6580 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules 

13 12 U.S.C. 4802(a). 14 12 U.S.C. 4802(b). 

the Board’s granting of relief to a bank 

seeking relief from the requirements of 

the Board’s SAR regulations, when such 

relief would be beneficial from a safetyand-soundness and anti-money 

laundering regulatory perspective. The 

proposed rule would be issued pursuant 

to the Board’s safety-and-soundness 

authority over supervised institutions. 

The proposed rule will apply to small 

bank holding companies and their 

nonbank subsidiaries and small state 

member banks as well as Edge and 

agreement corporations, and U.S. offices 

of foreign banking organizations 

supervised by the Federal Reserve. The 

Board does not expect that the proposal 

would impose a significant cost on 

small banking organizations due to 

compliance, recordkeeping, and 

reporting updates from this proposal. 

The Board does not believe that the 

proposal would result in any significant 

economic impact on banking 

organizations as there are no projected 

recordkeeping, reporting, or other 

compliance requirements associated 

with the proposal. Moreover, the 

proposal does not impose any new 

requirements on banking organization, 

as applying for an exemption under the 

proposal would be entirely voluntary. In 

addition, the Board is not aware of any 

federal rules that duplicate, overlap, or 

conflict with the proposed rule. For 

these reasons, the Board believes that 

the proposed rule will not have a 

significant economic impact on a 

substantial number of small entities 

supervised by the Board, and believes 

that there are no significant alternatives 

to the proposed rule that would reduce 

the economic impact on small banking 

organizations supervised by the Board. 

D. Riegle Community Development and 

Regulatory Improvement Act of 1994 

Pursuant to section 302(a) of the 

Riegle Community Development and 

Regulatory Improvement Act (RCDRIA), 

in determining the effective date and 

administrative compliance requirements 

for new regulations that impose 

additional reporting, disclosure, or other 

requirements on insured depository 

institutions, each federal banking 

agency must consider, consistent with 

principles of safety and soundness and 

the public interest, any administrative 

burdens that such regulations would 

place on insured depository institutions, 

including small depository institutions, 

and customers of depository 

institutions, as well as the benefits of 

such regulations.13 In addition, section 

302(b) of RCDRIA requires new 

regulations and amendments to 

regulations that impose additional 

reporting, disclosures, or other new 

requirements on insured depository 

institutions generally to take effect on 

the first day of a calendar quarter that 

begins on or after the date on which the 

regulations are published in final 

form.14 The proposed rule would not 

impose additional reporting, disclosure, 

or other requirements; therefore the 

requirements of the RCDRIA do not 

apply. 

However, the agencies invite 

comments that further will inform the 

agencies’ consideration of RCDRIA. 

List of Subjects in 12 CFR Part 208 

Accounting, Agriculture, Banks, 

Banking, Confidential business 

information, Consumer protection, 

Crime, Currency, Federal Reserve 

System, Flood insurance, Insurance, 

Investments, Mortgages, Reporting and 

recordkeeping requirements, Securities. 

Authority and Issuance 

For the reasons stated in the 

preamble, the Board of Governors of the 

Federal Reserve System proposes to 

amend 12 CFR part 208 as follows: 

PART 208—MEMBERSHIP OF STATE 

BANKING INSTITUTIONS IN THE 

FEDERAL RESERVE SYSTEM 

(REGULATION H) 

■ 1. The authority citation for part 208 

continues to read as follows: 

Authority: 12 U.S.C. 24, 36, 92a, 93a, 

248(a), 248(c), 321–338a, 371d, 461, 481–486, 

601, 611, 1814, 1816, 1817(a)(3), 1817(a)(12), 

1818, 1820(d)(9), 1833(j), 1828(o), 1831, 

1831o, 1831p–1, 1831r–1, 1831w, 1831x, 

1835a, 1882, 2901–2907, 3105, 3310, 3331– 

3351, 3905–3909, 5371, and 5371 note; 15 

U.S.C. 78b, 78I(b), 78l(i), 780–4(c)(5), 78q, 

78q–1, 78w, 1681s, 1681w, 6801, and 6805; 

31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 

4104b, 4106, and 4128. 

■ 2. In § 208.62, add a new paragraph (l) 

to read as follows: 

§ 208.62 Suspicious activity reports. 

* * * * * 

(l) Exemptions. 

(1)(i) The Board may exempt any 

member bank from the requirements of 

this section. Upon receiving a written 

request from a member bank, the Board 

will consider whether the exemption is 

consistent with safe and sound banking 

and may consider other appropriate 

factors. The Board also would seek 

FinCEN’s determination whether the 

exemption is consistent with the 

purposes of the Bank Secrecy Act, if 

applicable. The exemption shall be 

applicable only as expressly stated in 

the exemption, may be conditional or 

unconditional, may apply to particular 

persons or classes of persons, and may 

apply to transactions or classes of 

transactions. 

(ii) The Board will seek FinCEN’s 

concurrence with regard to any 

exemption request that would also 

require an exemption from FinCEN’s 

SAR regulations, and may consult with 

FinCEN regarding other exemption 

requests. The Board also may consult 

with the other state and federal banking 

agencies and consider comments before 

granting any exemption. 

(2) The Board will provide a written 

response to the member bank that 

submitted the exemption request after 

considering whether the exemption is 

consistent with safe and sound banking, 

consulting with the appropriate 

agencies, and seeking concurrence when 

appropriate. A member bank that has 

received an exemption under paragraph 

(1) of this section may rely on the 

exemption for a period of time to be 

communicated by the Board in its 

granting of the exemption, which may 

be indefinite. 

(3) The Board may extend the period 

of time or may revoke an exemption 

granted under paragraph (1) of this 

section. Exemptions may be revoked at 

the sole discretion of the Board. The 

Board will provide written notice to the 

member bank of the Board’s intention to 

revoke an exemption. Such notice will 

include the basis for the revocation and 

will provide an opportunity for the 

member bank to submit a response to 

the Board. The Board will consider the 

response prior to deciding whether to 

revoke an exemption, and will notify 

the member bank of the Board’s final 

decision to revoke an exemption in 

writing. 

By order of Board of Governors of the 

Federal Reserve System. 

Ann Misback, 

Secretary of the Board. 

[FR Doc. 2021–00033 Filed 1–21–21; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 353 

RIN 3064–AF56 

Exemptions to Suspicious Activity 

Report Requirements 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The FDIC is inviting comment 

on a proposed rule that would modify 


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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules 6581 

1The FDIC first codified this requirement in 1986 

at 12 CFR part 353 (1986), which required FDIC 

insured state non-member banks to report 

‘‘apparent violation[s]’’ of federal criminal law. 51 

FR 16485, 16486 (May 5, 1986). 

2Public Law 102–550, 106 Stat. 3672 (Oct. 28, 

1992). 

3 31 U.S.C. 5318(g)(1). The quoted text is from 

section 1517 of the Annunzio-Wylie Anti-Money 

Laundering Act, which was originally codified at 31 

U.S.C. 5314(g). The text was moved as part of the 

Violent Crime Control and Law Enforcement Act of 

1994. 4FinCEN is the Administrator of the Bank 

Secrecy Act. 5 61 FR 4326 (Feb. 5, 1996). Prior to the adoption 

of FinCEN’s SAR regulation in 1996 and the 

accompanying revisions to the FDIC’s regulation, 

the FDIC’s criminal referral regulation had no 

specific provision requiring the reporting of money 

laundering transactions. See footnote 1. However, 

the FDIC’s criminal referral regulation prior to the 

SAR regulation broadly encompassed money 

laundering and structuring transactions. See 58 FR 

28757, 28772 (May 17, 1993). 

6 61 FR 6095 (Feb. 16, 1996) (FDIC); 61 FR 6100 

(Feb. 16, 1996) (OTS); 61 FR 4326 (Feb. 5, 1996) 

(FinCEN). 

7See 12 CFR part 353; 31 CFR 1020.320(a)(2). 

the requirements for FDIC-supervised 

institutions to file Suspicious Activity 

Reports (SARs). The proposed rule 

would amend the FDIC’s SAR regulation 

to allow the FDIC to issue exemptions 

from the SAR requirements. The 

proposed rule would make it possible 

for the FDIC to grant relief to FDICsupervised institutions that develop 

innovative solutions to meet Bank 

Secrecy Act (BSA) requirements more 

efficiently and effectively. 

DATES: Comments are due on or before 

February 22, 2021. Comments on the 

Paperwork Reduction Act burden 

estimates are due on or before March 23, 

2021. 

ADDRESSES: You may submit comments, 

identified by RIN 3064–AF56, by any of 

the following methods: 

• FDIC Website: https://

www.fdic.gov/regulations/laws/federal/. 

Follow instructions for submitting 

comments on the agency website. 

• FDIC Email: Comments@fdic.gov. 

Include RIN 3064–AF56 on the subject 

line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW, Washington, DC 20429. 

• Hand Delivery/Courier: Comments 

may be hand-delivered to the guard 

station at the rear of the 550 17th Street 

building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

Please include your name, affiliation, 

address, email address, and telephone 

number(s) in your comment. All 

statements received, including 

attachments and other supporting 

materials, are part of the public record 

and are subject to public disclosure. 

You should submit only information 

that you wish to make publicly 

available. 

Please note: All comments received 

will be posted generally without change 

to http://www.fdic.gov/regulations/laws/ 

federal, including any personal 

information provided. 

FOR FURTHER INFORMATION CONTACT: Lisa 

Arquette, Associate Director, (202) 898– 

8633, larquette@fdic.gov, Division of 

Risk Management Supervision; John 

Dorsey, Acting Supervisory Counsel, 

(202) 898–3807, jdorsey@fdic.gov, Legal 

Division; or Constantine Lizas, Counsel, 

(202) 898–6925, clizas@fdic.gov, Legal 

Division. 

SUPPLEMENTARY INFORMATION: 

I. Policy Objectives 

The policy objective of the proposed 

rule is to allow the FDIC to grant SAR 

filing exemptions, in conjunction with 

the Financial Crimes Enforcement 

Network of the Department of the 

Treasury (FinCEN), to FDIC-supervised 

institutions that develop innovative 

solutions to meet BSA requirements 

more efficiently and effectively. The 

FDIC is proposing this rule as a 

proactive measure to address the 

likelihood that FDIC-supervised 

institutions will leverage existing or 

future technologies to report 

information concerning suspicious 

activity in a different manner or time 

frame or to share SAR-related 

information. This change would more 

closely align the FDIC’s regulation with 

FinCEN’s regulation. FinCEN, unlike the 

FDIC, has broad statutory authority to 

issue exemptions from the SAR filing 

requirements. Because the FDIC’s SAR 

regulations do not currently contain any 

provision by which the FDIC can issue 

case-by-case exemptions, a situation 

could arise in which FinCEN grants an 

exemption from the SAR filing 

requirements to an FDIC-supervised 

institution, but the institution would 

still need to file a SAR if the 

circumstance fell within the FDIC’s SAR 

rule. The proposed rule would allow the 

FDIC to grant exemptions from SAR 

filing requirements in conjunction with 

FinCEN to reduce potential regulatory 

burden when a request involves the 

SAR filing requirements of both FinCEN 

and the FDIC. 

II. Background 

The FDIC has long required its 

supervised institutions to report 

potential violations of law arising from 

transactions that flow through those 

institutions. From 1986 to 1996, FDICsupervised institutions filed criminal 

referral forms with the FDIC, Federal 

Bureau of Investigation, and the local 

U.S. Attorney’s office.1 The FDIC 

required reporting through criminal 

referral forms to facilitate the reporting 

of potential violations to law 

enforcement. 

In 1992, Congress passed the 

Annunzio-Wylie Anti-Money 

Laundering Act, which redesigned the 

criminal referral process applicable to 

FDIC-supervised institutions and made 

the reporting of certain suspicious 

transactions a requirement of the BSA.2

The Annunzio-Wylie Anti-Money 

Laundering Act permitted the 

Department of the Treasury to require 

financial institutions, including FDICsupervised institutions, to ‘‘report any 

suspicious transaction relevant to a 

possible violation of law or 

regulation.’’ 3 Thereafter, the 

Department of the Treasury, in 

consultation with the FDIC, the other 

federal banking agencies, 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, FinCEN implemented its SAR 

regulation in 1996 4 for financial 

institutions subject to BSA requirements 

to address, among other things, 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 

FDIC 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 FinCEN’s 

reporting requirements, and further 

refine the reporting processes.6

As a result of this redesign and 

FinCEN’s implementing regulation, 

FDIC-supervised institutions are 

currently required under both FDIC and 

FinCEN regulations to file SARs. These 

regulations are not identical but are 

substantially similar. Both SAR 

regulations require, among other things, 

FDIC-supervised institutions to file 

SARs relating to money laundering and 

transactions that are designed to evade 

the reporting requirements of the BSA, 

as well as maintain the confidentiality 

of a SAR in most circumstances.7

However, the FDIC’s SAR regulation 

covers 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 


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6582 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules 

8See 31 U.S.C. 5318(a)(7), with implementing 

regulations at 31 CFR 1010.970. 

9See https://www.fdic.gov/news/news/press/ 

2018/pr18091a.pdf. 

10Under the Bank Secrecy Act, the term ‘‘bank’’ 

is defined in 31 CFR 1010.100(d) and includes each 

agent, agency, branch, or office within the United 

States of banks, savings associations, credit unions, 

and foreign banks. 

prompt notification to the institution’s 

board of directors when a SAR has been 

filed. 

FinCEN has general authority to grant 

exemptions from the BSA’s 

requirements, which includes granting 

exemptions under its SAR reporting 

regulation.8 FinCEN’s regulation 

provides that ‘‘[t]he 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 

exceptions or 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 of Treasury delegated this 

exemption authority to FinCEN. In 

contrast, the FDIC’s SAR regulations 

contain a discrete set of filing 

exemptions pertaining to physical 

crimes (robberies and burglaries), and 

lost, missing, counterfeit, or stolen 

securities. 

This disparity in exemptions makes it 

more difficult for the FDIC to grant relief 

if an FDIC-supervised institution has a 

novel SAR filing proposal that does not 

squarely fit within the FDIC’s regulatory 

requirements, but would nonetheless be 

consistent with safe and sound banking 

and with the BSA. As financial 

technology and innovation continue to 

develop in the area of monitoring and 

reporting financial crime and terrorist 

financing, the FDIC will need the 

express regulatory flexibility to grant 

exemptive relief when appropriate in 

this area. 

Moreover, in 2018, the FDIC, the 

Board of Governors of the Federal 

Reserve System, the National Credit 

Union Administration, the Office of the 

Comptroller of the Currency, and 

FinCEN issued a statement encouraging 

banks to take innovative approaches to 

meet their BSA/Anti-Money Laundering 

compliance obligations.9 The statement 

explained that banks 10 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 

filing 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 FDICsupervised institutions, the use of 

shared utilities and shared data, and the 

use and sharing of de-identified data 

(commonly referred to as anonymized 

data). The FDIC expects that new 

technologies will continue to prompt 

additional innovative approaches 

related to suspicious activity monitoring 

and SAR filing. 

If the FDIC adopts the proposed rule 

and uses it to grant exemptions, the 

exemptions would not relieve FDICsupervised institutions from the 

obligation to comply with FinCEN’s 

SAR regulation when applicable. To the 

extent an exemption request from an 

FDIC-supervised institution involves 

both the FDIC’s SAR regulation and 

FinCEN’s SAR regulation, the FDICsupervised institution would need an 

exemption from both the FDIC and 

FinCEN. The FDIC expects to coordinate 

with FinCEN when handling parallel 

exemptions. As explained above, 

however, the FDIC’s SAR regulation 

imposes additional requirements not 

included in FinCEN’s SAR regulation. 

To the extent an exemption request is 

subject to a requirement imposed by the 

FDIC’s SAR regulation alone (and not a 

parallel FinCEN requirement), the 

proposed rule would allow the FDIC to 

exempt a supervised institution from 

that requirement. 

III. Proposed Regulation Changes 

The proposed rule would add three 

paragraphs to 12 CFR 353.3(d) of the 

FDIC Rules and Regulations that would 

permit the FDIC to exempt a supervised 

institution from the requirements, in 

full or in part, of 12 CFR 353.3. Under 

the proposed rule, the FDIC in 

evaluating an exemption request would 

determine whether the request is 

consistent with safe and sound banking, 

and may consider other appropriate 

factors. The FDIC would also seek 

FinCEN’s determination whether the 

exemption request is consistent with the 

purposes of the BSA, as applicable, 

where an exemption request involves 

the filing of a SAR for potential money 

laundering, violations of the BSA, or 

other unusual activity covered by 

FinCEN’s SAR regulation. When a 

request involves the SAR filing 

requirements of both FinCEN and the 

FDIC, the proposed rule would require 

the FDIC to seek FinCEN’s concurrence. 

In addition, the proposed rule provides 

that the FDIC may grant an exemption 

for a specified time period. The 

supervised institution would then be 

able to rely on the exemption for a 

period of time as determined and 

communicated by the FDIC. Under the 

proposed rule, the FDIC could also 

extend or revoke previously granted 

exemptions if circumstances change 

related to the factors set out above 

(consistent with the BSA and safety and 

soundness), or any imposed conditions. 

A. Part 353.3(d) Exemptions 

Section 353.3(d) sets forth exemptions 

from the FDIC’s SAR regulation. 

Currently, Section 353.3(d)(1) exempts 

FDIC-supervised institutions from filing 

a SAR for a committed or attempted 

robbery or burglary that is reported to 

the appropriate law enforcement 

authorities. Section 353.3(d)(2) exempts 

an FDIC-supervised institution from 

filing a SAR for lost, missing, 

counterfeit, or stolen securities if the 

institution files a report pursuant to the 

reporting requirements of 17 CFR 

240.17f–1. The proposed rule would 

add three paragraphs to § 353.3(d). 

B. Part 353.3(d)(3) 

The proposed paragraph (d)(3) would 

permit the FDIC to exempt any FDICsupervised institution from the 

requirements of 12 CFR 353.3. Upon 

receiving a written request from an 

FDIC-supervised institution, the FDIC 

would determine whether the 

exemption is consistent with safe and 

sound banking. The FDIC would also 

seek FinCEN’s determination whether 

the exemption is consistent with the 

purposes of the BSA, as applicable, 

where an exemption request also 

requires an exemption from FinCEN’s 

SAR regulation. The 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 proposed paragraph (d)(3) would 

require the FDIC to seek FinCEN’s 

concurrence regarding an exemption 

request that also requires an exemption 

from FinCEN’s SAR regulation. The 

proposed paragraph (d)(3) would permit 

the FDIC to consult with FinCEN 

regarding other exemption requests. The 

FDIC may also consult with the other 


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11FDIC-supervised institutions are set forth in 12 

U.S.C. 1813(q)(2). 

12See 85 FR 31598 (May 26, 2020). 

13This estimate uses the May 2019 75th 

percentile hourly wage rate for Financial Managers 

($73.48), Compliance Officers ($43.70), Financial 

Clerks ($18.20), and Tellers ($17.49) reported by the 

Bureau of Labor Statistics, National IndustrySpecific Occupational Employment, and Wage 

Estimates. These wage rates have been adjusted for 

changes in the Consumer Price Index for all Urban 

Consumers between May 2019 and June 2020 (0.67 

percent) and grossed up by 51 percent to account 

for non-monetary compensation as reported by the 

June 2020 Employer Costs for Employee 

Compensation Data. The mix of professions varies 

depending on the task associated with filing SARs 

including reviewing alerts, documenting reasons 

why some alerts do not merit a SAR filing, drafting, 

writing, and submitting SARs, and storing SARs 

and supporting documentation. For this calculation 

the FDIC assumed that the mix of professions 

involved in each task, the percentage of SAR alerts 

that result in a SAR filing, and the percentage of 

SARs that are batch filed or filed discretely, and the 

percentage of SARs that contain extended content 

matches what FinCEN reported in its recent 

estimates of the costs associated with SAR filing 

requirements (85 FR 31598). 

14FDIC analysts queried data on SAR filings by 

institution from a SAR database that FinCEN makes 

available to regulators and law enforcement 

agencies. 

15This estimate uses FinCEN data on the SAR 

filings of each FDIC-supervised institution, in 

combination with FinCEN’s methodology for 

estimating costs associated with SAR filings, to 

estimate the SAR-related costs that each FDICsupervised institution incurred in the second 

quarter of 2020. That estimate is then multiplied by 

four, and compared to each institution’s previous 

four quarters of merger-adjusted noninterest 

expense and wages and salary expense reported in 

Call Report filings from September 2019–June 2020. 

state and federal banking agencies 

before granting any exemption. 

C. Part 353.3(d)(4) 

The proposed paragraph (d)(4) would 

require that, after the FDIC has received 

FinCEN’s concurrence and consulted 

with appropriate agencies, the FDIC 

provide a written response to the FDICsupervised institution that submitted 

the exemption request. An FDICsupervised institution that has received 

an exemption under paragraph (d)(3) 

may rely on the exemption for a period 

of time to be communicated by the FDIC 

in its granting of the exemption, which 

may be indefinite. 

D. Part 353.3(d)(5) 

The proposed paragraph (d)(5) would 

permit the FDIC to revoke or extend the 

period of time for an exemption granted 

under paragraph (d)(3). Under the 

proposed paragraph (d)(5), the FDIC 

would have discretion to revoke 

exemptions. The proposed paragraph 

(d)(5) would require the FDIC to provide 

written notice to the FDIC-supervised 

institution of the FDIC’s intention to 

revoke an exemption. The proposed 

paragraph (d)(5) would require the 

written notice to include the basis for 

the revocation and provide the FDICsupervised institution an opportunity to 

respond. The proposed paragraph (d)(5) 

would require the FDIC to consider the 

institution’s response before deciding to 

revoke an exemption. The proposed 

paragraph (d)(5) would require the FDIC 

to notify, in writing, the FDICsupervised institution of the FDIC’s 

final decision to revoke an exemption. 

IV. Summary 

If the proposal is finalized, 12 CFR 

353.3(d) would be amended to add 

paragraphs (d)(3) through (5), and 

would apply to all FDIC-supervised 

institutions. These initiatives would 

permit the FDIC to grant SAR 

exemptions to FDIC-supervised 

institutions to promote innovation, 

reduce burden, and meet BSA 

requirements more efficiently and 

effectively. 

V. Expected Effects 

As explained previously, the 

proposed rule would amend 12 CFR 

353.3(d) to add paragraphs (d)(3) 

through (5), and would apply to all 

FDIC-supervised institutions. As of June 

30, 2020, the FDIC supervised 3,270 

institutions.11 The proposal would 

permit the FDIC to grant relief to FDICsupervised institutions that leverage 

existing or future technologies to gather 

and submit the information contained in 

SARs to the appropriate law 

enforcement authorities and regulatory 

agencies in a more efficient and cost 

effective manner. This change would 

more closely align the FDIC’s 

regulations with those of FinCEN, 

which has broad statutory authority to 

issue exemptions from SAR filing 

requirements. Because the FDIC’s SAR 

regulations do not currently contain any 

provision by which the FDIC can issue 

case-by-case exemptions, a situation 

could arise in which FinCEN grants an 

exemption from SAR filing 

requirements to an FDIC-supervised 

institution that has developed 

innovative methods for meeting SAR 

filing requirements, but the institution 

would still need to file a SAR. The 

proposed rule would allow the FDIC to 

grant exemptions from SAR filing 

requirements in conjunction with 

FinCEN to reduce potential regulatory 

burden. 

The FDIC does not have the ability to 

forecast the number of requests for 

exemptions that FDIC-supervised 

institutions will file as a result of this 

rule, or the number of requests that the 

FDIC will grant. The proposed rule is 

likely to pose some increase in 

compliance costs associated with 

submitting an exemption request to the 

FDIC, however the FDIC believes that 

the costs are likely to be small. The 

FDIC expects this proposed rule will 

result in cost savings for FDICsupervised institutions that obtain 

exemptions from SAR filing 

requirements. However, the cost savings 

are projected to be relatively modest. 

For example, using the methodology for 

calculating the cost associated with 

filing SARs that FinCEN published in 

May 2020,12 the FDIC estimates that 

FDIC-supervised institutions incurred 

roughly $3.8 million 13 in costs in the 

second quarter of 2020 related to 

reviewing alerts, and drafting, writing, 

submitting, and storing SAR filings and 

documentation, which amounts to 

annual estimated costs of $15.2 million 

for FDIC-supervised institutions in 

aggregate. 

The FDIC estimated the 

recordkeeping, reporting, and disclosure 

costs of filing SARs for each FDICsupervised institution in the second 

quarter of 2020 using data on SAR 

filings for each institution in 

combination with FinCEN’s 

methodology for estimating costs 

associated with SAR filings.14 The 

annualized estimated recordkeeping, 

reporting, and disclosure costs of filing 

SARs in the second quarter of 2020 do 

not represent more than 1.9 percent of 

annual non-interest expense for any 

FDIC-supervised institution. 

Additionally, only one FDIC-supervised 

institution incurred estimated 

annualized recordkeeping, reporting, 

and disclosure costs associated with 

SAR filing that amounted to more than 

5 percent of annual wage and salary 

expense with the costs equaling 5.2 

percent.15 Therefore, the economic 

benefit of this proposed rule on FDICsupervised institutions is likely to be 

relatively small. Further, this proposed 

rule would only allow the FDIC to grant 

exemptions in instances where safety 

and soundness and Bank Secrecy Act 

regulatory requirements would not be 

compromised, so the proposed rule is 

also not expected to have any broader 

negative economic impacts. 

The FDIC invites comments on all 

aspects of this analysis. In particular, 

would the proposed rule have any costs 

or benefits to covered entities that the 

FDIC has not identified? 

VI. Alternatives 

The FDIC has considered alternatives 

to the proposed rule but believes that 

the proposed amendments represent the 

most appropriate option for covered 

institutions. As discussed earlier, 


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6584 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules 

16 5 U.S.C. 601, et seq. 

17The SBA defines a small banking organization 

as having $600 million or less in assets, where ‘‘a 

financial institution’s assets are determined by 

averaging the assets reported on its four quarterly 

financial statements for the preceding year.’’ See 13 

CFR 121.201 (as amended by 84 FR 34261, effective 

August 19, 2019). ‘‘SBA counts the receipts, 

employees, or other measure of size of the concern 

whose size is at issue and all of its domestic and 

foreign affiliates.’’ See 13 CFR 121.103. Following 

these regulations, the FDIC uses a covered entity’s 

affiliated and acquired assets, averaged over the 

preceding four quarters, to determine whether the 

FDIC-supervised institution is ‘‘small’’ for the 

purposes of RFA. 

18FDIC-supervised institutions are set forth in 12 

U.S.C. 1813(q)(2). 

19Call Report data, March 2020. 

20See 85 FR 31598. 

21This estimate uses the May 2019 75th 

percentile hourly wage rate for Financial Managers 

($73.48), Compliance Officers ($43.70), Financial 

Clerks ($18.20), and Tellers ($17.49) reported by the 

Bureau of Labor Statistics, National IndustrySpecific Occupational Employment, and Wage 

Estimates. These wage rates have been adjusted for 

changes in the Consumer Price Index for all Urban 

Consumers between May 2019 and June 2020 (0.67 

percent) and grossed up by 51 percent to account 

for non-monetary compensation as reported by the 

June 2020 Employer Costs for Employee 

Compensation Data. The mix of professions varies 

depending on the task associated with filing SARs 

including reviewing alerts, documenting reasons 

why some alerts do not merit a SAR filing, drafting, 

FinCEN has statutory authority to grant 

relief from SAR filing requirements to 

FDIC-supervised institutions, and this 

proposed rule would amend the FDIC’s 

regulations so that the FDIC may issue 

exemptions to SAR filing requirements 

in conjunction with FinCEN. This 

change could reduce regulatory burden 

for FDIC-supervised institutions by 

allowing institutions that develop 

innovative techniques for meeting BSA 

requirements to obtain exemptions from 

SAR filing requirements. The FDIC 

considered maintaining its regulations 

in their current form, but chose not to 

do so because the FDIC believes that 

doing so would be unnecessarily 

burdensome and may discourage 

institutions from developing innovative 

approaches to meeting BSA 

requirements. 

VII. Request for Comments 

The FDIC invites comments on all 

aspects of this proposed rulemaking. In 

particular, the FDIC requests comments 

on the following questions: 

Question 1. The FDIC invites 

comments on the proposed exemptions 

to 12 CFR 353.3. 

Question 2. The FDIC invites 

comments on whether any additional 

detail relating to the procedures that 

would be followed in considering, 

granting, or revoking exemptions are 

necessary. 

Written comments must be received 

by the FDIC no later than February 22, 

2021. 

VIII. Administrative Law Matters 

A. The Paperwork Reduction Act 

Certain provisions of the proposed 

rule contain ‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act (PRA) of 1995 

(44 U.S.C. 3501–3521). In accordance 

with the requirements of the PRA, the 

FDIC may not conduct or sponsor, and 

the 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 information 

collection requirements contained in 

this notice of proposed rulemaking have 

been submitted to OMB for review and 

approval by FDIC under section 3507(d) 

of the PRA and § 1320.11 of OMB’s 

implementing regulations (5 CFR part 

1320) as a new information collection. 

The proposed rule contains voluntary 

reporting requirements, or exemption 

requests, in 12 CFR 353.3(d)(3). 

Title of Proposed Information 

Collection: Exemptions to Suspicious 

Activity Report Requirements. 

OMB Control Number: 3064—[NEW]. 

Frequency of Response: On Occasion. 

Affected Public: Businesses or other 

for-profit. 

Respondents: Any FDIC-supervised 

institution wishing to obtain an 

exemption from the Suspicious Activity 

Report requirements. 

Estimated Number of Annual 

Respondents: 3. 

Estimated Burden per Response: 8 

hours. 

Total estimated annual burden: 24 

hours. 

To derive these estimates, the FDIC 

assumed that the FDIC-supervised 

institutions that file the most SARs will 

be the most likely to request exemptions 

from SAR filing requirements. There are 

ten FDIC-supervised institutions that 

filed 1,000 or more SARs in the second 

quarter of 2020. The FDIC expects 

roughly one-third of those institutions 

to request an exemption per year, so the 

FDIC expects 3 annual respondents to 

this information collection. The FDIC 

estimates the hourly burden of an 

exemption request to be 8 hours. 

Comments are invited on: (a) Whether 

the collection of information is 

necessary for the proper performance of 

the FDIC’s functions, including whether 

the information has practical utility; (b) 

the accuracy of the estimates of the 

burden of the information collection, 

including the validity of the 

methodology and assumptions used; (c) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; (d) ways to minimize the 

burden of the information collection on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology; 

and (e) estimates of capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to provide information. 

All comments will become a matter of 

public record. Comments on aspects of 

this notice that may affect reporting or 

recordkeeping requirements and burden 

estimates should be sent to the 

addresses listed in the ADDRESSES

section of this preamble. A copy of the 

comments may also be submitted to the 

FDIC OMB desk officer by mail to U.S. 

Office of Management and Budget, 725 

17th Street NW, #10235, Washington, 

DC 20503 or by facsimile to 202–395– 

5806, Attention, Federal Banking 

Agency Desk Officer. 

B. The Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA), 

requires that, in connection with a 

notice of proposed rulemaking, an 

agency prepare and make available for 

public comment an initial regulatory 

flexibility analysis that describes the 

impact of the proposed rule on small 

entities.16 However, a regulatory 

flexibility analysis is not required if the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities, 

and publishes its certification and a 

short explanatory statement in the 

Federal Register together with the rule. 

The Small Business Administration 

(SBA) has defined ‘‘small entities’’ to 

include banking organizations with total 

assets of less than or equal to $600 

million.17 Generally, the FDIC considers 

a significant effect to be a quantified 

effect in excess of 5 percent of total 

annual salaries and benefits per 

institution, or 2.5 percent of total 

noninterest expenses. The FDIC believes 

that effects in excess of these thresholds 

typically represent significant effects for 

FDIC-supervised institutions. For the 

reasons provided below, the FDIC 

certifies that the proposed rule would 

not have a significant economic impact 

on a substantial number of small 

banking organizations. Accordingly, a 

regulatory flexibility analysis is not 

required. 

As of June 30, 2020, the FDIC 

supervised 3,270 institutions,18 of 

which 2,492 are considered small 

entities for the purposes of RFA.19 Using 

the methodology for calculating the cost 

associated with filing SARs that FinCEN 

published in May 2020,20 the FDIC 

estimates that small FDIC-supervised 

institutions incurred $460,565.08 21 in 


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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules 6585 

writing, and submitting SARs, and storing SARs 

and supporting documentation. For this calculation 

the FDIC assumed that the mix of professions 

involved in each task, the percentage of SAR alerts 

that result in a SAR filing, and the percentage of 

SARs that are batch filed or filed discretely, and the 

percentage of SARs that contain extended content 

matches what FinCEN reported in its recent 

estimates of the costs associated with SAR filing 

requirements (85 FR 31598). 

22FDIC analysts queried data on SAR filings by 

institution from a SAR database that FinCEN makes 

available to regulators and law enforcement 

agencies. 

23This estimate uses FinCEN data on the SAR 

filings of each FDIC-supervised institution, in 

combination with FinCEN’s methodology for 

estimating costs associated with SAR filings, to 

estimate the SAR-related costs that each FDICsupervised institution incurred in the second 

quarter of 2020. That estimate is then multiplied by 

four, and compared to each institution’s previous 

four quarters of merger-adjusted noninterest 

expense and wages and salary expense reported in 

Call Report filings from June 2019 to March 2020. 

24Public Law 106–102, section 722, 113 Stat. 

1338, 1471 (1999). 

25Public Law 104–208, 110 Stat. 3009 (1996). 

26 82 FR 15900 (March 31, 2017). 

27 12 U.S.C. 4802(a). 28 Id. 

costs in the second quarter of 2020 

related to reviewing alerts, documenting 

the reasons why certain alerts do not 

merit a SAR filing, and drafting, writing, 

submitting, and storing SAR filings and 

documentation, which amounts to 

annual estimated costs of $1,842,260.32 

for small FDIC-supervised institutions 

in aggregate. 

The FDIC estimated costs of filing 

SARs for each FDIC-supervised 

institution in the second quarter of 2020 

using data on SAR filings for each 

institution in combination with 

FinCEN’s methodology for estimating 

costs associated with SAR filings.22 The 

annualized estimated recordkeeping, 

reporting, and disclosure costs of filing 

SARs in the second quarter of 2020 do 

not represent more than 1.9 percent of 

annual non-interest expense for any 

small FDIC-supervised institution. 

Additionally, only one small FDICsupervised institution incurred 

estimated annualized costs associated 

with SAR filing that amounted to more 

than 5 percent of annual wage and 

salary expense with the costs equaling 

5.2 percent.23 While the total estimated 

costs of filing SARs represent a 

significant expense for one FDICsupervised small entity, the costs do not 

represent a significant amount for all 

other FDIC-supervised small entities. 

Thus, the cost savings from this 

proposal for all other FDIC-supervised 

small entities will likely not be 

significant. In addition, the cost savings 

from receiving a SAR exemption would 

be at least partially offset by the costs 

associated with requesting an 

exemption and the costs associated with 

developing a method for meeting SAR 

requirements. Further, this proposed 

rule would only allow the FDIC to grant 

exemptions in instances where safety 

and soundness and BSA regulatory 

requirements would not be 

compromised, so the proposed rule is 

also not expected to have any broader 

negative economic impacts. 

Based on the information above, the 

FDIC certifies that the rule would not 

have a significant economic impact on 

a substantial number of small entities. 

The FDIC invites comments on all 

aspects of the supporting information 

provided in this section, and in 

particular, whether the proposed rule 

would have any significant effects on 

small entities that the FDIC has not 

identified. 

C. Plain Language 

Section 722 of the Gramm-LeachBliley Act 24 requires the federal 

banking agencies to use plain language 

in all proposed and final rules 

published after January 1, 2000. The 

FDIC has sought to present the proposed 

rule in a simple and straightforward 

manner. The FDIC invites comments on 

whether the proposal is clearly stated 

and effectively organized, and how the 

FDIC might make the proposal easier to 

understand. 

D. The Economic Growth and 

Regulatory Paperwork Reduction Act 

Under section 2222 of the Economic 

Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA), the 

FDIC is required to review all of its 

regulations, at least once every 10 years, 

in order to identify any outdated or 

otherwise unnecessary regulations 

imposed on insured institutions.25 The 

FDIC, along with the other federal 

banking agencies, submitted a Joint 

Report to Congress on March 21, 2017 

(EGRPRA Report) discussing how the 

review was conducted, what has been 

done to date to address regulatory 

burden, and further measures the FDIC 

will take to address issues that were 

identified.26 By providing the ability to 

issue exemptions and reduce burdens 

on FDIC-supervised institutions, this 

rule complements other actions that the 

FDIC has taken, separately and with the 

other federal banking agencies, to 

further the EGRPRA mandate. 

E. Riegle Community Development and 

Regulatory Improvement Act of 1994 

Pursuant to section 302(a) of the 

Riegle Community Development and 

Regulatory Improvement Act 

(RCDRIA),27 in determining the effective 

date and administrative compliance 

requirements for new regulations that 

impose additional reporting, disclosure, 

or other requirements on insured 

depository institutions (IDIs), each 

federal banking agency must consider, 

consistent with principles of safety and 

soundness and the public interest, any 

administrative burdens that the 

regulations would place on depository 

institutions, including small depository 

institutions, and customers of 

depository institutions, as well as the 

benefits of the regulations. In addition, 

section 302(b) of RCDRIA requires new 

regulations and amendments to 

regulations that impose additional 

reporting, disclosures, or other new 

requirements on IDIs generally to take 

effect on the first day of a calendar 

quarter that begins on or after the date 

on which the regulations are published 

in final form.28 The FDIC invites 

comments that further will inform its 

consideration of RCDRIA. 

List of Subjects in 12 CFR Part 353 

Banks, banking, Crime, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

For the reasons stated in the 

preamble, the Federal Deposit Insurance 

Corporation proposes to amend 12 CFR 

part 353 as follows: 

PART 353—SUSPICIOUS ACTIVITY 

REPORTS 

■ 1. The authority citation for part 353 

continues to read as follows: 

Authority: 12 U.S.C. 1818, 1819; 31 U.S.C. 

5318. 

■ 2. Revise § 353.3 paragraph (d) to read 

as follows: 

§ 353.3 Reports and records. 

* * * * * 

(d) Exemptions. (1) An FDICsupervised institution need not file a 

suspicious activity report for a robbery 

or burglary committed or attempted, 

that is reported to appropriate law 

enforcement authorities. 

(2) An FDIC-supervised institution 

need not file a suspicious activity report 

for lost, missing, counterfeit, or stolen 

securities if it files a report pursuant to 

the reporting requirements of 17 CFR 

240.17f–1. 

(3) The FDIC may exempt any FDICsupervised institution from the 

requirements of this section. Upon 

receiving a written request from an 

FDIC-supervised institution, the FDIC 

will determine whether the exemption 

is consistent with safe and sound 

banking and may consider other 

appropriate factors. The FDIC will also 


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6586 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Proposed Rules 

1See 50 FR 53294–01 (Dec. 31, 1985). 

2 58 FR 5663 (Jan. 22, 1993). 

3Public Law 102–550, 106 Stat. 3672, 4059 

(1992). 

4 31 U.S.C. 5318(g)(1). The quoted text is from 

section 1517 of the Annunzio-Wylie Anti-Money 

Laundering Act, which was originally codified at 31 

U.S.C. 5314(g). The text was moved as part of the 

Violent Crime Control and Law Enforcement Act of 

1994. 

seek FinCEN’s determination whether 

the exemption is consistent with the 

purposes of the BSA, if applicable. The 

exemption shall be applicable only as 

expressly stated in the exemption, 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 FDIC will seek FinCEN’s 

concurrence with regard to any 

exemption request that also requires an 

exemption from FinCEN’s SAR 

regulation, and may consult with 

FinCEN regarding other exemption 

requests. The FDIC also may consult 

with the other state and federal banking 

agencies before granting any exemption. 

(4) The FDIC will provide a written 

response to the FDIC-supervised 

institution that submitted the exemption 

request after considering whether the 

exemption is consistent with safe and 

sound banking, consulting with the 

appropriate agencies, and seeking 

concurrence when appropriate. An 

FDIC-supervised institution that has 

received an exemption under paragraph 

(d)(3) of this section may rely on the 

exemption for a period of time to be 

communicated by the FDIC in its 

granting of the exemption, which may 

be indefinite. 

(5) The FDIC may extend the period 

of time or may revoke an exemption 

granted under paragraph (d)(3) of this 

section. Exemptions may be revoked at 

the sole discretion of the FDIC. The 

FDIC will provide written notice to the 

FDIC-supervised institution of the 

FDIC’s intention to revoke an 

exemption. The notice will include the 

basis for the revocation and will provide 

an opportunity for the FDIC-supervised 

institution to submit a response to the 

FDIC. The FDIC will consider the 

response prior to deciding whether or 

not to revoke an exemption, and will 

notify the FDIC-supervised institution of 

the FDIC’s final decision to revoke an 

exemption in writing. 

* * * * * 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 

Dated at Washington, DC, on December 15, 

2020. 

James P. Sheesley, 

Assistant Executive Secretary. 

[FR Doc. 2021–00037 Filed 1–21–21; 8:45 am] 

BILLING CODE 6714–01–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 748 

RIN 3133–AF25 

Bank Secrecy Act 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Proposed rule. 

SUMMARY: The NCUA Board (Board) is 

inviting comment on a proposed rule 

that would modify the requirements for 

federally insured credit unions (FICUs) 

to file Suspicious Activity Reports 

(SARs). The proposed rule would 

amend the NCUA’s SARs regulation to 

allow the Board to issue exemptions 

from the requirements of that regulation 

in order to grant relief to FICUs that 

develop innovative solutions to meet 

the requirements of the Bank Secrecy 

Act (BSA). 

DATES: Comments must be received by 

February 22, 2021. 

ADDRESSES: You may submit written 

comments, identified by RIN 3133– 

AF25, by any of the following methods 

(Please send comments by one method 

only): 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (703) 518–6319. Include 

‘‘[Your Name]—Comments on Proposed 

Rule: Bank Secrecy Act’’ in the 

transmittal. 

• Mail: Address to Melane ConyersAusbrooks, Secretary of the Board, 

National Credit Union Administration, 

1775 Duke Street, Alexandria, Virginia 

22314–3428. 

• Hand Delivery/Courier: Same as 

mail address. 

Public Inspection: You may view all 

public comments on the Federal 

eRulemaking Portal at http://

www.regulations.gov as submitted, 

except for those we cannot post for 

technical reasons. The NCUA will not 

edit or remove any identifying or 

contact information from the public 

comments submitted. Due to social 

distancing measures in effect, the usual 

opportunity to inspect paper copies of 

comments in the NCUA’s law library is 

not currently available. After social 

distancing measures are relaxed, visitors 

may make an appointment to review 

paper copies by calling (703) 518–6540 

or emailing OGCMail@ncua.gov. 

FOR FURTHER INFORMATION CONTACT: 

Policy and Analysis: Timothy Segerson, 

Deputy Director, Office of Examination 

and Insurance, (703) 518–6397; 

Legal:Justin Anderson, Senior Staff 

Attorney, Damon P. Frank, Staff 

Attorney, and Chrisanthy J. Loizos, 

Senior Staff Attorney, Office of General 

Counsel, (703) 518–6540; or by mail at 

National Credit Union Administration, 

1775 Duke Street, Alexandria, VA 

22314. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

Requirements related to SARs are 

codified in 12 CFR 748.1(c). This 

section of the NCUA’s regulations 

requires FICUs to file SARs under 

certain conditions. In addition, this 

section provides for: (i) Board of 

director or other committee notification; 

(ii) filing exceptions; (iii) SAR 

confidentiality; (iv) recordkeeping 

requirements; (v) supporting 

documentation requirements; and (vi) 

limitations on liability. The proposed 

rule would allow the NCUA to issue 

exemptions from the regulation’s SAR 

requirements. 

II. Background 

The NCUA’s original SARs regulation 

required FICUs to report potential 

violations of law arising from 

transactions that flow through those 

institutions.1 As discussed in more 

detail later in this document, this 

regulation has been amended and 

updated since its inception. The 

NCUA’s purpose for the regulation has, 

however, remained unchanged because 

fraud, abusive insider transactions, 

check-kiting schemes, money 

laundering, and other financial crimes 

can pose serious threats to a financial 

institution’s continued viability and, if 

unchecked, can undermine the public 

confidence in the nation’s financial 

services industry generally.2

In 1992, Congress passed the 

Annunzio-Wylie Anti-Money 

Laundering Act (the Anti-Money 

Laundering Act), which redesigned the 

criminal referral process applicable to 

credit unions and made the reporting of 

certain suspicious transactions a 

requirement of the BSA.3 The AntiMoney Laundering Act permitted the 

Department of the Treasury to require 

financial institutions, including credit 

unions, to ‘‘report any suspicious 

transaction relevant to a possible 

violation of law or regulation.’’ 4


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