By PAUL O’DONOGHUE, Senior Correspondent
THE US Treasury today (Thursday) announced a major easing on rules around filing SARs for banks.
The fundamental relaxation on mandatory reporting of many Suspicious Activity Reports will come as a major relief for US financial institutions – and is likely to be replicated in Europe and elsewhere in due course.
The new measures from Treasury announced include:
- Structuring SARS – the presence of a transaction or series of transactions with a value close to the CTR filing threshold of $10,000 is not in itself sufficient evidence the transaction is suspicious – and therefore should not be filed as a structuring SAR
- Continuing Activity Reviews (CARs) – clarification that relief provided by FinCEN some years ago related to “continuing activity reports” was NOT intended to establish a requirement that financial institutions conduct a manual investigation into account activity 90 days after each initial SAR filing to confirm if the activity repeated itself.
- No SAR documentation – clarification that banks or FIs are not expected to provide lengthy justifications when a decision is made NOT to file a SAR.
FinCEN, the AML unit of the U.S. Treasury, said the guidance will ensure that banks “are not needlessly expending resources on efforts that do not provide law enforcement with the information they need to combat criminal activity”.
Today’s new guidance document formalises clarifications that Treasury Under Secretary John Hurley floated in a speech last month. He described the imperative of cutting red tape for banks.
SARs changes
‘Structuring SARs’ are reports which banks must send if they suspect a customer is ‘structuring’ a transaction to avoid triggering oversight.
This involves breaking a large transaction into two or more smaller transactions to avoid the $10,000 CTR (Currency Transaction Report) filing threshold.
The new guidance states that the presence of a transaction (or series of transactions) with a value close to the CTR threshold is “not information sufficient to require the filing of a SAR”
“Financial institutions are only required to file a SAR if the institution knows, suspects, or has reason to suspect that the transaction or series of transactions are designed to evade CTR reporting requirements,” it said.
Previous guidance from FinCEN states: “Structuring is a federal crime, and must be reported by filing a SAR.”
Its old guidance gave the example of a customer breaking a $12,000 transaction into two $6,000 payments to avoid the CTR threshold.
FinCEN also issued new guidance on continuing activity reviews (CARs). Previously, the watchdog advised banks to do a follow up report on a SAR within 90 days of the initial filing.
Now, it has said that this advice was not intended to be a hard requirement.
Finally, FinCEN also said financial institutions can significantly reduce the documentation needed to justify not filing SARs. Previously, many lenders felt they had to submit detailed information to justify why certain transactions were not deemed suspicious.
Overhaul pledge
The new FinCEN guidance comes just a month after John Hurley, the Under Secretary for Terrorism and Financial Intelligence (TFI), said officials would reduce the complexity of filing SARs.
“The purpose of the BSA (Bank Secrecy Act) is to combat money laundering by requiring financial institutions to provide highly useful information to the government. SARs are the primary vehicles of that information,” he said during the ACAMS Assembly in Las Vegas.
“As everyone in this field knows, there are useful SARS and not so useful SARS. Regulatory pressure has led to more and more of the not so useful SARS.
He added: “Complexity is also a major problem. The fact that instructions of completing a SAR are 170 pages long illustrates the challenge.
“Such complexity is not just a waste of your effort and resources. It also increases the likelihood of errors, making the underlying data less reliable.”
Mr Hurley also said excessive SARs can lead to ‘debanking’.
This refers to when a financial institution declines to do business with a customer. The Trump administration has accused many banks of debanking conservatives.
Many U.S. regulators have issued guidance to cut down on the practice.
Earlier this week, the OCC (Office of the Comptroller of the Currency) and the FDIC (Federal Deposit Insurance Corporation) proposed a rule to eliminate ‘reputational risk’ from their supervisory programs.
The Federal Reserve also said in June that it will no longer consider “reputational risk” when examining banks.
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