BSA and Burden
EGRPRA (the Economic Growth and Regulatory Paperwork Reduction Act of 1996) requires the federal financial regulatory agencies to study their regulations to find ways to reduce regulatory burdens. The agencies have solicited comment on regulatory burden opportunities in 28 regulations. Comments are due by May 4, 2005.
What, exactly, does it mean to find ways to reduce regulatory burden? EGRPRA, passed by Congress, was a neat way of acknowledging the reality of regulatory burden while passing the buck to the agencies. On paper, it is a noble idea. The reality, however, is that true regulatory burden reduction cannot be approached from a single direction.
This latest EGRPRA proposal asks for suggestions on ways to reduce BSA regulatory burden, including both CTR filing and SAR filing. This is a nice idea, but, unfortunately the banking agencies don't call all the shots on this topic. No regulatory burden can be accomplished without the participation or leadership of FinCEN.
Next, any regulatory burden reduction involves change and change is in and of itself burdensome. Thus, any change should deliver enough benefit to justify the change.
Finally, changes to regulatory burden are prevented to the extent that the existing law requires what is burdensome. And this is the source of the dilemma.
There are two ways to go about reducing the burden of BSA. One would be to get rid of the laws requiring CTR and SAR filings and all that goes with it. However tempting this may seem, it is not going to happen. Don't bother suggesting it.
The alternative is to make the requirements more workable. To do this, it makes sense to look at process rather than only requirements. For example, CTRs must be filed within 15 days. Look at the process involved to compile information that triggers the CTR and that must be included on the CTR. Then consider whether the process could be changed in a way that would ease burden. Easing burden might mean doing less work to file the CTR or it might mean less interruption of delivering the product or service. Easing burden might also involve when and how the institution aggregates deposit information and reviews the results. Or it might involve changing expectations of due diligence.
Working on ways to reduce burden for identifying suspicious activity may have more results simply because the process is not as fixed as that for filing CTRs. However, suggesting a relaxation of standards in a post-9/11 will not be persuasive.
The publication from the agencies poses several specific questions: whether there is a need for statutory change, whether the regulations and related requirements are consistent with statutory purposes, whether the approach could be more flexible, whether the rules have a dampening effect on competition or limit competitive advantages, whether the regulations are sufficiently clear, and whether there is inconsistency or redundancy of regulations that could be relieved.
Several of these questions are more significant than others for financial institutions trying to change reality. For example, in asking whether the regulation is consistent with statutory purposes, it may be useful to explain the effect of the requirement when the effect may interfere with the statutory purpose. In compiling information to complete a CTR, the customer is often alerted and may then attempt to structure deposits.
The most significant area for possible comment is the inconsistency and overlap between regulations. The recent clarification issued by FinCEN about when and whether to file a SAR for a customer on the OFAC list is a good example of two reports going in on one customer.
Whether you choose to participate in the comment process or not, careful consideration of the agencies' questions in the context of your daily work can be a valuable process.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 2, 2/05
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