New Year’s Resolutions Part 1: FinCEN
Welcome to the first Compliance Blog post of 2022! At this time of year, many people adopt New Year’s resolutions – setting goals or accomplishments to work towards during the rest of this calendar year. While federal regulators don’t have New Year’s resolutions per se, they did recently publish their regulatory agendas, which include many actions expected in the coming year. Let’s review FinCEN's Fall 2021 agenda. Agendas for other regulatory agencies will be discussed in future Compliance Blog posts.
The Financial Crimes Enforcement Network (FinCEN) continues to implement provisions from the 2021 National Defense Authorization Act, which included the Anti-Money Laundering Act of 2020 (AMLA) and the Corporate Transparency Act of 2020 (CTA). We previously blogged about FinCEN’s Spring 2021 agenda here. The Fall agenda includes many of the same items with updated timelines, though there are a few new items as well. Here’s a breakdown of the current agenda:
- BSA requirements of Real Estate Industry: On December 8, 2021, FinCEN published an Advanced Notice of Proposed Rulemaking regarding potential BSA recordkeeping and reporting requirements for the real estate industry (real estate agents, settlement attorneys, etc.). This ANPRM was discussed in a previous post in the Compliance Blog. The agenda notes that the comment period will end in February 2022 but does not state when a Final Rule can be expected.
- No-Action Letter Program: On June 30, 2021, FinCEN announced they had completed an assessment of whether to establish a process for issuing no-action letters (NALs), and had concluded that a NAL process would be useful. The Fall 2021 agenda now states that FinCEN plans to issue an advanced notice of proposed rulemaking (ANPRM), which will solicit comments on the possible contours of a NAL process, and may also issue a proposed rule in the future to establish regulations for the NAL program, if necessary. The agenda says the ANPRM is expected in June 2022. This is a new item that did not appear on the Spring agenda.
- Recordkeeping for Virtual Currencies Transactions: In October 2020, FinCEN and the Federal Reserve Board published a Proposed Rule that would clarify that the term “money,” as used in BSA regulations regarding certain funds transfer and transmittal of funds, also covers convertible currency which act as a substitute for currency, but which does not have legal tender status. Such a change would subject certain domestic and cross-border virtual currency transactions to BSA recordkeeping requirements. The Spring 2021 agenda originally stated that a final action was expected in September 2021 and would have clarified that the changes also apply to digital assets which do have legal tender status. However, the Fall agenda now states that the agencies plan to issue a second proposed rule to make that clarification. FinCEN expects the new proposed rule to be issued in March 2022.
- BSA Requirements for Virtual Currency: In December 2020, FinCEN issued a Proposed Rule that would require banks (including credit unions) and money services businesses (MSBs) to submit reports, keep records, and verify the identity of customers involved in transactions involving convertible virtual currency or digital assets. The Fall agenda says that a proposed rule is expected in February 2022.
- 314(b) Information Sharing: FinCEN expects to issue a proposed rule that would “strengthen the administration” of the safe harbor provisions for information sharing by financial institutions and their associations under section 314(b) of the USA PATRIOT Act. This item also appeared on the Spring 2021 agenda. While FinCEN had originally expected a proposed rule on this topic in November 2021, the Fall agenda now updates the timeline – a proposed rule is expected in March 2022.
- Beneficial Ownership Database: The CTA changed the way beneficial ownership information will be obtained, by requiring legal entities to submit their beneficial ownership information directly to FinCEN, rather than requiring credit unions to collect the information from the legal entity at account opening. To accomplish this, the CTA required FinCEN to adopt regulations requiring entities to submit their beneficial ownership information to FinCEN, to establish a beneficial ownership database, and to change the current beneficial ownership requirements applicable to credit unions. As we’ve blogged about previously here, FinCEN has issued a proposed rulemaking regarding the requirement to submit beneficial ownership information to FinCEN, but has not yet issued proposed rules on the other aspects of the CTA. The Fall agenda states that a proposed rule can be expected in February 2022, but does not state what the proposed rule would cover.
- Dealers in Antiquities: The AMLA required FinCEN to amend its regulations to add certain persons engaged in the trade, solicitation or sale of antiquities to the definition of “financial institution,” thereby subjecting them to BSA regulatory requirements, such as recordkeeping and reporting requirements. In September 2021, FinCEN issued an Advanced Notice of Proposed Rulemaking (ANPRM) on this topic. The Fall agenda now states that a proposed rule can be expected around June 2022.
- SAR sharing with foreign affiliates: The AMLA required FinCEN to establish a pilot program that would allow financial institutions to share their Suspicious Activity Reports (SARs) with foreign branches, subsidiaries, and affiliates. The Fall agenda says a proposed rule on this topic is expected around March 2022, with comments due in May 2022.
- National Priorities: The AMLA required FinCEN to establish a set of national Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) priorities and to promulgate regulations relating to those priorities. As discussed in this previous post in the Compliance Blog, FinCEN published the national priorities on June 30, 2021. At that time, FinCEN announced that regulations would eventually be published regarding the priorities, and that credit unions would be required to incorporate the priorities into their BSA programs by the effective date of those regulations. The Fall agenda now states that proposed rule on the priorities should be expected around April 2022.
- Whistleblowers: The AMLA required FinCEN to establish a program through which whistleblowers would receive an award if they provide FinCEN or the Department of Justice with information about a violation of the BSA that leads to a successful action. The law also requires confidentiality and protection from retaliation for whistleblowers. The Fall agenda states that a proposed rule is expected around April 2022.
- Removing obsolete penalty language: The Fall agenda announces that it plans to amend section 1010.820(g) to remove language regarding the maximum penalty for failure to report on certain foreign financial accounts. The agenda states this language was made obsolete by legislation passed in 2004, which allowed for a greater maximum penalty. FinCEN published a final rule on this topic on December 23, 2021.
Keep reading the Compliance Blog for updates on these new regulations as they’re published by FinCEN.
About the Author
Nick St. John, NCCO, NCBSO, Director of Regulatory Compliance, NAFCU
Nick St. John, was named Director of Regulatory Compliance in August 2022. In this role, Nick helps credit unions with a variety of compliance issues.