name and address of the originator;
  2. The amount of the payment;
  3. The execution date of the payment;
  4. Any payment instructions received from the originator with the payment order; and
  5. The identity of the beneficiary’s financial institution.

In addition to verifying the identity of a “non-established customer” making the request, the originator’s financial institution must retain as much of the following information from all beneficiaries as the financial institution receives with the payment order:

  1. Name and address;
  2. The account number; and
  3. Any other specific identifier of the beneficiary1.

When deciding the current $3,000.00 threshold in 1995, the agencies balanced the value of data on funds transfers with the burden to the financial system. The threshold was established in response to concerns by financial institutions that imposing these requirements could result in significant implementation and ongoing costs.

In October 2001, the Financial Action Task Force (FATF) issued, “Special Recommendations on Terrorist Financing.” Special Recommendation VII aimed to make sure that basic information pertaining to the originator or transmitter in a funds transfer would be collected, retained, and transmitted to financial institutions in the payment chain. The FATF recommended a de minimis threshold no higher than $1,000.00 to identify low value originators without driving legitimate transactions underground and below regulatory review.

1The beneficiary’s financial institution must verify the identity of the beneficiary or recipient and keep various items of information identifying the beneficiary if the beneficiary is not an “established customer” and the financial institution delivers the proceeds in person. This would apply to credit unions that receive fund transfers for non-members.

DISCUSSION

The recordkeeping requirement currently applies to funds transfers and transmittals of funds of $3,000.00 or more. FinCEN and the Federal Reserve Board (Board) issued the Advance Notice of Proposed Rulemaking requesting comment on the potential effect of lowering or eliminating this threshold as a means to combat terrorism, money laundering, and other illicit activity and protecting the U.S. financial system from these threats.

The notice requests comment on the burden to the financial system that would result from lowering or eliminating the threshold for the requirement to collect retain, and transmit information on funds transfers and transmittals of funds. This ANPR is also seeking comment from law enforcement on the benefits of lowering this threshold.

In addition to this Advance Notice, FinCEN is evaluating the burden to financial institutions and usefulness to law enforcement of a reporting requirement for certain cross-border funds transfers and funds transmittals. CUNA has been meeting with FinCEN to discuss the burden to credit unions of such reporting for the preparation of its feasibility study. If the current $3,000.00 threshold for recordkeeping is reduced or eliminated, the reporting requirement currently being considered could similarly include cross-border funds transfers in amounts less than $3,000.00. Therefore, this Comment Call will also address burdens to credit unions of a requirement to report cross-border funds transfers below the $3,000.00 threshold.

QUESTIONS REGARDING THE PROPOSED SAR REVISIONS

  1. What proportion of funds transfers that you process as an originator’s financial institution involves amounts:

    a. Less than $3,000.00? ______
    b. Less than $2,000.00? ______
    c. Less than $1,000.00? ______


  2. For each category of funds transfer in Question 1, what proportion of wire transfers do you process for nonmembers:

    a. As an originating credit union?
        1. Less than $3,000.00? ______
        2. Less than $2,000.00? ______
        3. Less than $1,000.00? ______

    b. As a beneficiary’s credit union?
        1. Less than $3,000.00? ______
        2. Less than $2,000.00? ______
        3. Less than $1,000.00? ______


  3. Are your verification practices for non-members different based on whether the funds transfer involves an amount above or below the current $3,000.00 threshold? Please explain your different verification practices.
















  4. Are your recordkeeping practices wire transfers different based on whether the funds transfer involves an amount above or below the current $3,000.00 threshold? Please explain your different recordkeeping practices.
















  5. Does the information that you include in wire transfers differ between those transfers involving amounts below $3,000.00 and those with amounts above $3,000.00? If so, please describe the differences.
















  6. Are your recordkeeping practices for domestic and cross-border funds transfers different? If so, please explain the differences.
















  7. How would reducing or eliminating the threshold affect the price and type of services that you provide regarding domestic and cross-border funds transfers? Please explain.










  8. Is there a point at which lowering the threshold would substantially impact the price and type of services provided by you? If yes, please explain.
















  9. How would reducing or eliminating the threshold affect the cost and efficiency of your payment operations and the payments system in general?
















  10. Please provide any other comments.
















Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com