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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules
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Thereafter, the Department of the Treasury, in consultation with the NCUA, the other federal banking agencies,5 and law enforcement developed the modern SAR form and reporting process, which standardized the reporting forms and created a centralized database that could be accessed by multiple law enforcement and regulatory agencies.
To implement this new reporting system, in 1996, the Financial Crimes Enforcement Network of the Department of the Treasury FinCEN issued its implementing SAR regulations for 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.6 To further implement this new reporting process and reduce unnecessary reporting burdens, the NCUA 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.7
As a result of this redesign and FinCENs implementing regulations, FICUs are currently required to file SARs under both NCUA and FinCEN
regulations. These regulations are not identical but are substantially similar with regard to the specified BSA
reporting obligations required by FinCEN. Both the NCUAs and FinCENs SAR regulations, among other things, require FICUs to file SARs relating to money laundering and transactions that are designed to evade the reporting requirements of the BSA 8 Furthermore, with respect to the SAR confidentiality requirements in the BSA, both the NCUAs and FinCENs SAR regulations require FICUs to maintain the confidentiality of a SAR, and any 5 For purposes of this rulemaking, the other federal banking agencies are defined as the Board of Governors of the Federal Reserve FRB, the Federal Deposit Insurance Corporation FDIC, and the Office of the Comptroller of the Currency OCC.
6 61 FR 4326 Feb. 5, 1996 FinCEN. The NCUAs current regulation is codified at 12 CFR
748.1c1ivB. It should be noted that prior to the adoption of FinCENs SAR regulation in 1996
and the accompanying revisions to the NCUAs regulation, the NCUAs criminal referral regulation did not have a specific provision that required the reporting of money laundering transactions.
However, the required criminal referral form broadly encompassed money laundering and structuring transactions.
7 61 FR 11526 Mar. 21, 1996 NCUA; 61 FR
4326 Feb. 5, 1996 FinCEN.
8 12 CFR 748.1c1ivB NCUA; 31 CFR
1020.320a2 FinCEN.

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information that would reveal the existence of the SAR, outside of certain circumstances.9
However, the NCUAs and the other federal banking agencies regulations cover a slightly broader range of transactions e.g., insider abuse at any dollar amount.10
The NCUA and FinCEN SAR
regulations also provide: i That SARs are not required for a robbery or burglary committed or attempted that is reported to appropriate law enforcement authorities; ii that SARs are confidential and shall not be disclosed except as authorized; iii recordkeeping requirements for SARs and supporting documentation; iv that supporting documentation shall be deemed to have been filed with the SAR; and v that supporting documentation shall be made available to appropriate law enforcement agencies upon request. The NCUA and FinCEN SAR regulations also provide a safe harbor from liability to any FICU and any of its officials, employees, or agents that make a voluntary disclosure of any possible violation of law or regulation to a government agency or file a SAR
pursuant to the regulations or any other authority. The NCUAs regulation also contains a provision requiring that FICUs promptly notify their board of directors or committee designated by the board of directors to receive such notifications when a SAR has been filed.
FinCEN has general authority to grant exemptions from the requirements of the BSA, which includes granting exemptions under its SAR reporting regulations.11 FinCENs regulation provides that the Secretary of Treasury, in his sole discretion, may by written order or authorization make exceptions to or grant exemptions from the requirements of the BSA. Such exemptions may be conditional or unconditional, may apply to particular persons or to classes of persons, and may apply to transactions or classes of transactions. The Secretary has delegated this exemption authority to FinCEN.12
As financial technology and innovation continue to develop in the area of monitoring and reporting financial crime and terrorist financing, the NCUA will need the express regulatory flexibility to grant exemptive 9 12 CFR 748.1c5 NCUA; 31 CFR
1020.320e1 FinCEN.
10 12 CFR 748.1c NCUA; 12 CFR 208.62 FRB;
12 CFR 390.355 FDIC; 12 CFR 21.11, 163.80
OCC.
11 See 31 U.S.C. 5318a7, with implementing regulations at 31 CFR 1010.970.
12 Treas. Order 18001, re-affirmed Jan. 14, 2020.

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relief when appropriate in this area on a consistent basis. In 2018, the NCUA, FinCEN, and the other federal banking agencies issued a statement encouraging financial institutions to take innovative approaches to meet their BSA/antimoney laundering BSA/AML
compliance obligations.13 That statement explained that financial institutions are encouraged to consider, evaluate, and where appropriate, responsibly implement innovative approaches in this area. Today, innovative approaches and technological developments in the areas 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. Requests for exemptive relief pertaining to innovation or other matters may involve, among other things, expanded investigations and SAR timing issues, SAR disclosures and sharing, continued SAR filings for ongoing activity, SAR
outsourcing of responsibilities and practices, the role of agents of FICUs, the use of shared utilities and shared data, and the use and sharing of deidentified data. The NCUA expects that new technologies will continue to prompt additional innovative approaches related to SAR filing and monitoring.
It is important to recognize that any NCUA-issued exemptions from its SAR
regulation would not relieve the FICU
from independent obligation to comply with FinCENs SAR regulations, if applicable. To the extent an exemption request from a FICU involves both the NCUAs SAR regulation and FinCENs SAR regulation, the FICU would need an exemption from both the NCUA and FinCEN. The NCUA expects to coordinate with FinCEN when handling parallel exemptions. As explained above, however, the NCUAs SAR
regulation imposes additional requirements not included in FinCENs SAR regulation. To the extent an exemption request is subject to a requirement imposed by the NCUAs SAR regulation alone and not a parallel 13 Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing Dec. 3, 2018, available at https www.ncua.gov/
newsroom/press-release/2018/agencies-issue-jointstatement-encourage-innovative-approachesbsaaml-compliance.

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