Post by anenro on Jul 10, 2023 17:18:13 GMT 4
FinCEN Provides Key Updates on Rulemaking Agenda Timeline
By Kaley Schafer on July 9, 2023
POSTED IN AMLA OF 2020, BENEFICIAL OWNERSHIP, BSA AML REFORM, CORPORATE TRANSPARENCY ACT, CUSTOMER DUE DILIGENCE, EXAMINATION, FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN), INFORMATION SHARING, REAL ESTATE, SUSPICIOUS ACTIVITY REPORT (SAR), WHISTLEBLOWER
Without much fanfare, the Financial Crimes Enforcement Network (FinCEN) published in June its Spring 2023 Rulemaking Agenda, which provides proposed timelines for upcoming key rulemakings projected throughout the rest of 2023. FinCEN continues to focus on issuing rulemakings required by the Anti-Money Laundering Act of 2020 (the “AML Act”) and the Corporate Transparency Act (“CTA”). FinCEN has been criticized for being slow in issuing regulations under the AML Act and the CTA, but Congress has imposed many obligations upon FinCEN, which still is a relatively small organization with a limited budget.
Here are the six upcoming rulemakings and their expected timing. All of these issues are critical. We also discuss the issues for which FinCEN has not provided a proposed timeline.
July 2023: Notice of Proposed Rulemaking (NPRM) implementing section 6314 of the AML Act and the Anti-Money Laundering Whistleblower Improvement Act regarding whistleblower incentives and protections. As a reminder, qualifying whistleblowers are entitled to awards between 10 and 30 percent of the value of “monetary sanctions” above $1 million collected through an enforcement action regarding certain violations of the Bank Secrecy Act (BSA) and U.S. economic sanctions. A whistleblower also may be awarded additional monies for related actions. In addition, the Department of Treasury will administer the newly created Financial Integrity Fund to pay whistleblower awards. We previously have blogged about section 6314.
August 2023: NPRM regarding real estate transaction reports and records. The release of the NPRM was pushed back by several months. FinCEN released an advanced NPRM in December 2021, which sought comments on potential BSA/AML requirements for persons involved in real estate transactions, particularly non-financed transactions. Critical issues will include the scope of the proposed BSA requirements, and the type of real estate transactions to which they will apply (E.g. Any monetary threshold? Nationwide application? Only residential deals, or commercial deals as well? Who is responsible for any reporting requirements? Etc.)
September 2023: Final Rule regarding beneficial ownership information (BOI) access and safeguards and the use of FinCEN Identifiers. The final rule will establish the framework for authorized recipients’ access to BOI as well as instances where reporting companies can use FinCEN Identifiers. As we previously blogged, there was strong push back by the financial services industry, partly because the proposal limited financial institutions’ ability to use BOI, thereby contradicting the CTA’s objectives.
November 2023: Final Rule implementing section 6212 of the AML Act that establishes a pilot program permitting financial institutions to share suspicious activity reports (SARs) with their foreign branches, subsidiaries, and affiliates. This final rule has been delayed by several months from FinCEN’s prior rulemaking agenda.
December 2023: NPRM implementing section 6101(b) of the AML Act that establishes national exam and supervision priorities. Section 6101(b) requires financial institutions to incorporate a risk assessment and AML/countering financial terrorism (CFT) priorities into their risk-based compliance programs. In June 2021, FinCEN preliminarily released the first set of national AML/CFT priorities but highlighted that these did not have to be incorporated into compliance programs until regulations were promulgated. FinCEN will update these priorities every four years. As we previously blogged, the preliminary list of priorities was extremely broad, to the point of presenting limited utility. The NPRM will be important in regards to whether it provides any greater clarity or precision.
December 2023: Lastly, a NPRM revising the existing Customer Due Diligence (CDD) Rule is expected. This is the third required rulemaking in the series to implement the BOI rule under the CTA. Given the current differences between how the CDD Rule and the CTA define “beneficial owner,” as well as differences involving exempted entities and serious questions regarding how financial institutions can or should access BOI under the CTA in order to comply with the CDD Rule, this will be a very important NPRM.
Notable absences from FinCEN’s rulemaking agenda include a NPRM implementing section 6305 of the AML Act, which provides for a no-action letter (NAL) program. FinCEN conducted an assessment, determined that a NAL program was appropriate, and issued an ANPRM in June 2022. FinCEN’s Fall 2022 rulemaking agenda projected a NPRM in November 2023, but this item is missing from the Spring agenda.
Another notable absence from the Spring agenda is a NPRM regarding the voluntary information sharing program under 314(b) of the USA PATRIOT Act. FinCEN’s Fall 2022 and other previous rulemaking agendas have included this item with the only information being that the agency is considering a rulemaking to strengthen the administration of the regulation implementing the voluntary information sharing program. The Fall 2022 agenda indicated that a NPRM was expected last month but this item is missing from the agency’s Spring agenda.
Of course, whether FinCEN will be able to have the Beneficial Ownership Secure System (BOSS) under the CTA to be actually up and running by the January 1, 2024 effective date remains a significant outstanding question. The fact that FinCEN will not even issue a NPRM addressing an proposed “alignment” between the CTA and the CDD Rule until December 2023 suggests that the process of working out real-world implementation of the CTA will extend for quite some time.
By Kaley Schafer on July 9, 2023
POSTED IN AMLA OF 2020, BENEFICIAL OWNERSHIP, BSA AML REFORM, CORPORATE TRANSPARENCY ACT, CUSTOMER DUE DILIGENCE, EXAMINATION, FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN), INFORMATION SHARING, REAL ESTATE, SUSPICIOUS ACTIVITY REPORT (SAR), WHISTLEBLOWER
Without much fanfare, the Financial Crimes Enforcement Network (FinCEN) published in June its Spring 2023 Rulemaking Agenda, which provides proposed timelines for upcoming key rulemakings projected throughout the rest of 2023. FinCEN continues to focus on issuing rulemakings required by the Anti-Money Laundering Act of 2020 (the “AML Act”) and the Corporate Transparency Act (“CTA”). FinCEN has been criticized for being slow in issuing regulations under the AML Act and the CTA, but Congress has imposed many obligations upon FinCEN, which still is a relatively small organization with a limited budget.
Here are the six upcoming rulemakings and their expected timing. All of these issues are critical. We also discuss the issues for which FinCEN has not provided a proposed timeline.
July 2023: Notice of Proposed Rulemaking (NPRM) implementing section 6314 of the AML Act and the Anti-Money Laundering Whistleblower Improvement Act regarding whistleblower incentives and protections. As a reminder, qualifying whistleblowers are entitled to awards between 10 and 30 percent of the value of “monetary sanctions” above $1 million collected through an enforcement action regarding certain violations of the Bank Secrecy Act (BSA) and U.S. economic sanctions. A whistleblower also may be awarded additional monies for related actions. In addition, the Department of Treasury will administer the newly created Financial Integrity Fund to pay whistleblower awards. We previously have blogged about section 6314.
August 2023: NPRM regarding real estate transaction reports and records. The release of the NPRM was pushed back by several months. FinCEN released an advanced NPRM in December 2021, which sought comments on potential BSA/AML requirements for persons involved in real estate transactions, particularly non-financed transactions. Critical issues will include the scope of the proposed BSA requirements, and the type of real estate transactions to which they will apply (E.g. Any monetary threshold? Nationwide application? Only residential deals, or commercial deals as well? Who is responsible for any reporting requirements? Etc.)
September 2023: Final Rule regarding beneficial ownership information (BOI) access and safeguards and the use of FinCEN Identifiers. The final rule will establish the framework for authorized recipients’ access to BOI as well as instances where reporting companies can use FinCEN Identifiers. As we previously blogged, there was strong push back by the financial services industry, partly because the proposal limited financial institutions’ ability to use BOI, thereby contradicting the CTA’s objectives.
November 2023: Final Rule implementing section 6212 of the AML Act that establishes a pilot program permitting financial institutions to share suspicious activity reports (SARs) with their foreign branches, subsidiaries, and affiliates. This final rule has been delayed by several months from FinCEN’s prior rulemaking agenda.
December 2023: NPRM implementing section 6101(b) of the AML Act that establishes national exam and supervision priorities. Section 6101(b) requires financial institutions to incorporate a risk assessment and AML/countering financial terrorism (CFT) priorities into their risk-based compliance programs. In June 2021, FinCEN preliminarily released the first set of national AML/CFT priorities but highlighted that these did not have to be incorporated into compliance programs until regulations were promulgated. FinCEN will update these priorities every four years. As we previously blogged, the preliminary list of priorities was extremely broad, to the point of presenting limited utility. The NPRM will be important in regards to whether it provides any greater clarity or precision.
December 2023: Lastly, a NPRM revising the existing Customer Due Diligence (CDD) Rule is expected. This is the third required rulemaking in the series to implement the BOI rule under the CTA. Given the current differences between how the CDD Rule and the CTA define “beneficial owner,” as well as differences involving exempted entities and serious questions regarding how financial institutions can or should access BOI under the CTA in order to comply with the CDD Rule, this will be a very important NPRM.
Notable absences from FinCEN’s rulemaking agenda include a NPRM implementing section 6305 of the AML Act, which provides for a no-action letter (NAL) program. FinCEN conducted an assessment, determined that a NAL program was appropriate, and issued an ANPRM in June 2022. FinCEN’s Fall 2022 rulemaking agenda projected a NPRM in November 2023, but this item is missing from the Spring agenda.
Another notable absence from the Spring agenda is a NPRM regarding the voluntary information sharing program under 314(b) of the USA PATRIOT Act. FinCEN’s Fall 2022 and other previous rulemaking agendas have included this item with the only information being that the agency is considering a rulemaking to strengthen the administration of the regulation implementing the voluntary information sharing program. The Fall 2022 agenda indicated that a NPRM was expected last month but this item is missing from the agency’s Spring agenda.
Of course, whether FinCEN will be able to have the Beneficial Ownership Secure System (BOSS) under the CTA to be actually up and running by the January 1, 2024 effective date remains a significant outstanding question. The fact that FinCEN will not even issue a NPRM addressing an proposed “alignment” between the CTA and the CDD Rule until December 2023 suggests that the process of working out real-world implementation of the CTA will extend for quite some time.