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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules
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institutions in meeting Bank Secrecy Act requirements more efficiently and effectively, including through development of innovative solutions.
DATES: Comments must be received by February 22, 2021.
ADDRESSES: You may submit comments, identified by Docket No. R1738 and RIN 7100AG08, by any of the following methods:
Agency website: http
www.federalreserve.gov. Follow the instructions for submitting comments at https www.federalreserve.gov/apps/
foia/proposedregs.aspx.
Email: regs.comments@
federalreserve.gov. Include docket number and RIN in the subject line of the message.
Fax: 202 4523819 or 202 452
3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551.
All public comments are available from the Boards website at http
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted, unless modified for technical reasons or to remove personally identifiable information at the commenters request.
Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays. For security reasons, the Board requires that visitors call 202
4523684 to make an appointment to inspect comments.
FOR FURTHER INFORMATION CONTACT:
Jason Gonzalez, Assistant General Counsel, 202 4523725, or Bernard Kim, Senior Counsel, 202 4523083, Legal Division; or Suzanne Williams, Deputy Associate Director, 202 452
3513, or Koko Ives, Manager, 202 973
6163, Division of Supervision and Regulation, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551. Users of Telecommunication Device for Deaf TDD only, call 202
2634869.
SUPPLEMENTARY INFORMATION:
I. Introduction Pursuant to the Boards Regulations H, K, and Y, state member banks, Edge and agreement corporations, U.S. offices of foreign banking organizations supervised by the Federal Reserve, and bank holding companies and their nonbank subsidiaries must file
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Suspicious Activity Reports SARs to report known or suspected violations of U.S. law.1 The proposed rule would amend the Boards SAR regulations to expressly provide for exemptions from the regulations SAR requirements, in full or in part and subject to the Boards approval.
II. Background The Board, along with the other federal banking agencies, is charged with safeguarding the safety and soundness of its supervised institutions.
Pursuant to its safety-and-soundness authority and enabling statutes, the Board has long required a member bank, a bank holding company and its nonbank subsidiaries, an Edge Act or Agreement corporation, or a U.S. branch or agency of a foreign bank to refer potential violations of law arising from transactions that flow through those institutions to relevant law enforcement authorities, because financial crimes can pose serious threats to a financial institutions continued viability and, if unchecked, may undermine the public confidence in the financial services industry.2
In 1992, Congress passed the Annunzio-Wylie Anti-Money Laundering Act, which redesigned the criminal referral process applicable to Board-supervised entities and made the reporting of certain suspicious transactions a requirement of the Bank Secrecy Act BSA.3 The Act permitted the Department of the Treasury to require financial institutions to report any suspicious transaction relevant to a possible violation of law or regulation. 4 Thereafter, the Department of the Treasury, in consultation with the federal banking agencies and law enforcement, developed the modern SAR form and reporting process, which standardized the reporting forms, eliminated duplicate filings, and created a centralized database that could be accessed by multiple law enforcement and regulatory agencies.
To implement this new reporting system, the Financial Crimes Enforcement Network FinCEN, a bureau of the Department of the 1 12 CFR 208.62; 12 CFR 211.5k; 12 CFR
211.24f; 12 CFR 225.4f. See Board, Supervision & Regulation Letter SR 108, Suspicious Activity Report Filing Requirements for Banking Organizations Supervised by the Federal Reserve Apr. 27, 2010.
2 See generally 58 FR 47206 Sept. 3, 1993
codifying the Boards criminal referral procedures;
see also SR 889, New Criminal Referral Form and Updated Criminal Referral Procedures Mar. 18, 1988.
3 Public Law 102550, 106 Stat. 3672 1992.
4 31 U.S.C. 5318g1.

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Treasury, issued its implementing SAR
regulations in 1996. The regulations require financial institutions subject to the requirements of the BSA to, among other things, specifically address the reporting of money laundering transactions and transactions designed to evade the reporting requirements of the BSA.5
To further implement this new reporting process and reduce unnecessary reporting burdens, the Board and the other federal banking agencies contemporaneously amended their criminal referral form regulations to incorporate the new SAR form and reporting database, align their regulatory reporting requirements with FinCENs BSA reporting requirements, and further refine the reporting processes.6
As a result of this redesign and FinCENs implementing regulations, relevant institutions supervised by the Board are currently required to file SARs under both the Boards and FinCENs SAR regulations. These regulations are not identical but are substantially similar with regard to the specified BSA reporting obligations required by FinCEN, in that they both require banks, among other things, to file SARs relating to money laundering and transactions designed to evade BSA
reporting requirements, as well as maintain the confidentiality of a SAR in most circumstances. However, the Boards SAR regulations cover a slightly broader range of transactions, for example, by requiring SARs to be filed for any known or suspected instance of insider abuse in any amount, and further requiring the prompt notification to the institutions board of directors when a SAR has been filed.
The Secretary of the Treasury has statutory authority to grant exemptions from the requirements of the BSA, which includes FinCENs SAR
requirements.7 The regulation implementing this exemption authority provides: 8
The Secretary of the Treasury, in his sole discretion, may by written order or authorization make exceptions to or grant exemptions from the requirements of this chapter. Such exceptions or exemptions may be conditional or unconditional, may apply to particular persons or to classes of persons, and may apply to particular transactions or classes of transactions. They shall, however, be applicable only as expressly stated in the order of authorization, and they shall be revocable in the sole discretion of the Secretary.
5 61

FR 4326 Feb. 5, 1996.
FR 4338 Feb. 5, 1996.
7 See 31 U.S.C. 5318a7.
8 31 CFR 1010.970a.
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