(BILLING CODE: 4820-03-P)

**DEPARTMENT OF THE TREASURY**

**Financial Crimes Enforcement Network**

**31 CFR Part 103**

**RIN 1506-AA21**

**Proposed Amendment to the Bank Secrecy Act Regulations \--**

**Requirement of Brokers or Dealers in Securities to Report Suspicious
Transactions**

**AGENCY:** Financial Crimes Enforcement Network ("FinCEN"), Treasury.

**ACTION:** Notice of proposed rulemaking.

**SUMMARY:** FinCEN is proposing to amend the Bank Secrecy Act
regulations to require brokers or dealers in securities
("broker-dealers") to report suspicious transactions to the Department
of the Treasury. This is the fourth proposal to be issued by FinCEN
concerning the reporting of suspicious transactions by the major
categories of financial institutions operating in the United States, as
a part of the counter-money laundering program of the Department of the
Treasury.

**DATES:** The suspicious transaction reporting rule would be effective
180 days after the date on which the final regulation to which this
notice of proposed rulemaking relates is published in the Federal
Register. Written comments on all aspects of the proposal are welcome
and must be received on or before \[INSERT DATE 60 DAYS AFTER THE DATE
OF PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER.\]

**ADDRESSES**: Written comments should be submitted to: Office of Chief
Counsel, Financial Crimes Enforcement Network, Department of the
Treasury, P.O. Box 1618, Vienna, Virginia 22183-1618,
[Attention]{.underline}: NPRM \-- Suspicious Transaction Reporting -
Brokers or Dealers in Securities. Comments also may be submitted by
electronic mail to the following Internet address:
<regcomments@fincen.treas.gov>, again with a caption, in the body of the
text, "[Attention]{.underline}: NPRM \-- Suspicious Transaction
Reporting - Brokers or Dealers in Securities." For additional
instructions on the submission of comments, see SUPPLEMENTARY
INFORMATION under the heading "Submission of Comments."

[Inspection of comments]{.underline}. Comments may be inspected, between
10 a.m. and 4 p.m., in the FinCEN reading room in Washington, DC.
Persons wishing to inspect the comments submitted must request an
appointment by telephoning (202) 354-6400.

**FOR FURTHER INFORMATION CONTACT:** Peter G. Djinis, Executive
Assistant Director for Regulatory Policy, FinCEN, at (703) 905-3930;
Cynthia L. Clark, Deputy Chief Counsel, FinCEN, at (703) 905-3590.

**SUPPLEMENTARY INFORMATION:**

I. [Background]{.underline}.

A. [General Statutory Provisions]{.underline}.

The Bank Secrecy Act, P.L. 91-508, as amended, codified at 12 U.S.C.
1829b, 12 U.S.C. 1951‑1959, and 31 U.S.C. 5311‑5331, authorizes the
Secretary of the Treasury, [inter]{.underline} [alia]{.underline}, to
issue regulations requiring financial institutions to keep records and
file reports that are determined to have a high degree of usefulness in
criminal, tax, and regulatory matters, or in the conduct of intelligence
or counter-intelligence activities, to protect against international
terrorism, and to implement counter-money laundering programs and
compliance procedures.[^1] Regulations implementing Title II of the Bank
Secrecy Act (codified at 31 U.S.C. 5311-5330) appear at 31 CFR Part 103.
The authority of the Secretary to administer the Bank Secrecy Act has
been delegated to the Director of FinCEN.

B. [Suspicious Transaction Reporting.]{.underline}

The Secretary of the Treasury was granted authority in 1992, with the
enactment of 31 U.S.C. 5318(g)[^2], to require financial institutions to
report suspicious transactions. Subsection (g)(1) states generally:

> The Secretary may require any financial institution, and any director,
> officer, employee, or agent of any financial institution, to report
> any suspicious transaction relevant to a possible violation of law or
> regulation.

Subsection (g)(2) provides further:

> A financial institution, and a director, officer, employee, or agent
> of any financial institution, who voluntarily reports a suspicious
> transaction, or that reports a suspicious transaction pursuant to this
> section or any other authority, may not notify any person involved in
> the transaction that the transaction has been reported.

Subsection (g)(3) provides that neither a financial institution, nor any
director, officer, employee, or agent of any financial institution

> that makes a disclosure of any possible violation of law or regulation
> or a disclosure pursuant to this subsection or any other authority . .
> . shall . . . be liable to any person under any law or regulation of
> the United States or any constitution, law, or regulation of any State
> or political subdivision thereof, for such disclosure or for any
> failure to notify the person involved in the transaction or any other
> person of such disclosure.

Finally, subsection (g)(4) requires the Secretary of the Treasury, "to
the extent practicable and appropriate," to designate "a single officer
or agency of the United States to whom such reports shall be made."[^3]
The designated agency is in turn responsible for referring any report of
a suspicious transaction to "any appropriate law enforcement or
supervisory agency." [Id]{.underline}., at subsection (g)(4)(B).

In the USA Patriot Act, Congress specifically addressed the issue of
suspicious transaction reporting by broker-dealers. Section 356 of the
USA Patriot Act requires Treasury, after consultation with the
Securities and Exchange Commission and the Board of Governors of the
Federal Reserve System, to publish proposed regulations before January
1, 2002, requiring broker-dealers to report suspicious transactions
under 31 U.S.C. 5318(g). Section 356 requires final regulations to be
issued by July 2, 2002.[^4]

C. [Anti-money Laundering Programs]{.underline}.

The provisions of 31 U.S.C. 5318(h), also added to the Bank Secrecy Act
in 1992 by section 1517 of the Annunzio-Wylie Anti-Money Laundering Act,
authorize the Secretary of the Treasury "\[i\]n order to guard against
money laundering through financial institutions \... \[to\] require
financial institutions to carry out anti-money laundering programs." 31
U.S.C. 5318(h)(1). Those programs may include "the development of
internal policies, procedures, and controls"; "the designation of a
compliance officer"; "an ongoing employee training program"; and "an
independent audit function to test programs." 31 U.S.C. 5318(h)(A-D).

Section 352 of the USA Patriot Act amended section 5318(h) to mandate
compliance programs for all financial institutions defined in 31 U.S.C.
5312(a)(2). Section 352 of the USA Patriot Act is effective April 24,
2002.

D. [Broker-dealer Regulation and Money Laundering]{.underline}.

Broker-dealer operations are keyed primarily to the purchase and sale of
securities both for customers and for their own accounts. Broker-dealers
do not usually expect to receive from or disburse to customers
significant amounts of currency, and they are not direct participants in
the payment system. However, despite the limited use of currency in the
normal course of broker-dealer business generally, there are
broker-dealers that accept small amounts of currency or that accept
currency transactions approved by a legal or compliance department.[^5]
In addition, while broker-dealers are not direct participants in the
payment system, they do facilitate transfers or transmittals of funds
for their customers.

Money laundering occurs through broker-dealers, as it does through all
categories of financial institutions.[^6] Although the known experience
of depository institutions with significant money laundering is greater
than the known experience of the securities industry with money
laundering, this difference may reflect the fact that criminal funds
enter broker-dealer accounts at a later stage in the laundering process,
when those funds are less immediately identifiable than at the placement
stage. Past investigative attention, however, has focused more
intensively on the "placement" stage of money laundering (especially the
suspicious placement into the financial system of large amounts of
currency) than on transfers or conversions of illicit funds once they
are already in the financial system. In addition, there may be reason to
fear a potential increased use of broker-dealers for laundering purposes
in the wake of the growth of the broker-dealer industry and as criminals
develop new ways to launder money. The attention previously given to the
prevention of money laundering through banks reflects the central role
of banking institutions in the global payments system and the global
economy. But broker-dealers also play a global role and their array of
financial services is increasingly competitive with that of banks, for
example, for high net worth individuals.

The regulation of the securities industry in general and of
broker-dealers in particular relies on both the Securities and Exchange
Commission and the registered securities associations and national
securities exchanges (so-called self-regulatory organizations or
\"SROs\"). Broker-dealers have long reported possible securities law
violations through existing relationships with law enforcement, the
Securities and Exchange Commission and the SROs. Any effective system of
suspicious transaction reporting needs to consider the existing
broker-dealer regulatory structure, particularly existing procedures for
reporting violations of securities laws. Both the Securities and
Exchange Commission and the SROs have taken measures to address money
laundering concerns at broker-dealers.[^7] The Securities and Exchange
Commission adopted rule 17a-8 in 1981 under the Securities and Exchange
Act of 1934 ("Exchange Act"), which enables the SROs, subject to
Securities and Exchange Commission oversight, to examine for Bank
Secrecy Act compliance. Accordingly, both the Securities and Exchange
Commission and SROs will address broker-dealer compliance with this
rule.

Finally, certain broker-dealers have been subject to suspicious
transaction reporting since 1996. In particular, broker-dealers that are
affiliates or subsidiaries of banks or bank holding companies have been
required to report suspicious transactions by virtue of the application
to them of rules issued by the federal bank supervisory agencies. In
April 1996, banks, thrifts, and other banking organizations became
subject to a requirement to report suspicious transactions pursuant to
final rules issued by FinCEN[^8], under the authority contained in 31
U.S.C. 5318(g). In collaboration with FinCEN, the federal bank
supervisors (the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, and the National Credit
Union Administration) concurrently issued suspicious transaction
reporting rules under their own authority. [See]{.underline} 12 CFR
208.62 (Federal Reserve Board); 12 CFR 21.11 (OCC); 12 CFR 353.3 (FDIC);
12 CFR 563.180 (OTS); and 12 CFR 748.1 (NCUA). The bank supervisory
agency rules apply to banks, to non-depository institution affiliates
and subsidiaries of banks and bank holding companies (including
broker-dealers), and to bank holding companies (including bank holding
companies that are themselves broker-dealers).[^9] The rule proposed
today is intended to apply to all broker-dealers, without regard to
whether they are affiliates or subsidiaries of banks or bank holding
companies.[^10]

Developing suspicious activity reporting rules appropriate to
broker-dealers industry-wide involves taking into consideration many
important issues. Appropriate suspicious transaction reporting by
broker-dealers can provide significant information for criminal law
enforcement, tax and regulatory authorities about potential criminal
activity (as well as about previously undetected money laundering).

E. [Suspicious Transaction Reporting by Broker-Dealers \-- General
Issues]{.underline}. This notice of proposed rulemaking would generally
require broker-dealers to report suspicious transactions to the
Department of the Treasury. Several general issues cut across specific
proposed provisions, and it may be helpful to note those issues at the
outset.

1\. [Definition of Broker-Dealer]{.underline}. In light of the
definition of "broker or dealer in securities" in 31 CFR 103.11(f),
reporting would be required by any:

broker or dealer in securities, registered or required to be registered
with the Securities Exchange Commission under the Securities Exchange
Act of 1934.[^11]

Insurance companies or their affiliates that are registered
broker-dealers simply to permit the sale of variable annuities treated
as securities under the Securities Exchange Act of 1934 would be
subject, under the proposed rule, to suspicious transaction reporting
obligations. This treatment represents a change from prior treatment of
insurance companies required to register as broker-dealers in order to
sell variable annuities. In 1972, Treasury exempted from the provisions
of 31 CFR 103 persons required to register with the Securities and
Exchange Commission as broker-dealers solely in order to offer and sell
variable annuity contracts issued by life insurance companies. 37 FR
248986 (November 23, 1972). The exemption is inapplicable, however, if
such a registered broker-dealer at any time offers and sells other types
of securities in addition to variable annuities. FinCEN anticipates that
this exemption will be withdrawn on the effective date of the final rule
based on this notice of proposed rulemaking. Once the exemption is
withdrawn, persons required to register as broker-dealers in order to
offer and sell variable annuity contracts issued by life insurance
companies will be required to comply with all applicable BSA
requirements.

2\. [Use of Suspicious Transaction Reports - Centralized Data
Base]{.underline}. As is the case with reporting by other categories of
financial institutions subject to the Bank Secrecy Act, reports of
suspicious activity made by broker-dealers under the proposed rule would
be maintained in an automated data base containing information from all
broker-dealer filings. The data base will permit rapid dissemination to
appropriate agencies and self-regulatory organizations registered with
the Securities and Exchange Commission of reports within their
jurisdiction[^12], more thorough analysis and tracking of those reports,
and, in time, the provision to the financial community of information
about trends and patterns gleaned from the information reported, all as
contemplated by the Congress.

II\. Specific Provisions.

A. [103.11(ii) \-- Transaction]{.underline}.

The definition of "transaction" in the Bank Secrecy Act regulations for
purposes of suspicious transaction reporting conforms generally to the
definition Congress added to 18 U.S.C. 1956 when it criminalized money
laundering in 1986. [See]{.underline} Pub. L. 99-570, Title XIII,
1352(a), 100 Stat. 3207-18 (Oct. 27, 1986). This notice proposes to
amend that definition explicitly to include transactions involving any
instrument that falls within the definition of "security" in section
(3)(a)(10) of the Securities Exchange Act of 1934, 15 U.S.C. 78c(a)(10),
and to add a corresponding definition of "security" to 31 CFR Part 103.
These changes are necessary so that the reporting rules will conform to
the definition of broker or dealer in securities in 31 CFR 103.11(f) and
cover all activity that should be reported under the proposed rule.

B. [103.19 \-- Reports of suspicious transactions]{.underline}.

[General]{.underline}. Proposed section 103.19 contains the rules
setting forth the obligation of broker-dealers to report suspicious
transactions that are conducted or attempted by, at, or through a
broker-dealer and involve or aggregate at least \$5,000 in funds or
other assets. It is important to recognize that transactions are
reportable under this rule and 31 U.S.C. 5318(g) whether or not they
involve currency.[^13]

The obligation extends to transactions conducted or attempted by, at, or
through, the broker-dealer. However, paragraph (a) also contains
language designed to encourage the reporting of transactions that appear
relevant to violations of law or regulation, even in cases in which the
rule does not explicitly so require, for example in the case of a
transaction falling below the \$5,000 threshold in the rule.

Paragraph (a)(1) contains the general statement of the obligation to
file. To clarify that the proposed rule creates a uniform reporting
requirement for broker-dealers and banking organizations, the language
of the reporting obligation incorporates language from suspicious
activity reporting rules contained in both Title 12 and Title 31. Thus,
the rule requires the reporting of all activity "relevant to a possible
violation of law or regulation," including "any known or suspected
violation of Federal law, or a suspicious transaction related to a money
laundering activity or a violation of the Bank Secrecy Act". It is
anticipated that, when this proposed rule becomes effective, the federal
bank supervisors will amend or repeal, as appropriate, any duplicative
suspicious activity reporting requirements for broker-dealers.

Paragraph (a)(2) specifically describes two categories of transactions
that require reporting. The first category, described in proposed
paragraph (a)(2)(i), would require broker-dealers to report any known or
suspected Federal criminal violation, committed or attempted against, or
through, a broker-dealer. This language is intended to clarify the fact
that broker-dealers must report all suspicious transactions that are
relevant to a possible violation of law or regulation. Similar language
appears in the suspicious activity reporting rules imposed by the
federal bank supervisors under Title 12.

The second category of reportable transactions is contained in proposed
paragraph (a)(2)(ii), which would require broker-dealers to report to
the Treasury Department a transaction if the broker-dealer knows,
suspects, or has reason to suspect that it is one of three classes of
transactions (described more fully below) requiring reporting. The
"knows, suspects, or has reason to suspect" standard incorporates a
concept of due diligence in the reporting requirement.

The first class, described in proposed paragraph (a)(2)(ii)(A), includes
transactions involving funds derived from illegal activity or intended
or conducted in order to hide or disguise funds or assets derived from
illegal activity. The second class, described in proposed paragraph
(a)(2)(ii)(B), involves transactions designed, whether through
structuring or other means, to evade the requirements of the Bank
Secrecy Act. The third class, described in proposed paragraph
(a)(2)(ii)(C), involves transactions that appear to serve no business or
apparent lawful purpose, and for which the broker-dealer knows of no
reasonable explanation after examining the available facts relating to
the transaction and the parties.

It should be noted that the standard of reporting for the second
reporting category differs from that of the first. Under the first
reporting category, the broker-dealer must report "known or suspected"
criminal activity. In contrast, the second category of reportable
activity requires reporting if a broker-dealer \"knows, suspects, [or
has reason to suspect]{.underline}\" (emphasis added) that a transaction
should be reported under the rule. The inclusion of two distinct
reporting standards in the proposed rule is consistent with the
suspicious activity reporting regime to which banking organizations are
currently subject.[^14]

A determination as to whether a report is required must be based on all
the facts and circumstances relating to the transaction and customer of
the broker-dealer in question. Different fact patterns will require
different types of judgments. In some cases, the facts of the
transaction may indicate the need to report. For example, frequent and
large-scale usage of wire transfer facilities within a brokerage, with
nominal or nonexistent securities purchases or sales may be indicative
of suspicious activity. Similarly, the fact that a customer refuses to
provide information necessary for the broker-dealer to make reports or
keep records required by this Part or other regulations, provides
information that a broker-dealer determines to be false, or seeks to
change or cancel a transaction [after]{.underline} such person is
informed of currency transaction reporting or information verification
or recordkeeping requirements relevant to the transaction would all
indicate that a Suspicious Activity Report-BD (SAR-BD)[^15] should be
filed. (Of course, as the proposed rule makes clear, the broker-dealer
may not notify the customer that it intends to file or has filed a
suspicious transaction report with respect to the customer's activity.)

In other situations a more involved judgment may need to be made to
determine whether a transaction is suspicious within the meaning of the
rule. Transactions that raise the need for such judgments may include,
for example, (i) transmission or receipt of funds transfers without
normal identifying information or in a manner that indicates an attempt
to disguise or hide the country of origin or destination or the identity
of the customer sending the funds or of the beneficiary to whom the
funds are sent; or (ii) repeated use of an account as a temporary
resting place for funds from multiple sources without a clear business
purpose therefor. The judgments involved will also extend to whether the
facts and circumstances and the institution's knowledge of its customer
provide a reasonable explanation for the transaction that removes it
from the suspicious category.

31 U.S.C. 5318(g)(1) authorizes Treasury to require suspicious
transaction reporting not only by financial institutions but by "any
director, officer, employee, or agent of any financial institution."
This proposed rule addresses reporting by broker-dealers, but not by
individual employees of a broker-dealer who are "associated persons" of
that broker-dealer. FinCEN does not intend to reduce in any way the
obligations of broker-dealer employees or agents, within the context of
a broker-dealer's general regulatory or specific Bank Secrecy Act
compliance programs, but simply to avoid at this time creating an
obligation on the part of broker-dealer employees and agents
[independent]{.underline} of those general obligations.

The means of commerce and the techniques of money launderers are
continually evolving, and there is no way to provide an exhaustive list
of suspicious transactions. FinCEN hopes to continue its dialogue with
the securities industry about the manner in which a combination of
government guidance, training programs, and government-industry
information exchange can smooth the way for operation of the new
suspicious activity reporting system in as flexible and cost-efficient a
way as possible.

[Reporting Threshold]{.underline}. The proposed rule requires the
reporting of suspicious transactions of at least \$5,000.[^16] FinCEN is
aware of concern on the part of some broker-dealers that the threshold
would operate mechanically to require broker-dealers to establish
programs to examine every transaction occurring at the threshold
level.[^17] The suspicious transaction reporting rules, however, are not
intended to operate (and indeed cannot properly operate) in a mechanical
fashion. Rather, the suspicious transaction reporting requirements are
intended to function in such a way as to have financial institutions
evaluate customer activity and relationships for money laundering
risks.[^18]

Section 352 of the USA Patriot Act will require broker-dealers to
develop and implement programs designed to guard against money
laundering.[^19] FinCEN anticipates that these changes to section 5318
will be further addressed in a separate rulemaking prior to that date.
Current securities self-regulatory organization rules will also require
broker-dealers to have compliance programs for suspicious transaction
reporting.[^20] It is important to note however, that a risk-based
approach to developing compliance procedures that can be reasonably
expected to promote the detection and reporting of suspicious activity
should be the focus of a broker-dealer's anti-money laundering
compliance program. A compliance program that captures for review only
those transactions that are above a threshold set at a mechanically high
level, regardless of the money laundering or other risks such
transactions may involve, and regardless of the money laundering or
other risks that transactions at a lower dollar threshold may involve,
would likely not be a satisfactory program. Of course, the particular
contents or size of a compliance program must vary, as it does at
banking organizations, to reflect the size and nature of a particular
broker-dealer's operations.

[Filing Procedures]{.underline}. Paragraph (b) sets forth the filing
procedures to be followed by broker-dealers making reports of suspicious
transactions. Within 30 days after a broker-dealer becomes aware of a
suspicious transaction, the business must report the transaction by
completing a SAR-BD and filing it in a central location, to be
determined by FinCEN. The SAR-BD will resemble the SAR used by banks to
report suspicious transactions, and a draft form will be made available
for comment by publication in the Federal Register.

Supporting documentation relating to each SAR-BD is to be collected and
maintained separately by the broker-dealer and made available to law
enforcement, regulatory agencies, and SROs as permitted in paragraph (g)
of the rule, upon request. Special provision is made for situations
requiring immediate attention, in which case broker-dealers are to
telephone the appropriate law enforcement authority and the SEC in
addition to filing a SAR-BD.

[Exceptions]{.underline}. The proposed rule would create two exceptions
from reporting. The first exception deals with the reporting of lost,
stolen, missing or counterfeit securities; that reporting is to occur in
accordance with existing Securities and Exchange Commission rules. The
second exception permits the reporting of a violation of federal
securities laws (or rules of an appropriate SRO) by an employee or other
registered representative of a broker-dealer, under existing industry
procedures rather than through a SAR-BD. The second exception does not
apply, however, if the securities law or SRO rule violation is a
possible violation of 17 CFR 240.17a-8 or 17 CFR 405.4. These exceptions
are designed to permit the reporting of those potential violations
according to present procedures and modes in the securities industry.

[Retention of Records]{.underline}. Paragraph (d) provides that filing
broker-dealers must maintain copies of SAR-BDs and the original related
documentation for a period of five years from the date of filing. As
indicated above, supporting documentation is to be made available to
FinCEN, the SEC, other appropriate law enforcement and regulatory
authorities, and, as explained below, to SROs as permitted in paragraph
(g) of the rule, on request.

[Non-Disclosure]{.underline}. Paragraph (e) reflects the statutory bar
against the disclosure of information filed in, or the fact of filing, a
suspicious activity report (whether the report is required by the
proposed rule or is filed voluntarily). [See]{.underline} 31 U.S.C.
5318(g)(2) and 31 CFR 103.18(e)(for depository institutions). Thus, the
paragraph specifically prohibits persons filing SAR-BDs from making any
disclosure, except to law enforcement and regulatory agencies, and, as
explained below, to SROs as permitted in paragraph (g) of the rule,
about either the reports themselves or supporting documentation.

[Safe Harbor from Civil Liability]{.underline}. 31 U.S.C. 5318(g), as
amended by the USA Patriot Act, provides protection from liability for
making reports of suspicious transactions, and for failures to disclose
the fact of such reporting, contained in 31 U.S.C. 5318(g), as amended
by the USA Patriot Act. Section 351 of that Act clarifies that the safe
harbor applies to the voluntary reporting of suspicious transactions,
and the proposed rule reflects this clarification.

The USA Patriot Act clarifies that the safe harbor is available in the
arbitration of securities industry disputes. In this regard, FinCEN
recognizes that disputes between broker-dealers and their customers most
typically are resolved through arbitration. It is therefore anticipated
that disputes arising out of suspicious transaction reporting by
broker-dealers generally will be resolved through arbitration.

The safe harbor provision of 31 U.S.C. 5318(g) clearly protects any
financial institution from civil liability for reporting suspicious
activity.[^21] While the applicable law in this area is unambiguous,
FinCEN understands that arbitration, unlike litigation, is an equitable
forum where the decision makers have some degree of flexibility in
resolving the disputes before them. FinCEN further understands that, as
a practical matter, it may be difficult to overturn an arbitration
award, even where an arbitrator did not correctly apply the law.

The specific reference to arbitration in the safe harbor provision of
the proposed rule clarifies that the mere switch in venue from the
courts to arbitration for many securities industry disputes does not
alter the effect of the safe harbor from liability for suspicious
transaction reporting. In doing so, the proposed rule reflects the
recent amendment to section 5318(g) by the USA Patriot Act, which
clarifies that the safe harbor for suspicious transaction reporting
shall apply in arbitration. Section 351 of the USA Patriot Act states
that a financial institution that reports suspicious activity shall not
be liable for filing such a report \"under any law or regulation of the
United States, any constitution, law or regulation of any State or
political subdivision of any State, or under any contract or other
legally enforceable agreement ([including any arbitration
agreement]{.underline}).\" (Emphasis added.) FinCEN intends to work with
the SEC, SROs, and industry representatives to ensure that appropriate
educational materials are delivered to compliance and litigation
personnel.

It must be noted that, while the proposed rule reiterates and clarifies
the broad protection from liability for making reports of suspicious
transactions and for failures to disclose the fact of such reporting,
contained in the statutory safe harbor provision, the regulatory
provisions do not extend the scope of either the statutory prohibition
or the statutory protection. Inclusion of safe harbor language in the
proposal is in no way intended to suggest that the safe harbor can
override the non-disclosure provisions of the law and regulations. The
prohibition on disclosure (other than as required by the proposed rule)
applies regardless of any protection from liability. This means, for
example, that during an arbitration proceeding, a broker-dealer cannot
give a SAR-BD, or disclose that one was filed, to any participant in the
proceeding, including the arbitrator.

[Examination and Enforcement]{.underline}. Paragraph (g) notes that
compliance with the obligation to report suspicious transactions will be
examined, and provides that failure to comply with the rule may
constitute a violation of the Bank Secrecy Act and the Bank Secrecy Act
regulations. This paragraph also makes clear that a broker-dealer must
provide access to SAR-BDs that the broker-dealer has filed pursuant to
this requirement, to SROs registered with the Securities and Exchange
Commission that have jurisdiction to examine a broker-dealer for
compliance with this rule. In examining any particular failure to report
a transaction as required by this section, FinCEN and the SEC may take
into account the relationship between the particular failure to report
and the adequacy of the implementation and operation of a
broker-dealer's compliance procedures.

[Effective Date]{.underline}. Finally, paragraph (h) provides that the
new suspicious activity reporting rule is effective 180 days after the
date on which the final regulations to which this notice of proposed
rulemaking relates are published in the Federal Register.

III\. [Submission of Comments]{.underline}.

An original and four copies of any written hard copy comment (but not of
comments sent via E-Mail), must be submitted. All comments will be
available for public inspection and copying, and no material in any such
comments, including the name of any person submitting comments, will be
recognized as confidential. Accordingly, material not intended to be
disclosed to the public should not be submitted.

IV\. [Regulatory Flexibility Act]{.underline}.

FinCEN certifies that this proposed regulation will not have a
significant economic impact on a substantial number of small entities.
All broker-dealers, regardless of their size, are currently subject to
the Bank Secrecy Act. Procedures currently in place at broker-dealers to
comply with existing Bank Secrecy Act rules should help broker-dealers
identity suspicious transactions. In addition, the limited use of
currency in the broker-dealer industry will likely reduce the number of
suspicious activity reports required to be filed. Finally, certain small
broker-dealers may have an established and limited customer base whose
transactions are well-known to the broker dealer.

V. [Executive Order 12866]{.underline}.

The Department of the Treasury has determined that this proposed rule is
not a significant regulatory action under Executive Order 12866.

VI\. [Unfunded Mandates Act of 1995 Statement]{.underline}.

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4
(Unfunded Mandates Act), March 22, 1995, requires that an agency prepare
a budgetary impact statement before promulgating a rule that includes a
federal mandate that may result in expenditure by state, local and
tribal governments, in the aggregate, or by the private sector, of \$100
million or more in any one year. If a budgetary impact statement is
required, section 202 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. FinCEN has determined that it
is not required to prepare a written statement under section 202 and has
concluded that on balance this proposal provides the most cost-effective
and least burdensome alternative to achieve the objectives of the rule.

VII. [Paperwork Reduction Act]{.underline}.

[Recordkeeping Requirements of 31 CFR 103.20]{.underline}. The
collection of information contained in this notice of proposed
rulemaking is being submitted to the Office of Management and Budget for
review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)). Comments on the collection of information should be sent to
the Office of Management and Budget, Attn: Alexander T. Hunt, Office of
Information and Regulatory Affairs, Office of Management and Budget, New
Executive Office Building, Room 3208, Washington, DC 20503, with copies
to FinCEN at Department of the Treasury, Financial Crimes Enforcement
Network, Post Office Box 39, Vienna, Virginia 22183. Comments on the
collection of information should be received by \[**insert date that is
60 days after the publication of this document in the Federal
Register.**\] In accordance with requirements of the Paperwork Reduction
Act of 1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations,
5 CFR 1320, the following information concerning the collection of
information as required by 31 CFR 103.19 is presented to assist those
persons wishing to comment on the information collection.

FinCEN anticipates that this proposed rule, if adopted as proposed,
would result in the annual filing of a total of 2,000 Suspicious
Activity Report-BD forms. This result is an estimate extrapolated from
the number of suspicious activity reports currently being filed by the
broker-dealer industry either on a mandatory basis under the bank
supervisory agency rules or voluntarily.

[Description of Respondents]{.underline}: Brokers or dealers in
securities registered or required to be registered with the United
States Securities and Exchange Commission under the Securities Exchange
Act of 1934.

[Estimated Number of Respondents]{.underline}: 8,300.

[Frequency]{.underline}: As required.

[Estimate of Burden]{.underline}: The reporting burden of 31 CFR 103.19
will be reflected in the burden of the form, Suspicious Activity
Report-BD. The recordkeeping burden of 31 CFR 103.19 is estimated as an
average of 3 hours per form, which includes internal review of records
to determine whether the activity requires reporting.

[Estimate of Total Annual Recordkeeping Burden on
Respondents]{.underline}: Recordkeeping burden estimate = 6,000 hours.

FinCEN specifically invites comments on the following subjects: (a)
whether the proposed collection of information is necessary for the
proper performance of the mission of FinCEN, including whether the
information shall have practical utility; (b) the accuracy of FinCEN's
estimate of the burden of the proposed collection of information; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology.

In addition, the Paperwork Reduction Act of 1995 requires agencies to
estimate the total annual cost burden to respondents or recordkeepers
resulting from the collection of information. Thus, FinCEN also
specifically requests comments to assist with this estimate. In this
connection, FinCEN requests commenters to identify any additional costs
associated with the completion of the form. These comments on costs
should be divided into two parts: (1) any additional costs associated
with reporting; and (2) any additional costs associated with
recordkeeping.

**List of Subjects in 31 CFR Part 103**

Authority delegations (Government agencies), Banks and banking,
Currency, Investigations, Law enforcement, Reporting and recordkeeping
requirements.

[Proposed Amendments to the Regulations]{.underline}

For the reasons set forth above in the preamble, 31 CFR Part 103 is
proposed to be amended as follows:

**PART 103 ‑‑ FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS**

1\. The authority citation for Part 103 continues to read as follows:

**Authority:** 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5330.

2\. New paragraph 103.11(ww) is added to read as follows:

103.11(ww) [Security]{.underline}. Security means any instrument or
interest described in section 3(a)(10) of the Securities Exchange Act of
1934.

3\. Section 103.11(ii)(1) is revised to read as follows:

**103.11 Meaning of terms.**

\* \* \* \* \*

\(ii\) [Transaction]{.underline}. (1) Except as provided in paragraph
(ii)(2) of this section, transaction means a purchase, sale, loan,
pledge, gift, transfer, delivery or other disposition, and with respect
to a financial institution includes a deposit, withdrawal, transfer
between accounts, exchange of currency, loan, extension of credit,
purchase or sale of any stock, bond, certificate of deposit, or other
monetary instrument, or security, purchase or redemption of any money
order, payment or order for any money remittance or transfer, or any
other payment, transfer, or delivery by, through, or to a financial
institution, by whatever means effected.

\* \* \* \* \*

4\. In Subpart B, add new section 103.19 to read as follows:

**103.19 Reports by brokers or dealers in securities of suspicious
transactions.**

\(a\) [General]{.underline}. (1) Every broker or dealer in securities
(for purposes of this section, a "broker-dealer") shall file with the
Treasury Department, to the extent and in the manner required by this
section, a report of any suspicious transaction relevant to a possible
violation of law or regulation. This includes any known or suspected
violation of Federal law, or a suspicious transaction related to a money
laundering violation or a violation of the Bank Secrecy Act. A
broker-dealer may also file with the Treasury Department a report of any
suspicious transaction that it believes is relevant to the possible
violation of any law or regulation but whose reporting is not required
by this section. A voluntary filing does not relieve a broker-dealer
from the responsibility of complying with any other reporting
requirements imposed by the Securities and Exchange Commission or a
self-regulatory organization (\"SRO\") (as defined in section 3(a)(26)
of the Securities Exchange Act of 1934, 15 U.S.C. 78c(a)(26)).

\(2\) A transaction requires reporting under the terms of this section
if it is conducted or attempted by, at, or through a broker-dealer, it
involves or aggregates funds or other assets of at least \$5,000, and:

\(i\) The broker-dealer detects any known or suspected Federal criminal
violation, or pattern of criminal violations, committed or attempted
against the broker-dealer or involving a transaction or transactions
conducted through the broker-dealer, where the broker-dealer was either
an actual or potential victim of a criminal violation, or series of
criminal violations or that the broker-dealer was used to facilitate a
criminal transaction. (If it is determined prior to filing this report
that the identified suspect or group of suspects has used an "alias,"
then information regarding the true identity of the suspect or group of
suspects, as well as alias identifiers, such as drivers' licenses or
social security numbers, addresses and telephone numbers, must be
reported); or

\(ii\) the broker-dealer knows, suspects, or has reason to suspect that
the transaction (or a pattern of transactions of which the transaction
is a part):

\(A\) Involves funds derived from illegal activity or is intended or
conducted in order to hide or disguise funds or assets derived from
illegal activity (including, without limitation, the ownership, nature,
source, location, or control of such funds or assets) as part of a plan
to violate or evade any federal law or regulation or to avoid any
transaction reporting requirement under federal law or regulation;

\(B\) Is designed, whether through structuring or other means, to evade
any requirements of this part or of any other regulations promulgated
under the Bank Secrecy Act, Pub. L. 91-508, as amended, codified at 12
U.S.C. 1829b, 12 U.S.C. 1951‑1959, and 31 U.S.C. 5311‑5330; or

\(C\) Has no business or apparent lawful purpose or is not the sort in
which the particular customer would normally be expected to engage, and
the broker-dealer knows of no reasonable explanation for the transaction
after examining the available facts, including the background and
possible purpose of the transaction.

\(b\) [Filing procedures]{.underline}\--(1) [What to file]{.underline}.
A suspicious transaction shall be reported by completing a Suspicious
Activity Report - Brokers or Dealers in Securities("SAR-BD"), and
collecting and maintaining supporting documentation as required by
paragraph (d) of this section.

\(2\) [Where to file]{.underline}. The SAR-BD shall be filed with FinCEN
in a central location, to be determined by FinCEN, as indicated in the
instructions to the SAR-BD.

\(3\) [When to file]{.underline}. A SAR-BD shall be filed no later than
30 calendar days after the date of the initial detection by the
reporting broker-dealer of facts that may constitute a basis for filing
a SAR-BD under this section. If no suspect is identified on the date of
such initial detection, a broker-dealer may delay filing a SAR-BD for an
additional 30 calendar days to identify a suspect, but in no case shall
reporting be delayed more than 60 calendar days after the date of such
initial detection. In situations involving violations that require
immediate attention, such as ongoing money laundering schemes, the
broker-dealer shall immediately notify by telephone an appropriate law
enforcement authority and the Securities and Exchange Commission in
addition to filing a SAR-BD.

\(c\) [Exceptions]{.underline} (1). A broker-dealer is not required to
file a SAR-BD to report:

\(i\) Lost, missing, counterfeit, or stolen securities with respect to
which it files a report pursuant to the reporting requirements of 17 CFR
240.17f-1; or

\(ii\) A possible violation of any of the federal securities laws or
rules of a self-regulatory organization (\"SRO\") (as defined in section
3(a)(26) of the Securities Exchange Act of 1934, 15 U.S.C. 78c(a)(26)),
by the broker-dealer or any of its officers, directors, employees or
other registered representatives, other than a possible violation of 17
CFR 240.17a-8 or 17 CFR 405.4, so long as such violation is
appropriately reported to the Securities and Exchange Commission or an
SRO.

\(2\) A broker-dealer may be required to demonstrate that it has relied
on an exception in paragraph (c)(1)(ii) of this section, and must
maintain records of its determinations to do so for the period specified
in paragraph (d). To the extent that a Form RE-3, Form U-4, or Form U-5
concerning the transaction is filed consistent with the self-regulatory
organization rules, a copy of that form will be a sufficient record for
purposes of this rule.

\(3\) For the purposes of this paragraph (c) the term "federal
securities laws" means the "securities laws," as that term is defined in
section 3(a)(47) of the Securities Exchange Act of 1934, 15 U.S.C.
78c(a)(47), and the rules and regulations promulgated by the Securities
and Exchange Commission under such laws.

\(d\) [Retention of records]{.underline}. A broker-dealer shall maintain
a copy of any SAR-BD filed and the original or business record
equivalent of any supporting documentation for a period of five years
from the date of filing the SAR-BD. Supporting documentation shall be
identified as such and maintained by the broker-dealer, and shall be
deemed to have been filed with the SAR-BD. A broker-dealer shall make
all supporting documentation available to FinCEN, any other appropriate
law enforcement agencies or federal or state securities regulators, and
an SRO registered with the Securities and Exchange Commission in
accordance with paragraph (g) of this section, upon request.

\(e\) [Confidentiality of reports]{.underline}. No financial
institution, and no director, officer, employee, or agent of any
financial institution, who reports a suspicious transaction under this
part, may notify any person involved in the transaction that the
transaction has been reported. Thus, any person subpoenaed or otherwise
requested to disclose a SAR-BD or the information contained in a SAR-BD,
except where such disclosure is requested by FinCEN, the Securities and
Exchange Commission, or another appropriate law enforcement or
regulatory agency, or an SRO registered with the Securities and Exchange
Commission in accordance with paragraph (g) of this section, shall
decline to produce the SAR-BD or to provide any information that would
disclose that a SAR-BD has been prepared or filed, citing this paragraph
and 31 U.S.C. 5318(g)(2), and shall notify FinCEN of any such request
and its response thereto.

\(f\) [Limitation of liability]{.underline}. A broker-dealer, and any
director, officer, employee, or agent of such broker-dealer, that makes
a report of any possible violation of law or regulation pursuant to this
section or any other authority (or voluntarily) shall not be liable to
any person under any law or regulation of the United States (or
otherwise to the extent also provided in 31 U.S.C. 5318(g)(3), including
in any arbitration proceeding) for any disclosure contained in, or for
failure to disclose the fact of, such report.

\(g\) [Examination and enforcement]{.underline}. Compliance with this
section shall be examined by the Department of the Treasury, through
FinCEN or its delegees under the terms of the Bank Secrecy Act. Reports
filed under this section shall be made available to an SRO registered
with the Securities and Exchange Commission examining a broker-dealer
for compliance with the requirements of this section. Failure to satisfy
the requirements of this section may constitute a violation of the
reporting rules of the Bank Secrecy Act and of this part.

\(h\) [Effective date]{.underline}. This section is effective \[insert
date that is 180 days after the date on which the final regulation to
which this notice of proposed rulemaking relates is published in the
Federal Register.\]

Dated: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

James F. Sloan

Director,

Financial Crimes Enforcement Network

[^1]: Language expanding the scope of the Bank Secrecy Act to
    intelligence or counter-intelligence activities to protect against
    international terrorism was added by Section 358 of the Uniting and
    Strengthening America by Providing Appropriate Tools Required to
    Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (the
    \"USA Patriot Act\"), P.L. 107-56.

[^2]:     ^?^ 31 U.S.C. 5318(g) was added to the Bank Secrecy Act by
    section 1517 of the Annunzio-Wylie Anti-Money Laundering Act (the
    "Annunzio-Wylie Anti-Money Laundering Act"), Title XV of the Housing
    and Community Development Act of 1992, P.L. 102-550; it was expanded
    by section 403 of the Money Laundering Suppression Act of 1994 (the
    "Money Laundering Suppression Act"), Title IV of the Riegle
    Community Development and Regulatory Improvement Act of 1994, P.L.
    103-325, to require designation of a single government recipient for
    reports of suspicious transactions.

[^3]:     ^?^ This designation does not preclude the authority of
    supervisory agencies to require financial institutions to submit
    other reports to the same agency or another agency "pursuant to any
    other applicable provision of law." 31 U.S.C. 5318(g)(4)(C).

[^4]: The Congressional mandate to extend suspicious transaction
    reporting to broker-dealers reflects the concern of other
    governmental and international bodies about the need for an
    appropriate suspicious transaction reporting regime in the
    securities industry. For example, one of the central recommendations
    of the Financial Action Task Force ("FATF"), an inter-governmental
    body whose purpose is development and promotion of policies to
    combat money laundering, is that:

    > If financial institutions suspect that funds stem from a criminal
    > activity, they should be required to report promptly their
    > suspicions to the competent authorities.

    [Financial Action Task Force Annual Report]{.underline} (June 28,
    1996), Annex 1 (Recommendation 15). The recommendation applies
    equally to broker-dealers as to banks. [See]{.underline}
    [also]{.underline}, the European Community's [Directive on
    prevention of the use of the financial system for the purpose of
    money laundering]{.underline}. [EC Directive]{.underline}, O.J. Eur.
    Comm. (No. L 166) 77 (1991), Article 6. [Accord]{.underline}, [the
    Model Regulations Concerning Laundering Offenses Connected to
    Illicit Drug Trafficking and Related Offenses of the Organization of
    American States]{.underline}, OEA/Ser. P. AG/Doc. 2916/92 rev. 1
    (May 23, 1992), Article 13, section 2.

    The International Organization of Securities Commissions ("IOSCO")
    recommended in 1992 that member states consider "together with their
    national regulators charged with prosecuting money laundering
    offenses, the appropriate manner in which to address the
    identification and reporting of suspicious transactions" and "the
    appropriate means to ensure that securities and futures firms
    maintain monitoring and compliance procedures designed to deter and
    detect money laundering." IOSCO Report on Money Laundering,
    Conclusions 3 and 5, May 1992.

[^5]: ^?^ Report to the Chairman, Permanent Subcommittee on
    Investigations, Committee on Governmental Affairs, U.S. Senate,
    Anti-Money Laundering Efforts in the Securities Industry,
    GAO-02-111, October 2001 (\"the GAO Report\"). In addition, there
    are broker-dealers that accept cashier\'s checks, money orders, and
    traveler\'s checks. Of those broker-dealers that accept such
    financial instruments, 70 percent accept cashier\'s checks, nearly
    40 percent accept money orders, and approximately 20 percent accept
    traveler\'s checks. [See]{.underline}, the GAO Report at 26.

[^6]: ^?^ [See]{.underline}, [e]{.underline}.[g]{.underline}., [United
    States v. Kneeland]{.underline}, 148 F.3d 6 (1^st^ Cir. 1998)(funds
    obtained in "advance fee" fraud transferred from corporate to
    defendant's personal bank accounts, and from there to defendant's
    brokerage account, from brokerage account to commodities broker, and
    from commodities broker back to personal bank account); [United
    States v. Sabbath]{.underline}, 125 F.Supp. Lexis 18999 (E.D.N.Y.
    2000) (owner of failing company withdrew funds from corporation in
    months preceding bankruptcy, transferring those funds to a brokerage
    account in wife's maiden name, with mother-in-law's address, and a
    false social security number; money from corporation routed through
    several bank accounts before its final transfer to brokerage
    account); [United States v. Taylor]{.underline}, 984 F.2d 298 (9th
    Cir. 1993)(funds received upon fraudulent export sale of cellular
    telephones laundered through brokerage account). [See
    also]{.underline}, the GAO Report at 68-69.

[^7]: For example, in April 2001, the Director of the Office of
    Compliance Inspections and Examinations at the Securities and
    Exchange Commission announced that the Commission would undertake
    compliance sweeps of broker-dealers in the fall of 2001.
    [See]{.underline} Money Laundering: It\'s on the SEC\'s Radar
    Screen, Remarks at the Conference on Anti-Money Laundering
    Compliance for Broker-Dealers Securities Industry Association (May
    8, 2001) (transcript available at
    [www.sec.gov/news/speech/spch486.htm)](http://www.sec.gov/news/speech/spch486.htm);).
    BSA compliance with non-SAR related provisions has been included in
    the SEC\'s examination and enforcement programs since the 1970s, and
    in the SROs\' programs since 1982. The New York Stock Exchange and
    the National Association of Securities Dealers have both issued
    statements going back to 1989 regarding the importance of suspicious
    activity reporting to avoid money laundering charges.
    [See]{.underline} the GAO Report at 22.

[^8]: ^?^ See 31 CFR 103.18. The suspicious transaction reporting rules
    under the BSA for banking organizations previously appeared at 31
    CFR 103.21 before that section was renumbered as 31 CFR 103.18.
    [See]{.underline} 65 FR 13683, 13692 (March 14, 2000).

[^9]: For example, 12 CFR 225.4(f) subjects non-bank subsidiaries of
    bank holding companies to the suspicious transaction reporting
    requirements of Regulation H of the Board of Governors at 12 CFR
    208.62. Broker-dealers to which the bank supervisory agency rules
    for suspicious transaction reporting currently apply represent
    approximately half of the business of the broker-dealer industry,
    though in terms of numbers, they are only a small percentage of the
    approximately 8,300 broker-dealers in the United States.

[^10]: ^?^ Money transmitters, issuers, sellers, and redeemers of money
    orders, and issuers, sellers, and redeemers of traveler's checks
    will become subject to a similar reporting requirement pursuant to a
    final rule published in the Federal Register on March 14, 2000.
    [See]{.underline} 31 CFR 103.20. Under that rule, reporting will be
    required for suspicious transactions involving or aggregating at
    least \$2,000 in general or at least \$5,000 in the case of issuers
    of money orders and traveler's checks to the extent the transactions
    to be reported are identified from a review of clearance records and
    similar documents. Finally, FinCEN has proposed a rule that would
    require casinos and card clubs to report suspicious transactions
    involving or aggregating at least \$3,000. [See]{.underline} 63 FR
    27230 (May 18, 1998).

[^11]:     ^?^ The definitions of "broker," "dealer," and "security,"
    for purposes of the Securities Exchange Act of 1934 appear in
    sections 3(a)(4) ("broker"), 3(a)(5) ("dealer"), and 3(a)(10)
    ("security") of that Act, 15 U.S.C. 78c(a)(4), (5), and (10).

[^12]: See 31 U.S.C. 5319, as amended by the USA Patriot Act.

[^13]: Many currency transactions are [not]{.underline} indicative of
    money laundering or other violations of law, a fact recognized both
    by Congress, in authorizing reform of the currency transaction
    reporting system, and by FinCEN in issuing rules to implement that
    system ([See]{.underline} 31 U.S.C. 5313(d) and 31 CFR 103.22(d), 63
    FR 50147 (September 21, 1998)). But many non-currency transactions,
    (for example, funds transfers) [can]{.underline} indicate illicit
    activity, especially in light of the breadth of the statutes that
    make money laundering a crime. [See]{.underline} 18 U.S.C. 1956 and
    1957.

[^14]: [See]{.underline}, [e]{.underline}.[g]{.underline}., 12 CFR
    208.62(c) and 31 CFR 103.18(a)(2).

[^15]:     ^?^ The term "BD" is an abbreviation for "broker or dealer in
    securities" and is used to distinguish the form from forms for
    reporting by other non-bank institutions.

[^16]: Broker-dealers covered by the bank supervisory rules for
    suspicious transaction reporting already comply with a \$5,000
    threshold for suspicious transactions relating to money laundering,
    BSA violations, and other criminal violations with respect to which
    a suspect can be identified. However, under those rules, a \$25,000
    reporting threshold applies to other criminal violations with
    respect to which a suspect cannot be identified. The proposed rule
    does not adopt this two-tiered approach.

[^17]: The GAO report includes information, based on a survey conducted
    by the GAO, regarding the average size of transactions for retail
    customers of broker-dealers. The report concludes that the average
    dollar size of individual transactions (those involving securities
    trades) was \$22,306 (with \$5,000 as the most frequent size
    transaction). The report cautions, however, that GAO was not able to
    develop meaningful estimates for the entire industry because of the
    low number of firms that provided information and the wide range of
    responses.

[^18]: Thus, for example, transactions involving securities trades by
    the pension fund of a publicly traded corporation, even though
    involving a large dollar amount, would likely require a more limited
    scrutiny than less typical transactions such as those involving
    customers who wish to deposit currency in their brokerage account or
    to open a brokerage account using money orders even though the
    dollar amounts in those latter cases may be relatively small.

[^19]: [See]{.underline} 31 U.S.C. 5318(h). Section 312 of that Act
    amends section 5318 by adding a new paragraph (i) requiring
    financial institutions to establish enhanced due diligence
    procedures for certain private banking accounts and correspondent
    accounts, including reasonable steps to guard against money
    laundering and report suspicious activity involving these accounts.

[^20]: Existing securities law and self-regulatory organization rules
    will ensure that broker-dealers have suspicious activity reporting
    rule compliance programs in place. In particular, Section 19(g) of
    the Exchange Act provides that "Every self-regulatory organization
    shall comply with the provisions of this title, the rules and
    regulations thereunder, and its own rules, and . . . absent
    reasonable justification or excuse enforce compliance." To give
    effect to Section 19(g), both the National Association of Securities
    Dealers and the New York Stock Exchange promulgated compliance
    program rules. [See]{.underline} NASD Rule 3010 and NYSE Rule 342,
    including Supplemental Material .30. Rule 17a-8 of the Exchange Act
    requires broker-dealers to comply with applicable BSA rules.
    Accordingly, broker-dealers will be required under existing rules to
    develop compliance programs for the broker-dealer SAR rule proposed
    in this document.

[^21]: ^?^ [See]{.underline} [Lee v. Bankers Trust Co.]{.underline}, 166
    F.3d 540, 544 (2^nd^ Cir. 1999)(stating that in enacting 31 U.S.C.
    5318(g), the Congress "broadly and unambiguously provide\[d\] . . .
    immunity from any law (except the federal Constitution) for any
    statement made in a SAR by anyone connected to a financial
    institution").