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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules
The Secretary of the Treasury has delegated this exemption authority to FinCEN. The purpose of the Boards proposed rule, which would largely parallel FinCENs general exemptive authority, would be to facilitate the Boards granting of relief to a bank seeking an exemption from the requirements of the Boards SAR
regulations.
The decision to grant or deny such an exemption would be made from a safety-and-soundness and anti-money laundering regulatory perspective. In particular, the Boards view is that these exemptions would facilitate supervised institutions to meet BSA requirements more efficiently and effectively, including through development of innovative solutions. Financial technology and innovation continue to develop in the area of monitoring and reporting financial crime and terrorist financing, and the Board recognizes the increasing importance of regulatory flexibility to such efforts. Recently, the Board, along with the other federal banking agencies and FinCEN, issued a statement encouraging banks to take innovative approaches to meet their BSA/anti-money laundering BSA/AML
compliance obligations.9 The statement explained that banks are encouraged to consider, evaluate, and where appropriate, responsibly implement innovative approaches in this area.
Today, innovative approaches and technological developments in the area of SAR monitoring, investigation, and filings may involve, among other things:
i Automated form population using natural language processing, transaction data, and customer due diligence information; ii automated or limited investigation processes depending on the complexity and risk of a particular transaction and appropriate safeguards;
and iii enhanced monitoring processes using more and better data, optical scanning, artificial intelligence, or machine learning capabilities.
Accordingly, exemptive relief may be helpful to foster innovation in this area, as the Board expects that new technologies will continue to prompt additional innovative approaches related to SAR filing and monitoring.
It is important to recognize that any Board-issued exemptions from its SAR
regulations would not relieve the supervised institution from the independent obligation to comply with FinCENs SAR regulations, if applicable.
To the extent that the supervised 9 Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing Dec. 3, 2018, available at https www.federalreserve.gov/
newsevents/pressreleases/files/
bcreg20181203a1.pdf.

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institution is subject to requirements imposed by both the Boards and FinCENs SAR regulations, the institution would need to acquire an exemption from both the Board and FinCEN. The Board expects to coordinate with FinCEN when handling such parallel exemption requests, and accordingly, the Boards proposed rule would require FinCENs concurrence with regard to such exemptions. As explained above, however, the Boards SAR regulation imposes additional requirements not included in FinCENs regulation. To the extent the supervised institution is subject to a requirement imposed by the Boards SAR regulations alone and not a parallel FinCEN
requirement, the proposed rule would allow the Board to exempt the institution from that requirement without FinCENs concurrence.
III. The Proposal The proposed rule would provide for the issuance of exemptions from the requirements, in full or in part, of the Boards SAR regulations. Upon receiving a written request from a Board-supervised institution, the Board would determine whether the exemption is consistent with safe and sound banking. The Board would also seek FinCENs determination whether the exemption is consistent with the purposes of the BSA, as applicable, where an exemption request involves an exemption from the requirements to file a SAR required by FinCEN regulations implementing the BSA.
The proposed rule would require the Board to seek FinCENs concurrence regarding any exemptions that involve SAR provisions relating to potential money laundering or violations of the BSA or other unusual activity covered by FinCENs SAR regulation. The proposed rule would allow the Board to consult with FinCEN regarding other exemption requests. The Board may also consult with the other state and federal banking agencies before granting any exemption.
An approved exemption under the proposed rule may apply to only certain parts of the SAR requirements. It may be conditional or unconditional, may apply to particular persons or to classes of persons, and may apply to transactions or classes of transactions. In addition, the proposed rule provides that the Board may grant an exemption for a specified time period or extend the time period of a previously granted exemption. Finally, the proposed rule provides that the Board may, in its sole discretion, revoke previously granted exemptions.

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The changes made by the proposed rule would add a new paragraph l to 208.62 of Regulation H 12 CFR
208.62, which concerns the SAR filing obligations of member banks. Sections 211.5k and 211.24f of Regulation K
12 CFR 211.5k and 211.24f and 225.4f of Regulation Y 12 CFR
225.4f make 208.62 of Regulation H
applicable to Edge and Agreement corporations, the U.S. branches and agencies of foreign banks except a Federal branch or Federal agency or a state branch that is insured by the Federal Deposit Insurance Corporation, a representative office of a foreign bank, and bank holding companies and their nonbank subsidiaries, respectively. This means that the changes applicable to member banks will also be applicable to the suspicious activity reporting responsibilities of these other domestic and foreign banking organizations supervised by the Federal Reserve, including bank holding companies, Edge corporations, and the U.S.
branches and agencies of foreign banks.
The Board welcomes comments on any aspect of the proposed rule, in particular, with regard to whether additional or different factors or standards should be applied in the determination whether to grant an exemption request, as well as the form and manner of the Boards response to an exemption request.
IV. Administrative Law Matters A. Solicitation of Comments and Use of Plain Language Section 722 of the Gramm-LeachBliley Act Pub. L. 106102, 113 Stat.
1338, 1471, 12 U.S.C. 4809 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The Board has sought to present the proposed rule in a simple and straightforward manner, and invites comment on the use of plain language.
B. Paperwork Reduction Act Analysis Certain provisions of the proposed rule contain collections of information within the meaning of the Paperwork Reduction Act of 1995 PRA
44 U.S.C. 35013521. In accordance with the requirements of the PRA, the Board may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget OMB control number. The Board reviewed the proposed rule under the authority delegated to the Board by OMB. The proposed rule contains reporting requirements subject to the PRA. To
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