Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60377 

1 12 U.S.C. 1829b(b)(2) (2006). Treasury has 

independent authority to issue regulations requiring 

nonbank financial institutions to maintain records 

of domestic transmittals of funds. 

2 12 U.S.C. 1829b(b)(3) (2006). 

3 Id. 

accommodations to attend a public 

hearing, contact the person listed under 

FOR FURTHER INFORMATION CONTACT. We 

will arrange the location and time of the 

hearing with those persons requesting 

the hearing. If no one requests an 

opportunity to speak, we will not hold 

the hearing. If only one person 

expresses an interest, a public meeting 

rather than a hearing may be held, with 

the results included in the docket for 

this rulemaking. 

To assist the transcriber and ensure an 

accurate record, we request, if possible, 

that each person who speaks at a public 

hearing provide us with a written copy 

of his or her comments. The public 

hearing will continue on the specified 

date until everyone scheduled to speak 

has been given an opportunity to be 

heard. If you are in the audience and 

have not been scheduled to speak and 

wish to do so, you will be allowed to 

speak after those who have been 

scheduled. We will end the hearing after 

everyone scheduled to speak and others 

present in the audience who wish to 

speak, have been heard. 

IV. Procedural Determinations 

Executive Order 12866—Regulatory 

Planning and Review 

This rule is exempted from review by 

the Office of Management and Budget 

(OMB) under Executive Order 12866 

(Regulatory Planning and Review). 

Other Laws and Executive Orders 

Affecting Rulemaking 

When a State submits a program 

amendment to OSM for review, our 

regulations at 30 CFR 732.17(h) require 

us to publish a notice in the Federal 

Register indicating receipt of the 

proposed amendment, its text or a 

summary of its terms, and an 

opportunity for public comment. We 

conclude our review of the proposed 

amendment after the close of the public 

comment period and determine whether 

the amendment should be approved, 

approved in part, or not approved. At 

that time, we will also make the 

determinations and certifications 

required by the various laws and 

executive orders governing the 

rulemaking process and include them in 

the final rule. 

List of Subjects in 30 CFR Part 944 

Intergovernmental relations, Surface 

mining, Underground mining. 

Dated: August 12, 2010. 

Allen D. Klein, 

Director, Western Region. 

[FR Doc. 2010–24599 Filed 9–29–10; 8:45 am] 

BILLING CODE 4310–05–P 

DEPARTMENT OF THE TREASURY 

31 CFR Part 103 

RIN 1506–AB01 

Financial Crimes Enforcement 

Network; Cross-Border Electronic 

Transmittals of Funds 

AGENCY: Financial Crimes Enforcement 

Network (FinCEN), Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: FinCEN, a bureau of the 

Department of the Treasury (Treasury), 

to further its efforts against money 

laundering and terrorist financing, and 

is proposing to issue regulations that 

would require certain banks and money 

transmitters to report to FinCEN 

transmittal orders associated with 

certain cross-border electronic 

transmittals of funds (CBETFs). FinCEN 

is also proposing to require an annual 

filing with FinCEN by all banks of a list 

of taxpayer identification numbers of 

accountholders who transmitted or 

received a CBETF. 

DATES: Written comments are welcome 

and must be received on or before 

December 29, 2010 [See the Compliance 

Date heading of the SUPPLEMENTARY

INFORMATION for further dates.] 

ADDRESSES: Those submitting comments 

are encouraged to do so via the Internet. 

Comments submitted via the Internet 

may be submitted at http:// 

www.regulations.gov/search/index.jsp 

with the caption in the body of the text, 

‘‘Attention: Cross-Border Electronic 

Transmittals of Funds.’’ Comments may 

also be submitted by written mail to: 

Financial Crimes Enforcement Network, 

Department of the Treasury, P.O. Box 

39, Vienna, VA 22183, Attention: CrossBorder Electronic Transmittals of 

Funds. Please submit your comments by 

one method only. All comments 

submitted in response to this notice of 

proposed rulemaking will become a 

matter of public record, therefore, you 

should submit only information that 

will be available publicly. 

Instructions: Comments may be 

inspected, between 10 a.m. and 4 p.m., 

in the FinCEN reading room in Vienna, 

VA. Persons wishing to inspect the 

comments submitted must obtain in 

advance an appointment with the 

Disclosure Officer by telephoning (703) 

905–5034 (not a toll free call). In 

general, FinCEN will make all 

comments publicly available by posting 

them on http://www.regulations.gov/ 

search/index.jsp. 

FOR FURTHER INFORMATION CONTACT: The 

FinCEN regulatory helpline at (800) 

949–2732 and select Option 3. 

SUPPLEMENTARY INFORMATION: 

I. Statutory Provisions 

The Bank Secrecy Act (BSA) (Pub. L. 

91–508, codified at 12 U.S.C. 1829b and 

1951–1959, and 31 U.S.C. 5311–5314 

and 5316–5332) authorizes the Secretary 

of the Treasury (Secretary) to require 

financial institutions to keep records 

and file reports that the Secretary 

determines have a high degree of 

usefulness in criminal, tax, or regulatory 

investigations or proceedings, or in 

intelligence or counterintelligence 

matters to protect against international 

terrorism. The authority of the Secretary 

to administer the BSA has been 

delegated to the Director of FinCEN. The 

BSA was amended by the AnnunzioWylie Anti-Money Laundering Act of 

1992 (Pub. L. 102–550) (AnnunzioWylie). Annunzio-Wylie authorizes the 

Secretary and the Board of Governors of 

the Federal Reserve System (the Board) 

to jointly issue regulations requiring 

insured banks to maintain records of 

domestic funds transfers.1 In addition, 

Annunzio-Wylie authorizes the 

Secretary and the Board to jointly issue 

regulations requiring insured banks and 

certain nonbank financial institutions to 

maintain records of international funds 

transfers and transmittals of funds.2

Annunzio-Wylie requires the Secretary 

and the Board, in issuing regulations for 

international funds transfers and 

transmittals of funds, to consider the 

usefulness of the records in criminal, 

tax, or regulatory investigations or 

proceedings, and the effect of the 

regulations on the cost and efficiency of 

the payments system.3

The Intelligence Reform and 

Terrorism Prevention Act of 2004 (Pub. 

L. 108–458) amended the BSA to require 

the Secretary to prescribe regulations 

‘‘requiring such financial institutions as 

the Secretary determines to be 

appropriate to report to the Financial 

Crimes Enforcement Network certain 

cross-border electronic transmittals of 

funds, if the Secretary determines that 

reporting of such transmittals is 

reasonably necessary to conduct the 

efforts of the Secretary against money 

laundering and terrorist financing.’’ 

II. Background Information 

A. Current Regulations Regarding Funds 

Transfers 

On January 3, 1995, FinCEN and the 

Board jointly issued a rule that requires 


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4 31 CFR 103.33(e) (2009) (Recordkeeping 

requirements for banks); 31 CFR 103.33(f) (2009) 

(Recordkeeping requirements for nonbank financial 

institutions). 

5 31 CFR 103.33(g) (2009). 

6 31 CFR 103.33(g)(1)–(2) (2009). 

7 31 CFR 103.33(e)(1)(i), (f)(1)(i) (2009). 

8 31 CFR 103.33(e)(1)(ii)–(iii), (f)(1)(ii)–(iii) (2009). 

9The FATF is a 36-member inter-governmental 

policy-making body with the purpose of 

establishing international standards, and 

developing and promoting policies, both at national 

and international levels, to combat money 

laundering and terrorist financing. See generally 

http://www.fatf-gafi.org. The United States is a 

member of the FATF. 

10Revised Interpretative Note to Special 

Recommendation VII: Wire Transfers, FATF (Feb. 

29, 2008), http://www.fatf-gafi.org/dataoecd/16/34/ 

40268416.pdf. 

11The Final Report of the National Commission 

on Terrorist Attacks Upon the United States (9/11 

Commission Report) (July 22, 2004), http:// 

www.9-11commission.gov/report/911Report.pdf. 

12 Id. at 169. 

13 Id. at 528 n. 116. 

14See National Commission on Terrorist Attacks 

Upon the United States, Terrorist Financing Staff 

Monograph, 54–58 (2004). 

15 9/11 Commission at 382 (Testimony provided 

by Mr. Lee Hamilton, Vice-Chairman). 

banks and nonbank financial 

institutions to collect and retain 

information on certain funds transfers 

and transmittals of funds (Funds 

Transfer Rule).4 At the same time, 

FinCEN issued the ‘‘travel rule,’’ which 

requires banks and nonbank financial 

institutions to include certain 

information on funds transfers and 

transmittals of funds to other banks or 

nonbank financial institutions.5

The recordkeeping and travel rules 

provide uniform recordkeeping and 

transmittal requirements for financial 

institutions and are intended to help 

law enforcement and regulatory 

authorities detect, investigate, and 

prosecute money laundering and other 

financial crimes by preserving an 

information trail about persons sending 

and receiving funds through the funds 

transfer system. 

Under the ‘‘travel rule,’’ a financial 

institution acting as the transmittor’s 

financial institution must obtain and 

include in the transmittal order the 

following information on transmittals of 

funds of $3,000 or more: (a) Name and, 

if the payment is ordered from an 

account, the account number of the 

transmittor; (b) the address of the 

transmittor; (c) the amount of the 

transmittal order; (d) the execution date 

of the transmittal order; (e) the identity 

of the recipient’s financial institution; 

(f) as many of the following items as are 

received with the transmittal order: the 

name and address of the recipient, the 

account number of the recipient, and 

any other specific identifier of the 

recipient; and (g) either the name and 

address or the numerical identifier of 

the transmittor’s financial institution. A 

financial institution acting as an 

intermediary financial institution must 

include in its respective transmittal 

order the same data points listed above, 

if received from the sender.6

Furthermore, under the recordkeeping 

rule, of the information listed above, a 

financial institution must retain the 

following data points for transmittals of 

funds of $3,000 or more: 

• If acting as a transmittor’s financial 

institution, either the original, 

microfilmed, copied, or electronic 

record of the information received, or 

the following data points: (a) The name 

and address of the transmittor; (b) the 

amount of the transmittal order; (c) the 

execution date of the transmittal order; 

(d) any payment instructions received 

from the transmittor with the transmittal 

order; (e) the identity of the recipient’s 

financial institution; (f) as many of the 

following items as are received with the 

transmittal order: the name and address 

of the recipient, the account number of 

the recipient, and any other specific 

identifier of the recipient; and (g) if the 

transmittor’s financial institution is a 

nonbank financial institution, any form 

relating to the transmittal of funds that 

is completed or signed by the person 

placing the transmittal order.7

• If acting as an intermediary 

financial institution, or a recipient 

financial institution, either the original, 

microfilmed, copied, or electronic 

record of the received transmittal 

order.8

The recordkeeping rule requires that 

the data be retrievable and available 

upon request to FinCEN, to law 

enforcement, and to regulators to whom 

FinCEN has delegated BSA compliance 

examination authority. A broad range of 

government agencies regularly compel 

under their respective authorities (e.g., 

subpoena or warrant) financial 

institutions to provide information 

maintained pursuant to the 

recordkeeping rule, albeit in ad hoc and 

sometimes inconsistent and overlapping 

ways, depending upon the agency or 

investigator. 

B. FATF Special Recommendation VII 

Shortly after the attacks of September 

11, 2001, the Financial Action Task 

Force (the FATF) 9 adopted several 

special recommendations designed to 

stem the financing of terrorism. Special 

Recommendation VII (SR VII) was 

developed with the objective of 

preventing terrorists and other criminals 

from having unfettered access to wire 

transfers for moving their funds and 

detecting such misuse when it occurs.10

The FATF in adopting SR VII found 

that, ‘‘due to the potential terrorist 

financing threat posed by small wire 

transfers, countries should aim for the 

ability to trace all wire transfers and 

should minimize thresholds taking into 

account the risk of driving transactions 

underground.’’ The interpretive note to 

Special Recommendation VII goes on to 

say that countries may adopt a de 

minimis standard of $1,000, below 

which countries could exempt 

institutions from reporting or 

maintaining records. 

C. 9/11 Commission and Section 6302 

On November 27, 2002, President 

Bush signed legislation creating the 

National Commission on Terrorist 

Attacks Upon the United States (9/11 

Commission) (Pub. L. 107–306), which 

was directed to investigate the ‘‘facts 

and circumstances relating to the 

terrorist attacks of September 11, 2001,’’ 

including those involving intelligence 

agencies, law enforcement agencies, 

diplomacy, immigration issues and 

border control, the flow of assets to 

terrorist organizations, and the role of 

congressional oversight and resource 

allocation.11 To fulfill its mandate, the 

9/11 Commission reviewed over 2.5 

million pages of documents, conducted 

interviews of some 1,200 individuals in 

ten countries, and held 19 days of 

public hearings featuring testimony 

from 160 witnesses. 

In conducting its review, the 9/11 

Commission focused a significant 

amount of inquiry into the financial 

transactions undertaken by the 19 

hijackers and their associates. The 

Commission estimated that $400,000– 

$500,000 was used to support the 

execution of the attacks of September 

11, 2001.12 The Commission noted that 

the transactions were not inherently 

suspicious and the low volumes of the 

transactions would not have raised 

alarm at the financial institutions 

processing the transactions. The 

Commission also noted that no 

suspicious activity reports (SARs) were 

filed on these transactions prior to the 

attacks of September 11, 2001.13 The 

Commission determined that the current 

reporting and recordkeeping 

requirements contained in the BSA were 

insufficient to detect terrorist financing 

because of the inability of financial 

institutions to use typical money 

laundering typologies to detect terrorist 

financing transactions.14

The 9/11 Commission, through its 

final report and the August 23, 2004 

testimony of its Vice-Chairman,15 noted 

that vigorous efforts to track terrorist 

financing must remain front and center 


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16 Id. at 383. 

17Public Law 108–458, 118 Stat. 3638 (2004). 

18 31 U.S.C. 5318(n) (2006). 

19Feasibility of a Cross-Border Electronic Funds 

Transfer Reporting System under the Bank Secrecy 

Act, FinCEN Report to Congress dated January 17, 

2007, available at http://www.fincen.gov/ 

news_room/rp/files/cross_border.html. 

20See Feasibility Report App. G. FinCEN Industry 

Survey (Notice and Request for Comment, 71 Fed. 

Reg. 14289) and industry responses can be found 

in Appendix G of the Feasibility Report. 

21The Annunzio-Wylie Anti-Money Laundering 

Act of 1992 required the Secretary of the Treasury 

to establish a Bank Secrecy Act Advisory Group 

(BSAAG) consisting of representatives from Federal 

regulatory and law enforcement agencies, financial 

institutions, and trade groups with members subject 

to the requirements of the Bank Secrecy Act, 31 

CFR 103 et seq. or Section 6050I of the Internal 

Revenue Code of 1986. The BSAAG is the means 

by which the Secretary receives advice on the 

operations of the Bank Secrecy Act. As chair of the 

BSAAG, the Director of FinCEN is responsible for 

ensuring that relevant issues are placed before the 

BSAAG for review, analysis, and discussion. 

Ultimately, the BSAAG will make policy 

recommendations to the Secretary on issues 

considered. BSAAG membership is open to 

financial institutions and trade groups. 

22See Feasibility Report, at Section 3.0— 

Overview. 

23See Id. at Section 4.0. 

24See Id. at Section 3.0. 

25See Id. at Section 5.0. 

26See Id. at Section 6.0. 

27See Id. at Section 7.0. 

in U.S. counterterrorism efforts. The 

Commission also found that ‘‘terrorists 

have shown considerable creativity in 

their methods for moving money.’’ 16

Expanding upon this point in his 

August 23, 2004 testimony, 9/11 

Commission Vice-Chairman Hamilton 

stated: ‘‘While we have spent significant 

resources examining the ways al Qaeda 

raised and moved money, we are under 

no illusions that the next attack will use 

similar methods. As the government has 

moved to close financial vulnerabilities 

and loopholes, al Qaeda adapts. We 

must continually examine our system 

for loopholes that al Qaeda can exploit, 

and close them as they are uncovered. 

This will require constant efforts on the 

part of this Committee, working with 

the financial industry, their regulators 

and the law enforcement and 

intelligence community.’’ 

In response to the findings of the 9/ 

11 Commission, Congress passed the 

Intelligence Reform and Terrorism 

Prevention Act of 2004 (IRTPA),17

which was signed into law on December 

17, 2004, by President Bush. IRTPA 

encourages the sharing of information 

across intelligence agencies, protects the 

civil liberties and privacy of 

individuals, and provides processes 

through which intelligence agencies can 

obtain additional intelligence necessary 

to protect the United States and its 

citizens. Specifically, section 6302, 

codified under 31 U.S.C. 5318(n), 

requires that the Secretary study the 

feasibility of ‘‘requiring such financial 

institutions as the Secretary determines 

to be appropriate to report to [FinCEN] 

certain cross-border electronic 

transmittals of funds, if the Secretary 

determines that reporting of such 

transmittals is reasonably necessary to 

conduct the efforts of the Secretary 

against money laundering and terrorist 

financing.’’ The law further requires that 

the regulations be prescribed in final 

form ‘‘before the end of the 3-year period 

beginning on the date of enactment of 

the [Act].’’ 18

Although no particular provision of 

IRTPA on its own would have 

prevented the attacks of September 11, 

2001, together these provisions are 

designed to close the loop-holes that 

would allow future attacks of a similar 

design. For example, of the $400,000 to 

$500,000 used to fund the September 

11, 2001 attacks, an estimated $130,000 

was received by CBETFs sent from 

supporters overseas. Several of those 

transactions were above the $3000 

reporting threshold and involved a 

transmittor or recipient who was either 

an active target of an investigation at the 

time the transfer was made, or could 

have been recognized as a person of 

interest under the new IRTPA 

intelligence sharing provisions. 

D. Feasibility of a Cross-Border 

Electronic Funds Transfer Reporting 

System Under the Bank Secrecy Act 

Section 6302 of IRTPA requires that, 

prior to prescribing the contemplated 

regulations, the Secretary submit a 

report to Congress that: (a) Identified the 

information in CBETFs that might be 

found in particular cases to be 

reasonably necessary to conduct the 

efforts of the Secretary to identify 

money laundering and terrorist 

financing, and outlined the criteria to be 

used by the Secretary to select the 

situations in which reporting under this 

subsection may be required; (b) outlined 

the appropriate form, manner, content, 

and frequency of filing of the reports 

that might be required under such 

regulations; (c) identified the technology 

necessary for FinCEN to receive, keep, 

exploit, protect the security of, and 

disseminate information from reports of 

CBETFs to law enforcement and other 

entities engaged in efforts against money 

laundering and terrorist financing; and 

(d) discussed the information security 

protections required by the exercise of 

the Secretary’s authority under such 

subsection. In January 2007, the 

Secretary submitted the feasibility 

report required under Section 6302 (the 

‘‘Feasibility Report’’) to the Congress.19

FinCEN’s development of the 

Feasibility Report included multiple 

approaches. An internal working group 

of employees drawn from all operational 

divisions of FinCEN coordinated efforts 

within the organization, managed 

contact with external stakeholders, 

hosted small workshops with law 

enforcement representatives, visited 

relevant U.S. and foreign government 

and private sector organizations, 

surveyed industry and governmental 

organizations, solicited input from 

private sector technology experts,20 and 

researched extensively. In addition, 

FinCEN formed a subcommittee of the 

Bank Secrecy Act Advisory Group 

(BSAAG) 21 including representatives 

from across the spectrum of U.S. 

financial services industry members, 

and governmental agencies. The 

subcommittee did not author or review 

this report, but provided expert 

assistance in the identification and 

analysis of relevant issues, 

recommendations about the focus of the 

report, and important contacts within 

the U.S. financial services industry. 

FinCEN also drew upon the experience 

of the Australian Transaction Reports 

and Analysis Centre (AUSTRAC) and 

the Financial Transactions Reports and 

Analysis Centre (FINTRAC), FinCEN’s 

counterpart financial intelligence units 

in Australia and Canada, both of which 

already collect cross border funds 

transfer information.22

The Feasibility Report produced a 

general, high-level assessment of: 

• What information in a funds 

transfer is reasonably necessary to 

collect to conduct efforts to identify 

money laundering and terrorist 

financing, and the situations in which 

reporting may be required; 23

• The value of such information in 

fulfilling FinCEN’s counter-terrorist 

financing and anti-money laundering 

missions; 24

• The form that any such reporting 

would take and the potential costs any 

such reporting requirement would 

impose on financial institutions;25

• The feasibility of FinCEN receiving 

the reports and warehousing the data, 

and the resources (technical and 

human) that would be needed to 

implement the reporting requirement; 26

and, 

• The concerns relating to 

information security and privacy issues 

surrounding the reports collected.27

The Feasibility Report also identified 

a number of issues that policy makers 

were required to consider at any stage 

of the implementation of the reporting 

requirement, such as whether the 


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28 71 FR 14289 (March 21, 2006). 

29Feasibility Report, App. G at 119. 

30As discussed below, through understanding the 

processing of transactions by potential third-party 

reporters, FinCEN removed the reporting threshold 

for banks and adjusted the reporting threshold for 

money transmitters to $1,000. 

31See Feasibility Report, at Section 1.0— 

Executive Summary. 

32See Feasibility Report, at Section 8.0— 

Conclusions and Recommendations. 

potential value of requiring financial 

institutions to report information about 

CBETFs outweighs the potential costs of 

building the technology, the costs to 

financial institutions of implementing 

compliance processes, and the social 

costs related to privacy and security of 

the information. 

A significant concern for the 

centralization of information on CBETFs 

is the cost, both to U.S. financial 

institutions and to the government, of 

implementing the reporting requirement 

and building the technological systems 

to manage and support the reporting. 

Related to these concerns are questions 

about the government’s ability to use 

such data effectively. Another concern 

is the potential effect that any reporting 

requirement could have on dollar-based 

payment systems such as: (1) A shift 

away from the U.S. dollar toward other 

currencies (i.e., the Euro) as the basis for 

international financial transactions; (2) 

the creation of mechanisms and 

facilities for clearing dollar-based 

transactions outside the United States; 

and (3) interference with the operation 

of the central payments systems. The 

United States has economic and 

national security interests in the 

continued viability and vitality of 

dollar-based payments and these 

possible outcomes must inform and 

guide the rulemaking process. 

These issues were also pointed out by 

commenters in response to FinCEN’s 

March 2006 survey 28 regarding the 

reporting of CBETFs. In its response to 

FinCEN’s March 2006 survey, the 

American Bankers Association 

‘‘proposes for discussion whether 

piloting a single channel specific 

reporting requirement and then 

evaluating what has been achieved from 

a law enforcement perspective for what 

cost from an economic and privacy 

basis, isn’t a preferred alternative to 

attempting to implement a 

comprehensive definition-andexception driven cross-border, crosssystem regime.’’ 29 The Feasibility 

Report concluded that there was some 

value to a phased implementation of a 

CBETF reporting system. Building on 

the ABA’s suggestion, the Feasibility 

Report proposed an incremental 

development and implementation 

process. The pre-acquisition phase of 

the process involved three parallel 

efforts: user requirement analysis; 

institutional cost analysis; and value 

analysis. All three of these efforts 

provided vital information required to 

develop detailed requirements for the 

proposed regulation and technological 

system. If the concerns noted above or 

any as-yet unidentified issues would 

impede the project or cause it to be 

infeasible, such incremental approach 

provides the opportunity to alter or halt 

the effort before FinCEN or the U.S. 

financial services industry incurs 

significant costs. 

Based on extensive fieldwork and 

analysis of information and data, the 

Feasibility Report concluded that: 

• The information that FinCEN is 

seeking to be reported is reasonably 

necessary to support the Secretary’s 

efforts to combat money laundering and 

terrorist financing. Specifically, the 

inability to conduct proactive analysis 

on the information currently recorded 

by banks hinders law enforcement’s 

ability to identify significant 

relationships to active targets. 

• The basic information already 

obtained and maintained by U.S. 

financial institutions pursuant to the 

Funds Transfer Rule, including the 

$3,000 recordkeeping threshold, 

provides sufficient basis for meaningful 

data analysis.30

• Any threshold should apply only to 

discrete transactions and not to the 

aggregated total value of multiple 

transactions conducted very closely to 

one another in time. 

• Any reporting requirement should 

apply only to those U.S. institutions that 

exchange payment instructions directly 

with foreign institutions. FinCEN 

determined that a focused approach on 

those institutions that act as 

intermediaries would restrict the 

reporting requirement to those 

institutions with the systems able to 

process these reports and limit the 

implementation costs on the industry as 

a whole. 

• Any reporting requirement should 

permit institutions to report either 

through a format prescribed by FinCEN, 

through the submission of certain preexisting payment messages that contain 

the required data, or through an 

interactive online form for institutions 

that submit a low volume of such 

reports. The filing system should 

accommodate automated daily filing, 

periodic filing via manual upload, and 

discrete single report filing on an asneeded basis.31

• The implementation of the 

reporting requirement described in 

section 6302 would be a staged process, 

requiring FinCEN to review and update 

the requirements as necessary. 

As to the determination of what type 

of cross-border movements of funds to 

include in the first step of the staged 

process advocated by the Feasibility 

Report, the definition of ‘‘cross-border 

electronic transmittal of funds’’ lies at 

the heart of a successful implementation 

of the reporting requirement. The nature 

of the electronic funds transfer process 

as it has evolved in the United States 

poses specific difficulties in creating a 

definition that at once captures all of the 

nuances of the payment systems and 

avoids needless complexity. Section 

6302 contemplates a reporting 

requirement that is coextensive with the 

scope of the BSA funds transfer rule (31 

CFR § 103.33). Accordingly, for the 

purposes of the first step of a phased 

approach to the cross-border electronic 

transmittal of funds reporting 

rulemaking process (the CBETF First 

Stage), the Feasibility Report focused on 

electronic ‘‘transmittals of funds’’ as 

defined in 31 CFR 103.11(jj), and did 

not address any debit card type of 

transmittals, point-of-sale (POS) 

systems, transaction conducted through 

an Automated Clearing House (ACH) 

process, or Automated Teller Machine 

(ATM).32 Furthermore, within the 

current regulatory definition of 

‘‘transmittals of funds,’’ the Feasibility 

Report advised concentrating for the 

CBETF First Stage on those transactions 

involving depository institutions that 

exchange transmittal orders through 

non-proprietary messaging systems, and 

all money transmitters, and where the 

U.S. institution sends or receives a 

transmittal order directing the transfer 

of funds to or from an account 

domiciled outside the U.S.. Refining an 

appropriate regulatory definition of 

what transactions fall within the new 

reporting requirement will implicate a 

number of concerns that were identified 

by the Feasibility Report and should be 

further addressed during future studies. 

As further preparation for a study of 

the implications and benefits of 

implementing the first step of CBETF 

reporting, the Feasibility Report 

recommended the following: 

• Engaging with partners in the law 

enforcement, regulatory and intelligence 

communities to develop detailed user 

requirements to meet the most central 

needs of those who access BSA data. 

• Engaging in a detailed discussion 

with representatives of the U.S. 

financial services industry, along with 

representatives of the major payment 

systems and members of the Canadian 


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Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60381 

33See generally Implications and Benefits of 

Cross-Border Funds Transmittal Reporting, FinCEN 

Analytical Report, FinCEN (Sept. 27, 2010), 

http://www.fincen.gov/news_room/rp/rulings/pdf/ 

ImplicationsAndBenefitsOfCBFTR.pdf [hereinafter 

Implications and Benefits Study]. 

34See Implications and Benefits Study, at App. C. 

35FinCEN continued drawing upon the 

experience of AUSTRAC and FINTRAC, FinCEN’s 

counterpart financial intelligence units in Australia 

and Canada, both of which already collect cross 

border funds transfer information. The extensive 

and detailed information contributed to this effort 

by AUSTRAC and FINTRAC is contained in 

Appendix B (Financial Intelligence Unit Letters of 

Support) to the Study. 

36See Implications and Benefits Study, at Section 

1.0—Executive Summary. 

37See Feasibility Report, at Section 3.0— 

Overview. 

38See Feasibility Report, at Section 4.0—Data 

Reasonably Necessary to Identify Illicit Finance, 

and also Appendix F (Potential Analytical Value of 

Cross-Border Funds Transfer Report). 

and Australian financial services 

industries. These discussions would 

focus on quantifying the cost the 

proposed requirement would impose on 

reporting institutions and the potential 

impact on the day-to-day operation of 

the payment systems. 

• Engaging outside support to obtain 

and analyze a sizable sample of crossborder funds transfer data and exploring 

means of extracting value from the data, 

and identifying means to effectively and 

intelligently use the data to advance 

efforts to combat money laundering and 

illicit finance. 

III. Implications and Benefits of CrossBorder Funds Transmittal Reporting 

Based on the high-level assessment 

and recommendations of the Feasibility 

Report, FinCEN conducted an in-depth 

Implications and Benefits Study of 

Cross-Border Funds Transmittal 

Reporting (the Implications and Benefits 

Study, or simply the Study) 33

addressing the proposed first step of 

implementation of CBETF reporting. 

Significant input into the survey of 

banks and MSBs that supported the 

Study 34 was provided by BSAAG. The 

Study was also supported by interviews 

with law enforcement and regulatory 

agencies, information from foreign 

financial intelligence units,35 and 

interviews and surveys of financial 

institutions.36 The Study analyzed in 

detail the implications of CBETF 

reporting on the financial sector and the 

benefits to law enforcement of having 

access to CBETF data to determine the 

known or potential uses of CBETF data, 

the implications of reporting on the 

financial industry, and the technical 

requirements for accepting reports. 

A. The Known and Potential Uses of 

CBETF Data 

As illicit actors adapt to an 

increasingly transparent system, they 

must make additional and more 

complicated efforts to conceal their 

behavior and resort to slower, riskier, 

more expensive, and more cumbersome 

methods of raising and moving money. 

Every additional step or layer of 

complexity illicit actors must add to 

their schemes provides new 

opportunities for detection, and an 

increased risk to those who would abuse 

the financial system. The value of 

transparency is twofold—it deters those 

who would use the financial system for 

illicit activity and promotes the 

detection of those who do so. As 

governments throughout the world 

strive to promote transparency in the 

financial system, the shortage of tools 

for detecting schemes that rely on these 

modern technological payment systems 

creates a potential blind spot in our 

efforts to protect the homeland and to 

combat financial crime. 

Traditionally, experts describe three 

stages of money laundering: 

• Placement—introducing cash into 

the financial system or into legitimate 

commerce; 

• Layering—separating the money 

from its criminal origins by passing it 

through several financial transactions; 

• Integration—aggregating the funds 

with legitimately obtained money or 

providing a plausible explanation for its 

ownership. 

The BSA reporting regime deals well 

with the placement stage. Some 

financial institutions file Currency 

Transaction Reports (CTRs) when a 

person conducts certain types of large 

currency transactions, others file Forms 

8300 for large amounts of cash or 

monetary instruments received in a 

trade or business, and travelers entering 

the U.S. with more than $10,000 in 

currency must complete Currency and 

Monetary Instrument Reports (CMIRs). 

However, while these three reports 

address placement, due to their focus on 

currency-based transactions, they do not 

provide insights into the rapidly 

developing electronic aspects of 

financial transactions. These reports 

identify the physical movement of 

currency into and within the U.S. 

financial system. Electronic funds 

transfers, by contrast, represent an 

entirely different mode for the 

movement of money. 

The SAR provides some insight into 

the layering and integration stages by 

casting a light on transactions of any 

amount and type that financial 

institutions suspect are related to illicit 

activity or that are suspicious in that 

they do not appear to fit a known 

pattern of legitimate business activity. 

FinCEN has found that electronic funds 

transfers feature prominently in the 

layering stage of money laundering 

activity, which is not addressed in any 

of the reports currently filed if the 

transactions do not raise suspicions 

within the financial institution. 

Complex electronic funds transfer 

schemes can deliberately obscure the 

audit trail and disguise the source and 

the destination of funds involved in 

money laundering and illicit finance.37

In addition to addressing money 

laundering, the BSA requires reporting 

that has a high degree of usefulness in 

tax proceedings, and provides the 

Secretary with additional tools to 

prevent tax evasion. Although some 

models of tax evasion do follow the 

placement, layering, and integration 

models of money laundering, many do 

not because the proceeds are not illicit 

until after the money has been 

transferred overseas. The information 

proposed to be reported in this 

rulemaking will assist the government 

in preventing tax evasion and reducing 

the tax gap. 

A reporting requirement would create 

a centralized database of this very basic 

CBETF information in a single format 

and link it with other highly relevant 

financial intelligence. Furthermore, this 

very basic information about such 

transfers provides both a source of 

information that can provide new leads 

standing alone and can potentially 

enhance the use and utility of current 

BSA data collected by FinCEN when 

combined with those other data sources. 

Currently, the government has no ability 

on a national scale to systematically and 

proactively target money laundering, 

terrorist financing, tax evasion, and 

other financial crimes that are being 

conducted through wire transfers. By 

creating a reporting structure, the 

government will be able to query the 

data by geography and transaction 

value, uncovering linkages such as 

many people sending money to one 

person outside the United States or vice 

versa. These types of linkages play a 

critical role in the ability of the 

government to bring cases that it is not 

able to in today’s reporting 

environment. Among the ways in which 

FinCEN and its partners can exploit this 

data are individual searches for known 

subjects, data matching with other 

sources of lead information, and link 

analysis with other financial, law 

enforcement, and intelligence 

reporting.38

The study team worked with law 

enforcement and regulatory agencies to 

identify how CBETF data would be 

usable for those identified purposes to 

demonstrate the ‘‘reasonable necessity’’ 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60382 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

39See Implications and Benefits Study, at Section 

4.0—Benefits to Law Enforcement and Regulatory 

Agencies. 

40See Implications and Benefits Study, at Section 

1.0—Executive Summary. 

41See 31 CFR 103.33(e) (2009) (Office of 

Management and Budget (OMB) Control Number 

1505–0063). 

42See Implications and Benefits Study, at Section 

1.0—Executive Summary. 

of collecting CBETF data. The results of 

that analysis are summarized in the 

Implications and Benefits Study as 

follows: 

• Section 4.2, Business Use Case 

Process, describes the study team’s 

approach to developing the business use 

cases which illustrate potential uses of 

the data. 

• Section 4.3, Categories of Analysis, 

explains how the use cases were 

categorized (e.g., reactive, proactive). 

• Section 4.4, Domestic Business Use 

Case Summary, summarizes the use 

cases that the study team developed. 

• Section 4.5, Use of CBETF Data by 

International Financial Intelligence 

Units (FIUs), summarizes the use of 

CBETF data by FinCEN’s counterpart 

FIUs in foreign countries. 

• Section 4.6, Data Usability, Quality, 

and Prototyping, presents the results of 

the study team’s analysis to validate the 

usability of the data with CBETF data 

samples provided by the financial 

industry.39

From its interviews with law 

enforcement and regulatory agencies, 

the study team developed primary 

impact areas, also known as ‘‘business 

use cases,’’ and identified 24 scenarios 

in which thirteen different Federal and 

State law enforcement and regulatory 

agencies, in addition to FinCEN, would 

benefit from access to CBETF data based 

upon their investigative mission, 

current use of BSA data, or existing 

utilization of CBETF data obtained from 

financial institutions in the primary 

impact areas of terrorist financing, 

money laundering, tax evasion, human 

and drug smuggling, and regulatory 

oversight.40 The results of this work 

demonstrate how access to CBETF data 

would greatly improve both the 

efficiency of these agencies’ current 

investigations and their ability to 

identify new investigative targets as 

well as be highly valuable in the U.S. 

Government’s efforts to counter these 

associated crimes. The following 

examples are illustrative of the 

representative business use cases that 

were developed: 

• To support the FBI’s efforts in 

tracking and freezing terrorist assets, the 

FBI’s Terrorism Financing Operations 

Section (TFOS) analysts conduct 

sophisticated analysis, cross-referencing 

multiple disparate data sources, to 

identify financial transactions indicative 

of terrorist financing. The availability of 

CBETF data would significantly 

improve the efficiency of FBI analysts 

investigating targets suspected of 

engaging in terrorist financing by tracing 

the flow of proceeds to entities 

associated with terrorist organizations. 

Such analysis would play a critical role 

in the ability of the FBI to detect, 

disrupt, and dismantle terrorist 

financial support networks. 

• The Internal Revenue Service’s 

Abusive Tax Scheme Program, Offshore 

Compliance Initiatives Group, conducts 

sophisticated analysis to proactively 

identify taxpayers using offshore 

accounts and entities to evade U.S. 

income tax. The availability of CBETF 

data would significantly enhance the 

group’s ability to identify potential 

evasion by identified taxpayers through 

the analysis of funds transmittals from 

the United States to offshore accounts. 

• United States Immigration and 

Customs Enforcement (ICE) is 

establishing Trade Transparency Units 

(TTUs) with critical partner 

jurisdictions worldwide, in its effort to 

identify and eliminate customs fraud 

and trade-based money laundering. 

These TTUs have enhanced 

international cooperative investigative 

efforts to combat activities designed to 

exploit vulnerabilities in the U.S. 

financial and trade systems. As formal 

international financial systems become 

more highly regulated and transparent, 

criminal entities have resorted to 

alternative means of laundering illicit 

proceeds. Fraudulent practices in 

international commerce allow criminals 

to launder illicit funds while avoiding 

taxes, tariffs, and customs duties. To 

enhance combating this threat, ICE 

TTUs would conduct proactive analysis 

of CBETF data in conjunction with 

existing U.S. and foreign trade data to 

detect money laundering cases 

involving the international movement of 

over- or under-valued goods. 

Using FinCEN’s authority under the 

recordkeeping rule, FinCEN received a 

limited sample of CBETF data from 

several large financial institutions.41

Based on the business use cases, the 

study group performed an analysis of 

the sample data. This analysis yielded 

several findings: 

• CBETF data fields, under current 

recordkeeping requirements, are 

sufficient to conduct the type of 

analyses illustrated in the business use 

cases, although additional fields could 

add value. 

• Upon implementation, CBETF data 

would immediately be available to 

conduct the type of analyses illustrated 

in the business use cases. 

• Having CBETF data for transactions 

under $3,000 would significantly 

benefit the type of analysis illustrated in 

the business use cases. 

• The quality of the data in the 

sample was found to be acceptable to 

conduct the type of analyses illustrated 

in the business use cases. 

A comparison of a three month 

limited sample of CBETF data to 

FinCEN cases revealed a substantial 

number of instances where CBETF 

transactions were matched with existing 

cases and/or pointed to additional 

investigative leads.42 Based on the 

findings from the Study, FinCEN has 

determined that the collection of CBETF 

data would be ‘‘reasonably necessary’’ as 

set forth in Section 6302. This 

determination is based on the value 

FinCEN believes this information will 

have in our efforts to stem money 

laundering, tax evasion, and terrorist 

financing. FinCEN believes that a 

reporting requirement provides a 

significant advantage to the 

government’s efforts in these areas over 

the current recordkeeping requirement 

at a reasonable cost. These advantages 

are based on the central premise that 

proactive targeting is more effective 

with access to a larger dataset. 

FinCEN’s determination that a 

reporting requirement is reasonably 

necessary also rests on the tenet that the 

government has greater access to 

information than any individual 

institution. For example, if a bank or 

money transmitter has a customer who 

routinely transfers funds to a foreign 

country in amounts that, considered 

alone, would not appear significant, this 

activity may never be reviewed. By 

instituting a reporting requirement, the 

government will be able to observe 

whether this customer is conducting 

similar transactions at many other 

institutions and, if so, can see that the 

person may be avoiding detection by 

spreading their transactions across 

many market participants. Additionally, 

the government has access to more 

information than banks and money 

transmitters. While the government 

cannot provide the private sector access 

to trade and tax databases, for example, 

matching information in these databases 

with cross-border wire records will 

further prosecutions in these areas, 

potentially leading to recouping revenue 

that may otherwise go uncollected. 

Lastly, the government will always have 

access to classified information that 

cannot be shared with the private sector, 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60383 

43See Implications and Benefits Study, App. C. 

at 28 (OMB Control Number 1505–0191). 

44See Implications and Benefits Study, at Section 

5.0—Implications to the Financial Industry. 

45See Implications and Benefits Study, at Section 

1.0—Executive Summary. 

46See Implications and Benefits Study, at Section 

5.0—Implications to the Financial Industry. 

47See Implications and Benefits Study, at Section 

1.0—Executive Summary. 

48See Implications and Benefits Study, at Section 

1.0—Executive Summary. 

and the ability to run queries based on 

this information could have a significant 

impact on mapping a criminal or 

terrorist support network. 

B. Implications of CBETF Reporting to 

the Financial Industry 

To solicit input from the financial 

industry on the effects of a potential 

CBETF reporting requirement, FinCEN 

contracted with an experienced survey 

contractor to gather qualitative 

information and quantitative data from 

sectors of the industry that could be 

affected by the reporting requirement.43

On behalf of FinCEN, the contractor 

distributed the CBETF survey to 247 

depository institutions and 32 money 

transmitters that conduct CBETF 

transactions on behalf of their own 

customers or that act as a correspondent 

bank for other financial institutions. 

Acting on the recommendations of the 

Feasibility Report: 

• ‘‘Depository institutions’’ were 

defined as depository institution 

members of the Society of Worldwide 

Interbank Financial 

Telecommunications (SWIFT) user 

group located or doing business in the 

United States, including offices or 

agents of non-U.S. chartered depository 

institutions. 

• ‘‘Money transmitters’’ were defined 

as non-bank financial institutions that 

were registered with FinCEN as a money 

transmitter on November 10, 2007 and 

reported at least 20 branch locations in 

the United States.44

Out of the group of financial 

institutions surveyed, 81 provided 

responses to FinCEN on the 

implications and benefits of a potential 

CBETF reporting requirement based 

upon the transactions currently subject 

to FinCEN’s recordkeeping requirement, 

both at the $3,000 and zero threshold. 

Key findings from the survey of 

financial industry entities include the 

following: 

• Respondents expected an increase 

in the cost of complying with the new 

reporting requirement as compared to 

costs under the current process of 

complying with subpoenas or other 

legal demands under current 

recordkeeping requirements. 

• Respondents suggested many 

alternative reporting methods and 

implementation approaches to reduce 

the potential costs of a reporting 

requirement, such as reporting CBETF 

data weekly or monthly, having FinCEN 

obtain CBETF information directly from 

a financial industry entity that currently 

services the majority of depository 

institutions’ international funds 

transmittals such as SWIFT or some 

other centralized repository, either 

expanding or further limiting which 

CBETF transactions would need to be 

reported, or accepting the data in the 

existing format used by financial 

institutions. 

• Respondents consider customer 

privacy a significant concern. 

• Respondents noted that the security 

and uses of CBETF data are also a 

significant concern for financial 

institutions, especially the perceived 

ease of accessibility of the data to law 

enforcement. 

• Respondents felt that outreach and 

guidance both before and after the 

implementation of a reporting 

requirement would be critical to its 

effective implementation; this would 

include providing clear and specific 

regulations, detailed technical 

requirements, published guidance and 

frequently asked questions, sufficient 

implementation time, and coordinated 

testing opportunities.45

Survey respondents were given an 

opportunity to provide additional input 

on several topics related to a potential 

CBETF reporting requirement. The 

study team identified several areas of 

importance to financial institutions. 

One of the most significant suggestions 

received from respondents was to have 

FinCEN obtain CBETF information 

directly from SWIFT or some other 

centralized repository.46

Based on financial industry survey 

responses and interviews with financial 

institutions and law enforcement 

agencies, the study team developed the 

following two potential operating 

models, documented the uses and 

usability of the data, developed a rough 

order of magnitude (ROM) cost for each 

model, and documented how to apply 

FinCEN’s Information Technology (IT) 

Modernization Program security and 

privacy capabilities to CBETF data: 

• Standard Reporting Model: Each 

individual financial industry entity 

implements its own reporting system 

and reports CBETF information to 

FinCEN. 

• Hybrid Reporting Model: SWIFT 

reports CBETF information to FinCEN at 

the direction of its financial institution 

members. Large Money Services 

Businesses (MSBs) will report to 

FinCEN on their own behalf and small/ 

medium MSBs will use FinCENprovided e-Filing data entry capabilities 

rather than implementing their own 

solutions.47

In both of the potential operating 

models, the study team sought to reduce 

the effort of financial institutions and 

increase investigative efficiency of law 

enforcement by: 

• Reducing the number and scope of 

investigative subpoenas and requests for 

clarifying information sent from law 

enforcement agencies to financial 

institutions. 

• Reducing financial institution and 

law enforcement agency human 

resources required to execute business 

processes. 

• Increasing the use of technology to 

automate and standardize the transfer of 

data between financial institutions, 

FinCEN, and law enforcement agencies. 

• Employing consistent security and 

privacy controls between the financial 

institutions, FinCEN, and law 

enforcement agencies. 

• Reducing the number of 

overlapping requests and increasing the 

use of data obtained from financial 

institutions. 

Based on the results of their ROM cost 

analysis, the study team developed the 

following conclusions: 

• The Hybrid Reporting Model 

significantly reduces the cost of a 

potential reporting requirement for 

depository institutions because the 

depository institutions would only 

incur annual reporting charges from 

SWIFT. 

• The Hybrid Reporting Model 

significantly reduces the cost of a 

potential reporting requirement to 

MSBs, in aggregate, because the onetime and recurring annual costs of 

small/medium size MSBs using 

FinCEN’s e-Filing data entry capabilities 

would be significantly less than the onetime and recurring annual costs of 

implementing/operating individual 

solutions. The costs to large MSBs 

would be the same under both models. 

• The Hybrid Reporting Model 

slightly increases the costs of supporting 

a potential reporting requirement for 

FinCEN because of the higher 

implementation and maintenance/ 

operation costs for the interface to 

SWIFT and the e-Filing CBETF data 

entry capabilities for small/medium size 

MSBs. 

• Under both the Standard and 

Hybrid Reporting Models the cost to law 

enforcement agencies is the same.48

Additionally, FinCEN estimates that 

fewer than 300 banks and fewer than 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60384 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

49As discussed below, through understanding the 

processing of transactions by potential third-party 

reporters, FinCEN removed the reporting threshold 

for banks and adjusted the reporting threshold for 

money transmitters to $1,000. 

50See Feasibility Report, at Section 1.0— 

Executive Summary. 

51See Implications and Benefits Study, at Section 

5.0—Implications to the Financial Industry. 

52See Implications and Benefits Study, at Section 

1.0—Executive Summary. 53See Ltr. from Krista J. Shonk, Reg. Counsel, 

America’s Community Bankers, to FinCEN, Re: 

Threshold for the Requirement to Collect, Retain, 

and Transmit Information on Funds Transfers and 

Transmittals of Funds 3 (Aug. 21, 2006). http:// 

www.fincen.gov/statutes_regs/frn/comment_letters/ 

71fr35564_35567_rin1506_aa86/ 

americas_community_bank.pdf [ hereinafter 

America’s Community Banker’s Ltr.]. 

800 money transmitters will qualify as 

reporting financial institutions under 

the proposal to report individual 

CBETFs. For a full discussion of the 

anticipated financial implications 

associated with this proposal, see 

sections V through VII below. 

IV. Proposed CBETF Reporting 

Requirements 

Based on extensive fieldwork and 

analysis of information and data 

provided by the Feasibility Report and 

the Implications and Benefits Study, 

FinCEN determined that: 

• The basic information already 

obtained and maintained by U.S. 

financial institutions pursuant to the 

Funds Transfer Rule is sufficient to 

support the Secretary’s efforts against 

money laundering and terrorist 

financing. Any thresholds should apply 

only to discrete transactions and not to 

the aggregated total value of multiple 

transactions conducted very closely to 

one another in time.49

• Any reporting requirement should 

apply only to those U.S. institutions that 

exchange payment instructions directly 

with foreign institutions. FinCEN 

determined that a focused approach on 

those institutions that act as 

intermediaries as well as originating 

banks and beneficiary banks would 

restrict the reporting requirement to 

those institutions with the systems able 

to process these reports and limit the 

implementation costs on the industry as 

a whole. 

• Any reporting requirement should 

permit institutions to report either 

through a format prescribed by FinCEN, 

through the submission of certain preexisting payment messages that contain 

the required data, or through an 

interactive online form for institutions 

that submit a low volume of such 

reports. The filing system should 

accommodate automated daily filing, 

periodic filing via manual upload, and 

discrete single report filing on an asneeded basis.50

• The implementation of the 

reporting requirement described in 

section 6302 would be a staged process, 

requiring FinCEN to review and update 

the requirements as necessary. 

• The information that FinCEN is 

seeking to be reported is reasonably 

necessary to support the Secretary’s 

efforts to combat money laundering and 

terrorist financing. Specifically, the 

inability to conduct proactive analysis 

on the information currently recorded 

by banks hinders law enforcement’s 

ability to identify significant 

relationships to active targets. 

A. General Scope of Proposed CrossBorder Electronic Transmittal of Funds 

Report 

Based on the result of these efforts, 

and paying close attention to the above 

referenced concerns, FinCEN has 

developed the proposed rule as the 

initial implementation of the IRTPA. 

From information gathered during this 

stage, FinCEN will determine the need 

for future reporting requirements, and 

will formulate an improved 

development plan that incorporates 

future milestones and permits pilot 

testing of different aspects of the 

evolving reporting system. This 

incremental development approach will 

enable FinCEN to build the system in 

manageable stages and to test the 

system’s functionality at each stage 

before moving on to the next. 

For the CBETF First Stage, FinCEN 

proposes: 

• To limit the scope of the subject 

transactions to those defined as 

‘‘transmittals of funds’’ under the current 

regulation (31 CFR 103.11(jj)). 

• To further reduce the scope of the 

reporting requirement to those 

transactions involving (a) depository 

institutions that exchange transmittal 

orders through non-proprietary 

messaging systems, and (b) all money 

transmitters; and where the U.S. 

institution sends or receives a 

transmittal order directing the transfer 

of funds to or from an account 

domiciled outside the United States, 

FinCEN is proposing only to require 

reporting by those two types of financial 

institutions, because they carry out the 

great majority of CBETFs. FinCEN is 

proposing to require banks and money 

transmitters to report these transfers on 

a first in/last out basis. Hence, an 

institution will be required to report 

transfers to FinCEN only if it is the last 

U.S. institution to process a transaction 

prior to the transaction crossing the 

border or if it is the first U.S. institution 

to process the transaction received from 

a foreign financial institution. 

• Finally, to adopt the Hybrid 

Reporting Model, which would provide 

for (i) some third-party ‘‘centralized 

repository’’ (such as SWIFT) 51 to report 

CBFT information to FinCEN at the 

direction of its financial institution 

members; (ii) large MSBs to report to 

FinCEN on their own behalf; and (iii) 

small/medium MSBs to employ 

FinCEN-provided e-Filing data entry 

capabilities, rather than implementing 

their own solutions.52

In proposing a reporting requirement, 

FinCEN is striving to create the most 

efficient reporting regime that still 

achieves the overarching goal of 

providing the information that is 

necessary to law enforcement. In 

addition, FinCEN is trying to avoid 

requiring large changes to the business 

systems of the funds transmittal 

industry in order to implement this 

reporting regime. As such, FinCEN is 

proposing that banks report on all 

CBETFs and that money transmitters 

report on all CBETFs at or above $1,000. 

During FinCEN’s studies of the 

proposed reporting entities, FinCEN 

determined that banks, by and large, 

keep records for funds transfers 

regardless of dollar value. FinCEN was 

aware that, with respect to 

recordkeeping, many banks would 

prefer to not have to segregate 

transactions at certain thresholds due to 

increased costs.53 Hence, if required to 

report on funds transfers, many 

institutions will find reporting on all 

transactions less costly than reporting 

only those transactions that exceed a 

certain dollar threshold. The segregation 

or sorting of funds transfers by value, 

including for transfers denominated in 

non-U.S. dollar currencies, could 

require significant changes to the 

information technology systems of some 

banks and third-party carriers, at 

considerable additional costs. 

Additionally, transmittal orders 

carried by third parties are generally 

encrypted to protect the information 

therein. FinCEN was advised by 

industry members and financial 

regulators that some third-party carriers 

might be unable to identify the amounts 

of the encrypted transmittal orders sent 

through their system without the active 

intervention of both the sending and 

receiving financial institution, thereby 

increasing the cost of the third-party 

reporting option. Having no transaction 

threshold would allow third parties to 

report without adjusting encryption 

methods to provide them with access to 

transmittal amounts. Beyond 

operational difficulties, requiring only 

those transactions that are above a 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60385 

54See 12 U.S.C. 1829b(b)(3)(C) (2009) (Any 

information reported to Treasury or the Board in 

accordance with section 1829b(b)(3)(C) falls within 

an exception to the Right to Financial Privacy Act, 

12 U.S.C. 3401 et seq (2009)). See 12 U.S.C. 3413(d) 

(excepting disclosures pursuant to Federal law or 

rule). Moreover, the Right to Financial Privacy Act 

does not apply to money transmitters. See 12 U.S.C. 

3401(1) (2009) (defining a ‘‘financial institution’’ for 

purposes of the Act’s coverage to include banks and 

other depository institutions). 

55See Feasibility Report—Section 5, n. 21. See 

also Implications and Benefits Study—Section 3. 

56As discussed in Section II.A above (Background 

Information—Current Regulations Regarding Funds 

Transfers), the regulatory obligation of financial 

institutions in general to obtain and retransmit 

certain data points of transmittals of funds depends 

on the role they play in the transmittal chain, and 

on the amount of the transaction. Therefore, 

FinCEN acknowledges that some of the reportable 

fields of CBETFs collected through either method 

(submitting copies of the actual standard format 

transmittal orders or utilizing an alternative 

reporting format) might be empty or contain 

incomplete data. 

57FinCEN has consulted with the staff of the 

Board and has determined that the reporting 

requirements under this section will exceed the 

requirements under section 21 of the Federal 

Deposit Insurance Act and the regulations 

promulgated thereunder. Further, FinCEN has 

determined that the reporting of this information is 

reasonably necessary to conduct our efforts to 

identify cross-border money laundering and 

terrorist financing. 

certain threshold would open financial 

institutions up to liability under the 

Right to Financial Privacy Act. If an 

institution or its designated third-party 

sent a transaction that was under the 

threshold, such filing would not be 

protected from the exclusion in the 

Right to Financial Privacy Act regarding 

information required to be reported by 

the Federal government, subjecting the 

institution to liability. By requiring the 

reporting of all transactions, FinCEN is 

protecting institutions from this 

potential liability.54

For money transmitters the threshold 

issue must be treated differently because 

money transmitters have different 

business models than banks. Money 

transmitters do not typically establish 

long-term account relationships with 

their customers and therefore they do 

not have a business need to keep 

detailed records of all transactions, 

especially small electronic transfers. 

Money transmitters do, however, 

currently keep records of transfers to 

comply with the various recordkeeping 

requirements of FinCEN and other 

applicable authorities in the 

jurisdictions where they operate. Money 

transmitters that operate in more than 

one jurisdiction must comply with the 

recordkeeping requirements of all such 

jurisdictions. Because of this, many 

money transmitters have adopted global 

recordkeeping requirements and keep 

records at the lowest regulatory 

threshold required regardless of 

jurisdiction, thus assuring them of 

compliance in all applicable 

jurisdictions. Because many 

jurisdictions have adopted the $1,000 

threshold suggested in SRVII, a large 

portion of the money transmitter 

industry, by volume of transactions, is 

already keeping records at the $1,000 

level but is not keeping detailed records 

of transactions falling below that 

amount. 

B. What To Include in the Cross-Border 

Electronic Transmittal of Funds Report 

As a by-product of globally accepted 

standards, there already is a large degree 

of standardization in the formats of 

transmittal orders currently being used 

by banks. This standardization has been 

driven by global commercial incentives 

to allow straight-through processing for 

funds transfers, i.e., electronic 

processing without the need for rekeying or manual intervention. FinCEN 

intends to take advantage of this 

standardization, to the greatest degree 

possible, and to accept direct filings of 

copies of these transmittal orders in the 

form they are already being processed 

by institutions. 

The Implications and Benefits Study 

found that there is significant benefit in 

providing flexibility to the financial 

industry in how they would be able to 

comply with any proposed reporting 

requirement. For example, a large 

volume of the transmittal orders 

exchanged between foreign and U.S. 

banks as part of incoming or outgoing 

transmittals of funds are sent through a 

third party, that provides a secure, 

standardized electronic format for 

financial messaging between financial 

institutions, such as SWIFT. For this 

proposed rule, FinCEN is focusing on 

messaging systems, rather than financial 

settlement systems; therefore, the 

instructions exchanged between 

financial institutions through these 

third parties must be settled between 

the parties by other means (for example, 

using correspondent accounts or 

sending payments through a primary 

industry funds transfer system in the 

currency of denomination of the 

transmission of funds). By definition, 

FinCEN is not collecting information 

regarding funds transfers governed by 

the Electronic Fund Transfer Act of 

1978 (Title XX, Pub. L. 95–630, 92 Stat. 

3728, 15 U.S.C. 1693, et seq.), or any 

other funds transfers that are made 

through an automated clearinghouse, an 

automated teller machine, or a point-ofsale system. 

FinCEN proposes to require certain 

banks to submit copies of certain 

standard format transmittal orders 

directly to FinCEN. Banks covered by 

this option will be required to submit to 

FinCEN a copy of each full transmittal 

order. Because a significant portion of 

the transmittal orders are currently 

being carried by third parties, this 

proposed rule would clarify that while 

the reporting obligation and 

accountability for compliance rest with 

the bank, third-party reporting of these 

transmittal orders at the express 

direction of a bank would be acceptable 

to FinCEN. Some financial institutions 

suggested this option to FinCEN in the 

course of the interviews and survey 

conducted as part of FinCEN’s 

Feasibility Report and Implications and 

Benefits Study.55 For example, a 

substantial number of transmittals 

required to be reported by the proposed 

rule are processed by SWIFT through 

standardized formats. FinCEN 

anticipates that many first-in/last-out 

institutions will comply with their filing 

obligations through third-party carriers, 

like SWIFT, with significant cost 

savings compared to in-house reporting. 

If a bank is not able to submit (or 

cause to be submitted) copies of these 

standard format transmittal orders, 

FinCEN will accept submissions of just 

the required information in alternative 

formats to be prescribed by FinCEN. 

FinCEN proposes to require institutions 

utilizing this alternative reporting 

format to submit only the following 

information, if available,56 about all 

CBETFs: 

(i) Unique transaction identifier 

number; 

(ii) Either the name and address or the 

unique identifier of the transmittor’s 

financial institution; 

(iii) Name and address of the 

transmittor; 

(iv) The account number of the 

transmittor (if applicable); 

(v) The amount and currency of the 

funds transfer; 

(vi) The execution date of the funds 

transfer; 

(vii) The identity of the recipient’s 

financial institution; 

(viii) The name and address of the 

recipient; 

(ix) The account number of the 

recipient; and 

(x) Any other specific identifiers of 

the recipient or transaction.57

Certain money transmitters will be 

required to report on all transmittals of 

funds that are at or above the previously 

mentioned threshold of $1,000. 

Additionally, for reportable transactions 

of $3,000 or more, FinCEN is proposing 

that money transmitters include the U.S. 

taxpayer identification number of the 

transmittor or recipient (as applicable), 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60386 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

58As discussed in Section II.A above (Background 

Information—Current Regulations Regarding Funds 

Transfers), the regulatory obligation of financial 

institutions in general to obtain and retransmit 

certain data points of transmittals of funds depends 

on the role they play in the transmittal chain, and 

on the amount of the transaction. Therefore, 

FinCEN acknowledges that some of the reportable 

fields of CBETFs collected through either method 

(submitting copies of the actual standard format 

transmittal orders or utilizing an alternative 

reporting format) might be empty or contain 

incomplete data. 

59See i.e., The Wolfsberg Group, Clearing House 

Statement on Payment Message Standards: http:// 

www.wolfsberg-principles.com/pdf/WGNYCH_

Statement_on_Payment_Message_Standards_April19-2007.pdf. 

60See Basel Committee on Banking Supervision, 

‘‘Due diligence and transparency regarding cover 

payment messages related to cross-border wire 

transfers,’’ May 2009. 

61Revised Interpretative Note to Special 

Recommendation VII: Wire Transfers, FATF (Feb. 

29, 2008), http://www.fatf-gafi.org/dataoecd/16/34/ 

40268416.pdf. 

62 Interagency Joint Notice—‘‘Transparency and 

Compliance for U.S. Banking Organizations 

Conducting Cross-Border Funds Transfers,’’ 

available at http://www.occ.treas.gov/ftp/bulletin/ 

2009-36a.pdf. 

or if none, the alien identification 

number or passport number and country 

of issuance in their reports. As 

discussed below, FinCEN has 

determined that this information is 

reasonably necessary to assist in the 

investigation and prosecution of 

financial crimes including tax evasion. 

FinCEN will accept submissions from 

these money transmitters of the required 

information in formats that are 

prescribed by FinCEN. FinCEN proposes 

to require the following information, if 

available,58 in these submissions: 

(i) Unique transaction identifier 

number; 

(ii) Either the name and address or the 

unique identifier of the transmittor’s 

financial institution; 

(iii) Name and address of the 

transmittor; 

(iv) The account number of the 

transmittor (if applicable); 

(v) The amount and currency of the 

transmittal of funds; 

(vi) The execution date of the 

transmittal of funds; 

(vii) The identity of the recipient’s 

financial institution; 

(viii) For transactions over $3,000, the 

U.S. taxpayer identification number of 

the transmittor or recipient (as 

applicable), or if none, the alien 

identification number or passport 

number and country of issuance; 

(ix) The name and address of the 

recipient; 

(x) The account number of the 

recipient; and 

(xi) Any other specific identifiers of 

the recipient or transaction. 

C. Filing Methodology and Frequency of 

Cross-Border Electronic Transmittal of 

Funds Reports 

FinCEN proposes to require reporting 

financial institutions to submit the 

copies of certain standard format 

transmittal orders or the required data 

elements through an electronic filing 

system to be developed and 

implemented by FinCEN, which shall 

allow submissions filed either discretely 

on a transaction-by-transaction basis, or 

by batching transactions in a format 

approved by FinCEN. FinCEN believes 

that electronic filing is the most efficient 

and effective manner for both the 

government and the institutions and 

will result in not only cost savings on 

both sides of the submission but will 

also significantly reduce the chances for 

data corruption during data entry. In 

special cases, where hardship can be 

demonstrated, FinCEN is proposing to 

allow the Director of FinCEN to 

authorize a reporting financial 

institution to report in a different 

manner if the financial institution 

demonstrates that (a) the form of the 

required report is unnecessarily 

burdensome on the institution as 

prescribed; (b) a report in a different 

form will provide all the information 

FinCEN deems necessary; and (c) 

submission of the information in a 

different manner will not unduly hinder 

FinCEN’s effective administration of the 

BSA. Third-party reporters (entities 

engaged by reporting financial 

institutions to provide reporting 

services) will be required to report 

electronically in a format approved by 

FinCEN. 

FinCEN is considering whether to 

develop an Internet-based form that 

could be filed electronically through a 

secure Internet connection by 

institutions that have a limited quantity 

of reportable transactions and do not 

wish to invest in information 

technology changes required to file in a 

more automated fashion, such as 

batching. By doing this, FinCEN 

believes that it can provide an effective 

method for smaller institutions to 

continue to process a limited number of 

funds transmittals for their customers 

while not being required to invest 

significantly in additional technology. 

FinCEN intends to accept transmittal 

orders currently being carried by 

SWIFT. FinCEN intends to accept 

message traffic from other similarly 

situated entities as well. Given the types 

of transactions FinCEN is currently 

proposing to collect, and the current 

limited number of messaging systems in 

the marketplace, FinCEN anticipates 

banks will be able to comply with these 

regulations through submissions of 

copies of the transmittal orders 

currently being carried on SWIFT’s 

messaging format for person-to-person 

transmittals of funds (MT–103s at the 

time of the Implications and Benefits 

Study, but now additionally including 

202–COVs). 

The Feasibility Report and the 

Implications and Benefits Study 

analyzed CBETFs from the point of view 

of serial payments, where all the 

information sent to the beneficiary 

banks goes through the various 

intermediaries. While these reports were 

being produced, the financial industry 

started concentrating on the 

vulnerabilities of other cross-border 

transmittal mechanisms, namely, cover 

payments.59 Cover payments are 

generally used by a foreign bank to 

facilitate funds transfers on behalf of a 

customer to a recipient in another 

country and typically involve both (a) a 

transaction in a currency other than that 

of the country where the transmittor’s or 

recipient’s bank is domiciled, and (b) 

the transmittor’s and recipient’s banks 

not having a relationship with each 

other that allows them to settle with 

each other directly. In this 

circumstance, the originator’s bank may 

directly instruct the beneficiary’s bank 

to effect the payment and advise that 

transmission of funds to ‘‘cover’’ the 

interbank obligation created by the 

payment order has been arranged 

through a separate channel (the ‘‘cover 

intermediary bank’’).60 This cover 

payment mechanism, where the cover 

intermediary banks do not necessarily 

see all the information sent to the 

beneficiary bank, is distinct from the 

direct sequential chain of payments 

envisaged in the FATF Special 

Recommendation VII on wire 

transfers.61

As a result of an industry initiative, 

SWIFT developed a change in its 

message standards, allowing the 

covering payment (which used to be 

sent through a MT 202 message which 

generally provided no information about 

originator and beneficiary) to include 

full information about the other parties 

to the transaction. The new message 

standard (MT 202–COV) was 

implemented as of November 2009. On 

December 17, 2009, the U.S. Federal 

banking supervisors, in consultation 

with the Office of Foreign Assets 

Control (OFAC) and FinCEN, issued 

interagency guidance to clarify the 

supervisory perspective on certain key 

issues involving cover payments.62 The 

guidance covers the obligations of U.S. 

originators of cover payments, the 

responsibilities of U.S. cover 

intermediary banks for screening 


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Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60387 

63See generally Staff of Sen. Subcomm. on 

Investigations of the Comm. on Homeland Sec. and 

Govtl. Affairs, 110th Cong., Tax Haven Banks and 

U.S. Tax Compliance, (Sen. Subcomm. Print 2008); 

See generally Staff of Sen. Subcomm. on 

Investigations of the Comm. on Homeland Sec. and 

Govtl. Affairs, 109th Cong., Tax Haven Abuses: The 

Enablers, the Tools and Secrecy, (Sen. Subcomm. 

Print 2006). 

64 ‘‘General Explanations of the Administration’s 

Fiscal Year 2011 Revenue Proposals, Miscellaneous 

Tax Policy Document, at 63 (Treasury, Feb. 2010) 

http://www.ustreas.gov/offices/tax-policy/library/ 

greenbk10.pdf. 

65These proprietary systems include those 

developed by banks, or those off-the-shelf systems 

acquired and adopted or adapted by banks, or by 

the corporate structure the bank belongs to, to 

receive payment instructions from their customers 

(including those financial institutions that maintain 

correspondent accounts at such banks). 

66See Feasibility Report, at Section 5.0—Form, 

Manner, and Content of Reporting, and at App. D. 

See Id. App. G, at 134–135. 

messages for blank key fields and 

sanctioned entities, and for suspicious 

activity monitoring, and the supervisory 

approach to the foreign correspondent 

banking monitoring obligations of U.S. 

banks. SWIFT MT 202–COV messages 

are specifically covered by this 

proposed rulemaking. 

In determining reporting frequency, 

FinCEN is striving to reach the 

appropriate balance between providing 

timely information to law enforcement 

and limiting the cost of compliance to 

the institutions. Other nations’ financial 

intelligence units have been able to 

intercept ongoing criminal activity, such 

as illegal drug dealings, through the use 

of daily submissions of CBETF 

information. At the same time, FinCEN 

recognizes that requiring institutions to 

report daily could, in some cases, 

increase costs as compared to a less 

frequent reporting period. For this 

reason, FinCEN is proposing that 

institutions be required to report on 

covered transmittals of funds within 

five business days following the day 

when the reporting financial institution 

issued or received the respective 

transmittal order. This five-business-day 

interval was discussed with financial 

institutions and law enforcement during 

the review of the Implications and 

Benefits Study. Institutions will be 

permitted to report more frequently if 

desired. 

D. Annual Reports Proposed 

In addition to the CBETF reporting 

proposal, FinCEN is proposing, as a 

separate but related requirement, an 

annual report by banks of the account 

number and accountholder’s U.S. tax 

identification number (TIN) of all 

accounts used to originate or receive 

CBETFs subject to reporting under 

Section 6302 of the IRTPA. The purpose 

of this proposal is to enhance the 

usefulness of the funds transfer data to 

better detect, investigate, and prosecute 

money laundering and terrorist 

financing to the extent such crimes also 

may involve tax evasion. The extent to 

which offshore bank accounts are used 

to evade U.S. income tax is considerable 

and well-documented.63 The 

Administration, as part of a 

comprehensive effort to reduce the use 

of offshore accounts and entities to 

evade U.S. tax, has also proposed the 

collection of certain information 

regarding certain international transfers 

of funds.64

FinCEN is considering a methodology 

for this second reporting requirement 

that would require banks to submit an 

annual filing with FinCEN (the TIN 

annual report) that provides the account 

number and accountholder’s U.S. TIN of 

all accounts used to originate or receive 

one or more CBETFs in the previous 

calendar year. This annual reporting 

requirement would apply to all banks 

that maintained any customer account 

that was debited or credited to originate 

or receive a CBETF subject to reporting 

under this section, for any amount, 

during the previous calendar year. 

FinCEN would then endeavor to have 

that information matched with CBETF 

data received throughout the year and 

made available for the investigation and 

prosecution of tax evasion and other 

purposes consistent with the BSA. 

E. Exemptions 

Although myriad systems are 

available to U.S. financial institutions to 

process electronic funds transfers, crossborder funds transfers tend to flow 

through a small number of channels as 

they enter and leave the United States 

(i.e., Fedwire, CHIPS and SWIFT). As 

institutions pass payment orders along 

through correspondents en route to their 

destination, those institutions’ systems 

convert the orders from the many 

available formats to one of only a few. 

At some point in the cross-border 

payment chain a single U.S. financial 

institution must communicate directly 

with a foreign financial institution. 

On the other hand, financial 

institutions may use standardized or 

proprietary or internal systems to 

handle all or part of an electronic funds 

transfer (i.e., between branches of the 

same institution). Proprietary systems 

pose a special challenge to designing a 

reporting system because of the wide 

range of potential message formats, 

communications protocols, and data 

structures involved. The primary 

challenge that arises in this context is 

that a reporting requirement would 

require that the U.S.-based institution 

implement processes for identifying and 

extracting cross-border funds transfer 

information from its proprietary 

communications systems. The 

implementing regulation must take into 

account this kind of permutation in 

order to ensure that FinCEN collects 

CBETFs that follow this pattern. 

For banks, FinCEN is proposing to 

require reporting of all funds transfers 

that are effected through transmittal 

orders that are standardized across the 

banking industry. For this proposed 

reporting requirement, FinCEN intends 

to exempt from both reporting 

requirements funds transfers that are 

conducted entirely through, and 

messaged entirely through, systems that 

are proprietary to banks.65

This exemption would not apply to 

money transmitters because their 

business model for transmitting funds 

relies almost solely upon proprietary 

systems. Additionally, there is no 

industry-wide adoption of a 

standardized transmittal order format as 

exists in the banking industry. The 

largest MSBs generally maintain 

centralized communications systems 

and database records of customer 

transactions that provide an obvious 

source for the CBETF information 

collection.66 FinCEN is also proposing 

to exempt from both reporting 

requirements CBETFs where both the 

transmittor and the recipient are a bank, 

i.e., there is no third-party customer to 

the transaction. There is a lower risk of 

money laundering and terrorist 

financing associated with these 

transactions. 

F. Recordkeeping Rule Issues 

Changes to the regulations 

implementing Section 21 of the Federal 

Deposit Insurance Act for banks (31 CFR 

103.33 (e) and (f) (the Funds Transfer 

Rule) and 31 CFR 103.33 (g) (the Travel 

Rule)), would require a joint 

determination of the Board of Governors 

of the Federal Reserve System and the 

Secretary of the Treasury as to the 

necessity of such a change. Section 6302 

provides that information required to be 

reported under that section shall not 

exceed the information already required 

to be retained by financial institutions 

pursuant to the Funds Transfer Rule and 

the Travel Rule unless: 

(i) The Board and the Secretary jointly 

determine that particular items of 

information are not currently required 

to be retained under those law and 

regulations; and (ii) The Secretary 

determines, after consultation with the 

Board, that the reporting of such 

additional information is reasonably 

necessary to conduct the efforts of the 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60388 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

67As discussed in Section II.A above (Background 

Information—Current Regulations Regarding Funds 

Transfers), the regulatory obligation of financial 

institutions in general to obtain and retransmit 

certain data points of transmittals of funds depends 

on the role they play in the transmittal chain, and 

on the amount of the transaction. Therefore, 

FinCEN acknowledges that some of the reportable 

fields of CBETFs collected through either method 

(submitting copies of the actual standard format 

transmittal orders or utilizing an alternative 

reporting format) might be empty or contain 

incomplete data. 68 31 U.S.C. 5318(n)(5)(B). 

69 12 U.S.C. 3401et seq (2009). 

70 5 U.S.C. 552a (2009). 

71Federal Information Security Management Act 

of 2002, Title III, E-Government Act of 2002, Public 

Law 107–347, Dec. 17, 2002. 

72The routine uses for Bank Secrecy Act data are 

set forth at 70 FR 45756, 45760 (August 8, 2005) 

(Bank Secrecy Act Reports System—Treasury/ 

FinCEN .003). 

73E-Government Act of 2002, Public Law 107– 

347, section 208, (Dec. 17, 2002). 

74Office of Management and Budget, 

Memorandum M–03–22, Guidance for 

Implementing the Privacy Provisions of the EGovernment Act of 2002 (Washington, DC, Sept. 26, 

2003). 

75For a detailed discussion of the collection of 

the information contained in the proposed rule, see 

Feasibility Report at Section 7.0—Information 

Security Protection. 

Secretary to identify money laundering 

and terrorist financing. 

At this time, FinCEN and the Board 

are not proposing any amendments to 

the recordkeeping rule affecting banks. 

Also, FinCEN is not proposing any 

amendments to the recordkeeping rules 

affecting nonbank financial institutions. 

FinCEN understands that institutions 

collect and maintain a wide range of 

business records and customer and 

transaction-related information for 

business reasons unrelated to regulatory 

compliance. Additionally, FinCEN 

acknowledges that this proposed 

regulation would result in a requirement 

for institutions to report certain 

transactions where they are not 

currently required to keep records or 

verify customer identification.67

G. Compliance Date 

Section 6302 of the IRTPA requires 

the Secretary to certify that the 

information technology systems are in 

place to accept reports from the 

regulated industry prior to prescribing 

regulations requiring institutions to 

report on transmittals of funds. Because 

of the statutory language, FinCEN is 

unable to issue a final rule with a 

delayed effective date prior to having 

adequate technological systems in place. 

FinCEN does not anticipate these 

systems being in place before 2011. 

Hence, FinCEN does not anticipate 

issuing a final rule until after January 1, 

2012. FinCEN anticipates delaying the 

compliance date of the final rule to 

provide institutions with ample time to 

adjust necessary systems for 

compliance. 

H. Technical Requirements 

The development of information 

technology systems capable of receiving, 

storing, analyzing, and disseminating an 

estimated 750 million records a year is 

a daunting task. FinCEN will implement 

federated data warehouse architecture to 

receive, keep, exploit, protect the 

security of, and disseminate information 

submitted under the proposed reporting 

requirement. FinCEN will implement a 

separate path for the processing, 

enhancement, and storage of report 

information and would provide a single 

point of entry for users to submit 

queries to all BSA data systems, 

including CBETF information, in a way 

that is invisible to the user. A full 

description of the proposed 

architecture, procedural paths, and 

points of entry is contained in 

Appendices H (Technical Alternatives 

Analysis), J (Preliminary Work 

Breakdown Schedule), and L (Project 

Management and Information 

Technology Processes) to the Feasibility 

Report. 

I. Protection of Private Personal 

Financial Information 

While the benefits of centralizing BSA 

data have been substantial, these 

developments pose significant risks to 

the critical operations of the government 

and the security of the data contained in 

these systems. BSA data is highly 

sensitive data containing details about 

the financial activity of private persons. 

Without proper safeguards, this data 

could be at risk of inadvertent or 

deliberate disclosure or misuse and 

FinCEN’s mission could be undermined. 

These risks generally fall into two 

closely related categories, the privacy of 

the personal information contained in 

government systems, and the risk of 

system compromise or misuse. 

FinCEN will apply existing policies 

and procedures that comply with all 

applicable legal requirements, industry 

and government best practices, and the 

Department of the Treasury’s 

Information Technology Security 

Program Directive to every phase of the 

design and implementation of any 

system built to accommodate reporting 

of CBETF data. FinCEN also will impose 

strict limits on the use and redissemination of the data it provides to 

its law enforcement, regulatory, and 

foreign counterparts and strictly 

monitor those persons and organizations 

to which it grants access to the data. 

CBETF data will be technologically 

protected and secure and would only be 

available to FinCEN and the law 

enforcement and regulatory agencies 

authorized by law to access it. 

Compliance with these three 

requirement types will be subject to 

certification, and Section 6302 will not 

permit FinCEN to finalize this proposed 

rulemaking until such certification is 

issued and found acceptable.68

A number of Federal laws directly 

control the collection and use of data by 

government agencies with the aim of 

protecting the privacy of individual 

persons—namely, the Right to Financial 

Privacy Act,69 the Privacy Act,70 the 

Federal Information Security 

Management Act,71 and the Bank 

Secrecy Act itself.72 Lastly, the EGovernment Act of 200273 provides a 

further protection for personal 

information in government data 

systems, by requiring that agencies 

conduct ‘‘privacy impact assessments’’ 

prior to procuring or developing such 

systems.74

FinCEN has developed policies and 

procedures for compliance with these 

requirements in accordance with the 

Department of the Treasury’s 

Information Technology Security 

Program Directive. Compliance with 

these government-wide and departmentwide standards ensures that FinCEN 

designs and operates its information 

systems in accordance with government 

best practices for the maintenance and 

dissemination of sensitive data. In 

developing a system for the collection, 

storage, analysis, and sharing of CBETF 

reports, FinCEN will incorporate 

compliance with these standards into 

every phase of the design and 

implementation of the system. FinCEN 

has more than twenty years of 

experience in handling sensitive 

financial information about persons 

through the reporting it currently 

receives from financial institutions in 

the United States. FinCEN imposes 

strict limits on the use and redissemination of the data it provides to 

its law enforcement, regulatory, and 

foreign counterparts and strictly 

monitors those persons and 

organizations to which it grants access 

to the data.75

V. Section-By-Section Analysis 

The proposed rule (a) would 

implement section 6302 of the IRTPA by 

requiring certain banks and money 

transmitters (‘‘first-in/last-out’’ financial 

institutions) to file periodic reports with 

respect to certain CBETFs (mostly 

defined as reportable on the basis of 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
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76See 31 CFR 103.11 (2009). 

77See Feasibility Report, at Section 8.0— 

Conclusions and Recommendations. 

78See Feasibility Report, at Section 5.0—Form, 

Manner, and Content of Reporting. The ABA 

suggests, ‘‘regardless of the nature of any imagined 

reporting requirement, the financial services 

industry’s responsibility should extend only to the 

simple transmittal of raw data, with FinCEN 

assuming full responsibility for the refinement and 

distillation of the data into a format useful to law 

enforcement agencies.’’ While FinCEN believes that 

accommodation of every possible format is 

unreasonable, the approach proposed in the text 

recognizes the potential cost and strikes a balance 

aimed at accommodating the widest possible 

variation in reporting formats. 

method of transmission and monetary 

threshold), and (b) would require all 

banks to file an annual report with the 

account number and accountholder’s 

U.S. tax identification number of 

accounts involved in certain CBETFs. 

The rule describes the types of 

transmittal orders and advices of 

transmittal orders that should be subject 

to report, the information that should be 

reported, and the timeframe for the 

filing of the reports. 

General (§ 103.14(a)) 

FinCEN proposes to add 31 CFR 

103.14(a). That new paragraph would 

add a requirement that reporting 

financial institutions (as defined in this 

section) file reports with FinCEN with 

respect to CBETFs that meet the 

conditions in the rule and subject to the 

exemptions therein. The conditions that 

make a transaction reportable are the 

means of communication of the related 

transmittal order (or the advice of the 

transmittal order, when applicable), 

and, in the case of the CBETF periodic 

report, the position of the financial 

institution making or receiving the 

communication in the transmittal chain, 

and the amount of the transmittal of 

funds involved. 

Definitions (§ 103.14(b)) 

Most of the terms utilized in this 

section have the meanings previously 

set forth in Part 103 of Chapter I of Title 

31.76 Some of these terms, and all the 

terms defined specifically for this 

section, merit additional comment. 

Account. Account is defined in 

103.90(c). This definition covers ‘‘a 

formal banking or business relationship 

established to provide regular services, 

dealings, and other financial 

transactions * * *,’’ and includes the 

ongoing contractual relationships 

between some providers of money 

transmitting services and their 

customers. If (1) at the moment of 

opening an account for a person (or 

shortly thereafter), the financial 

institution has obtained and maintains 

on file the person’s name and address, 

as well as TIN (e.g., social security or 

employer identification number) or, if 

none, alien identification number or 

passport number and country of 

issuance; and (2) the financial 

institution provides financial services to 

such person relying on that information, 

then that person would constitute an 

‘‘established customer’’ of the financial 

institution as defined in 103.11(l). 

Cross-Border Electronic Transmittal of 

Funds. The definition of ‘‘cross-border 

electronic transmittal of funds’’ lies at 

the heart of a successful implementation 

of the reporting requirement. The nature 

of the electronic funds transfer process 

as it has evolved in the United States 

poses specific difficulties in creating a 

definition that at once captures all of the 

nuances of the payment systems and 

avoids needless complexity. Section 

6302 contemplates a reporting 

requirement that is coextensive with the 

scope of the BSA funds transfer rule (31 

CFR 103.33). Accordingly, for the 

purposes of the first stage of a phased 

approach to the cross-border electronic 

transmittal of funds reporting 

rulemaking process, the Feasibility 

Report focused on electronic 

‘‘transmittals of funds’’ as defined in 31 

CFR 103.11, and did not address any 

debit card type of transmittals, point-ofsale (POS) systems, transaction 

conducted through an Automated 

Clearing House (ACH) process, or 

Automated Teller Machine (ATM).77

Furthermore, within the current 

regulatory definition of ‘‘transmittals of 

funds,’’ the Feasibility Report 

concentrated for the first step in the 

staged implementation of Section 6302 

of the IRTPA on those transactions 

involving depository institutions that 

exchange transmittal orders through 

non-proprietary messaging systems, and 

all money transmitters, and where the 

U.S. institution sends or receives a 

transmittal order directing the transfer 

of funds to or from an account 

domiciled outside the U.S. Refining an 

appropriate regulatory definition of 

what transactions fall within the new 

reporting requirement will implicate a 

number of concerns that were identified 

by the Feasibility Report and should be 

further addressed during future studies. 

In consideration of these 

determinations, FinCEN proposes to 

define a CBETF generally as ‘‘[a] 

transmittal of funds where either the 

transmittal order or the advice is: (i) 

communicated through electronic 

means; and (ii) sent or received by 

either a first-in or a last-out financial 

institution.’’ 

The definition as provided 

concentrates on the evidence of the 

payment (as opposed to the actual 

payment itself), represented by a 

transmittal order (the combination of an 

instruction to pay and an authorization 

to debit an account or a confirmation of 

how the reimbursement for the payment 

is being disbursed) or an advice of a 

transmittal order (the notification that a 

credit to an account has been made, in 

relation to a CBETF). These messages 

have to be exchanged by electronic 

means between a foreign financial 

institution and either a first-in financial 

institution (for incoming CBETFs) or a 

last-out financial institution (for 

outgoing CBETFs). 

The definition does not intend to 

capture either (1) notifications of a debit 

to the account maintained by the foreign 

financial institution at the first-in 

financial institution, effected to cover 

the CBETF; (2) a retransmission of a 

transmittal order for the sole purpose of 

adding authentication; or (3) 

notifications to the third party that 

originates or is the beneficiary of the 

transmittal of funds. In certain business 

systems currently in use, the 

notification to a foreign financial 

institution of the credit to its 

correspondent account, processed in 

connection with a CBETF, is used by the 

foreign financial institution as the 

operative instrument for the payment to 

the beneficiary; this type of advice, 

which is used in lieu of the more 

traditional transmittal order, is among 

the types of additional electronic 

communication that the regulation seeks 

to capture. 

Additionally, the regulation will 

require the reporting of transmittal 

orders where the actual payment of the 

order does not occur for any reason. 

FinCEN acknowledges that this will 

result in the reporting of transactions 

where settlement never occurred, 

populating the database with unsettled 

transmittal orders. However, because 

the settlement could be cancelled after 

the reporting of the transmittal order to 

FinCEN, if FinCEN did not require the 

reporting of this message the financial 

institution would be subject to liability 

under the Right to Financial Privacy 

Act. Thus, to protect financial 

institutions and limit the costs of 

reporting, FinCEN will review whether 

there are classes of transactions where 

settlement did not occur for which it 

would be practicable and appropriate 

for FinCEN to arrange to exclude from 

the database.78

Electronic means are those means that 

utilize technology that has electrical, 

digital, magnetic, wireless, optical, 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60390 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

79 15 U.S.C. 7006(2) (2006). 80The quantity and quality of the information 

that is transmitted along the payment chain, either 

embedded in the payment itself or contained in a 

separate message, tends to degrade as such 

information is communicated among the links of 

the chain; the details contained in optional fields 

may be lost, abridged, or transcribed with errors 

from transmittal order to transmittal order along the 

chain. 

81See the Feasibility Report at 12–14. If more 

than one U.S. financial institution took part in the 

transmittal of funds, the last-out financial 

institution’s records should identify the transmittor, 

the transmittor’s financial institution, and other 

information about the transaction (e.g., recipient, 

recipient’s financial institution, information 

exchange, additional financial institutions involved 

and their roles, date, amount, etc.). Similarly, the 

U.S. bank’s records may provide a more complete 

picture of the entities involved in the overall chain 

of the transaction. Investigators and analysts could 

then determine where to turn for further 

information on the transaction and customer. In 

addition, the customer identification (to the extent 

it is included in the original message) and other 

transaction detail information should remain intact 

and available throughout this correspondent stage 

and therefore remain available in the instructions 

handled by the last-out financial institution. 

82 In its response to FinCEN’s March 2006 

industry survey, the American Bankers Association 

offered that ‘‘An unscientific poll of bankers visiting 

ABA’s compliance Web page revealed that only 1 

in 4 respondents identified themselves as 

conducting ‘‘last out, first in’’ cross-border 

transfers.’’ The ABA also noted ‘‘for some [banks] it 

required less IT logic to be built into the reporting 

system.’’ Significantly, the ABA opined ‘‘* * * a 

‘‘last out, first in’’ reporting obligation would suffice 

to capture the cross border transfer of funds and 

whatever information is attached to that transmittal. 

Although this method shifts much of the reporting 

cost to a smaller number of generally larger banks, 

many of the[m] possess sufficient capacity to 

perform the reporting with greater efficiency than 

would be the case if the obligation rested with all 

originating or beneficiary’s institutions.’’ 

83See Feasibility Report, at Section 5.0—Form, 

Manner, and Content of Reporting. The ABA 

suggests, ‘‘regardless of the nature of any imagined 

reporting requirement, the financial services 

industry’s responsibility should extend only to the 

simple transmittal of raw data, with FinCEN 

assuming full responsibility for the refinement and 

distillation of the data into a format useful to law 

enforcement agencies.’’ While FinCEN believes that 

accommodation of every possible format is 

unreasonable, the approach proposed in the text 

recognizes the potential cost and strikes a balance 

aimed at accommodating the widest possible 

variation in reporting formats. 

electromagnetic, or similar 

capabilities.79

First-in financial institution. For 

purposes of this section, in an incoming 

CBETF, FinCEN defines a first-in 

financial institution as any bank or 

money transmitter that receives a 

transmittal order or the advice of a 

transmittal order from a foreign 

financial institution. FinCEN views the 

bank or money transmitter in an 

incoming CBETF that received the 

transmittal order or the advice of the 

transmittal order directly from the 

foreign financial institution and 

maintains such foreign financial 

institution’s correspondent account, as 

having more consistently complete 

information about the transaction than 

other U.S. financial institutions that 

may be involved in the same transmittal 

of funds.80

Last-out financial institution. For 

purposes of this section, in an outgoing 

CBETF, FinCEN defines a last-out 

financial institution as any bank or 

money transmitter that sends the 

transmittal order or the advice of the 

transmittal order to a foreign financial 

institution. The last-out financial 

institution will have more consistently 

complete information about the 

transaction than other U.S. financial 

institutions that may be involved in the 

same transmittal of funds.81

Reporting Financial Institution. For 

purposes of this section, FinCEN defines 

a reporting financial institution as any 

bank (reporting bank) or money 

transmitter (reporting money 

transmitter) acting as a first-in or lastout financial institution. 

Whether a ‘‘first in’’ or ‘‘last out’’ 

institution, because of the size and 

nature of institutions that serve in 

correspondent roles for CBETFs, these 

banks are more likely to be connected 

with and use centralized message 

systems (SWIFT, Fedwire, CHIPS) and 

their standardized message formats. 

These standardized formats increase the 

ability of these institutions to handle the 

transactions with little manual 

intervention. In addition, these larger 

banks may often automatically ‘‘map 

over’’ messages from one system’s 

format to another (e.g., from SWIFT to 

Fedwire; from SWIFT to CHIPS). 

Accordingly, many would have systems 

in place to perform much of the data 

extraction necessary to create the 

reports required. 

In other words, the obligation to 

report should fall upon those U.S. 

institutions that transmit an electronic 

funds transfer instruction directly to a 

non-U.S. financial institution or 

conversely, those that receive such 

instructions directly from a non-U.S. 

financial institution. This approach 

aims to capture a funds transfer 

instruction at the point at which it 

crosses the U.S. border. The advantages 

of the approach are that it focuses the 

reporting requirement upon larger 

institutions that are most familiar with 

international funds transfers, have the 

technological systems in place to 

facilitate such transfers, and are in the 

best economic position to implement 

compliance systems and processes.82

Reporting Threshold. Reporting banks 

would be required to file periodic 

CBETF reports on transactions of any 

amount (zero threshold), while 

reporting money transmitters would be 

required to file periodic CBETF reports 

on transactions for amounts equal to or 

greater than $1,000, or its equivalent in 

any other currency. In the case of 

transactions denominated in foreign 

currency, the exchange rate that is 

applied should be that exchange rate 

that was provided to the customer at the 

time of the transaction. 

Filing Procedures (§ 103.14(c)) 

This section describes what reporting 

banks and reporting money transmitters 

would be required to report under the 

CBETF report proposal, in what format 

they must report the information, how 

often they must report it, and explicitly 

recognizes the possibility of reporting 

via a third party although responsibility 

for compliance with the reporting 

obligations would remain with the 

reporting financial institution. 

To accommodate these requirements, 

FinCEN had to adopt a limited number 

of standard forms for CBETF reporting. 

These standards had to accommodate 

automated filing of large collections of 

CBETF reports, manual uploading of 

mid-sized collections of CBETF reports, 

and discrete filing by small volume 

CBETF service providers. In addition, 

the standards had to assimilate the 

variations between the different CBETF 

message systems from which the 

reporting institutions would extract the 

data. Finally, the standards had to be 

such that reporting institutions could 

convert the source data from their 

systems into the required format with a 

minimum of manual intervention or 

system modifications.83 The proposed 

regulation will permit institutions to 

comply with this requirement through 

the submission of customized reports 

that comply with a format prescribed by 

FinCEN or through the submission of 

certain pre-existing formats (e.g., CHIPS 

or SWIFT messages) that contain the 

required data elements. The pre-existing 

forms deemed acceptable by FinCEN 

would serve as proxies for formally 

prepared reports. 

Reporting financial institutions would 

be required to report on CBETF at or 

above their respective thresholds (no 

threshold for banks and a $1,000 

threshold for money transmitters) by 

submitting a copy of the respective 

transmittal order or advice of the 

transmittal order, provided that the 

transmittal order or advice format has 

been approved for direct submission by 

FinCEN. If the reporting financial 

institution is unable to submit a copy of 

the respective, approved transmittal 

order or advice, then the reporting 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60391 

84See 31 CFR 103.33(e), (f) (2009). 85See 31 CFR 103.33(g) (2009). 

financial institution may discharge its 

reporting obligation by submitting the 

following information, if available, in a 

form specified by FinCEN: 

(i) Unique transaction identifier 

number; 

(ii) Either the name and address or the 

unique identifier of the transmittor’s 

financial institution; 

(iii) Name and address of the 

transmittor; 

(iv) The account number of the 

transmittor (if applicable); 

(v) The amount and currency of the 

transmittal of funds; 

(vi) The execution date of the 

transmittal of funds; 

(vii) The identity of the recipient’s 

financial institution; 

(viii) The name and address of the 

recipient; 

(ix) The account number of the 

recipient; 

(x) Any other specific identifiers of 

the recipient or transaction; and 

(xi) For transactions of $3,000 or more 

conducted through a money transmitter, 

the U.S. taxpayer identification number 

of the transmittor or recipient (as 

applicable) or, if none, the alien 

identification number or passport 

number and country of issuance. 

The data points requested coincide 

with the combined recordkeeping 

requirements imposed on financial 

institutions by the recordkeeping rule 84

and the travel rule,85 with the addition 

of the unique transaction identifier 

number, if such an identifier exists. The 

addition of the identifier is an 

operational necessity for FinCEN, for 

two major reasons: (1) Given the very 

large amount of transactions processed 

on a daily basis by reporting financial 

institutions involving the same 

amounts, transmittors, recipients, and 

intermediary financial institutions, the 

unique identifier number may be the 

only effective and efficient way for 

FinCEN and law enforcement to 

distinguish one particular transaction 

from others, which will become 

particularly useful in facilitating any 

follow-up communications with 

reporting financial institutions, and (2) 

given that a certain degree of 

duplication on the reporting is 

considered unavoidable, the unique 

transaction identifier is the most 

effective and efficient tool to allow 

deconfliction of several reports 

involving the same CBETF by FinCEN 

without requiring institutions to expend 

resources segregating reports relating to 

the same transaction. 

This section requires the reporting 

financial institution to file reports with 

FinCEN no later than five business days 

after issuing or receiving the transmittal 

notice or its advice. 

FinCEN understands that an 

institution required to file reports under 

section 103.14 may prefer to designate 

a third party to file those reports. As 

long as the reports are filed in the 

manner required by section 103.14, 

FinCEN will allow such a designation. 

However, it is important to emphasize 

that it is the responsibility of the 

reporting financial institution to comply 

with the reporting obligation, and the 

reporting financial institution is 

ultimately liable for any failures by the 

designated third party to file a report as 

required by the proposed rule. 

Nature and Form of Reports 

(§ 103.14(d)) 

All CBETF reports shall consist of 

electronic submissions filed either 

discretely on a transaction-bytransaction basis or by batching 

transactions in a format approved by 

FinCEN. FinCEN may authorize a 

designated reporting financial 

institution to report in a different 

manner if the financial institution 

demonstrates to FinCEN (1) that the 

form of the required report is 

unnecessarily onerous on the institution 

as prescribed; (2) that a report in a 

different form will provide all the 

information FinCEN deems necessary; 

and (3) that submission of the 

information in a different manner will 

not unduly hinder the effective 

administration of this part. 

Additional Annual Reports (§ 103.14(e)) 

On an annual basis, all banks must 

submit to FinCEN a report that provides 

the following information: the account 

number that was credited or debited to 

originate or receive a CBETF, and the 

U.S. taxpayer identification number of 

the respective accountholder. This 

report shall be submitted to FinCEN no 

later than April 15 of the year following 

the transaction date of the CBETF. 

FinCEN shall endeavor to link the 

periodic information submitted in the 

CBETF reports with the information 

provided in the TIN annual reports, 

matching transactions on the basis of 

common key data items contained in 

both reports: the U.S. transmittor’s or 

receiver’s account number. FinCEN’s 

ability to combine both sets of 

information will depend on the quality 

and integrity of the common key data 

items. 

Exemptions (§ 103.14(f)) 

At this time, FinCEN proposes that 

the following CBETFs be exempted from 

reporting requirements: (1) CBETFs 

where either the transmittor is a bank as 

defined in 31 CFR 103.11(c), and the 

recipient is a foreign (not within the 

United States) bank, or, the transmittor 

is a foreign bank and the recipient is a 

bank, and, in each case, there is no 

third-party customer to the transaction; 

or (2) the transmittal order and advice 

of the transmittal order are 

communicated solely through systems 

proprietary to a bank. 

VI. Proposed Location in Chapter X 

As discussed in a previous Federal 

Register Notice, 73 FR 66414, Nov. 7, 

2008, FinCEN is separately proposing to 

remove Part 103 of Chapter I of Title 31, 

Code of Federal Regulations, and add 

Parts 1000 to 1099 (Chapter X). If the 

notice of proposed rulemaking for 

Chapter X is finalized, the changes in 

the present proposed rule would be 

reorganized according to the proposed 

Chapter X. The planned reorganization 

will have no substantive effect on the 

regulatory changes herein. The 

regulatory changes of this specific 

rulemaking would be renumbered 

according to the proposed Chapter X as 

follows: 

Section 103.14 would be moved to 

§ 1010.380. 

VII. Executive Order 12866 

This proposed rule is a significant 

regulatory action, although not 

economically significant, and has been 

reviewed by the Office of Management 

and Budget (OMB) in accordance with 

Executive Order 12866 (EO 12866). 

VIII. Unfunded Mandates Act of 1995 

Statement 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 

(Unfunded Mandates Act), Public Law 

104–4 (March 22, 1995), requires that an 

agency prepare a budgetary impact 

statement before promulgating a rule 

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 205 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 the proposals in the Notice of 

Proposed Rulemaking provide the most 

cost-effective and least burdensome 

alternative to achieve the objectives of 

the rule. 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60392 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

86Table of Small Business Size Standards 

Matched to North American Industry Classification 

System Codes, Small Business Administration Size 

Standards 28 (SBA Aug. 22, 2008) [hereinafter SBA 

Size Standards]. 

87Federal Deposit Insurance Corporation, Bank 

Find, http://www2.fdic.gov/idasp/ 

main_bankfind.asp; select Size or Performance: 

Total Assets, type Equal or less than $: ‘‘175000’’, 

select Find [hereinafter FDIC Bank Find]. 

88National Credit Union Administration, Credit 

Union Data, http://webapps.ncua.gov/ 

customquery/; select Search Fields: Total Assets, 

select Operator: Less than or equal to, type Field 

Values: ‘‘175000000’’, select Go [hereinafter NCUA 

Data]. 

89See Implications and Benefits Study, App. C, 

6 figs. 1–2. FinCEN was able to determine that 110 

institutions that would be impacted by the 

proposed rule had assets over $1 billion. FinCEN 

also determined that 8 institutions that would be 

impacted by the proposed rule had assets less than 

$175 million. FinCEN was unable to determine an 

asset size for the estimated 182 additional 

institutions that would be impacted by the 

proposed rule. For purposes of estimating the 

population impacted by the rule for purposes of the 

RFA analysis, FinCEN includes these additional 

institutions in the estimate of small entities. 

90See 31 CFR 103.11(c) (2009) (The definition of 

‘‘bank’’ under the BSA regulations includes 

commercial banks and trusts, private banks, savings 

and loan associations, credit unions, U.S. agencies 

and branches of foreign banks, etc.) 

91 31 CFR 103.33(e) (2009) (Recordkeeping 

requirements for banks); 31 CFR 103.33(f) (2009) 

(Recordkeeping requirements for nonbank financial 

institutions). 

92See FinCEN MSB Registration List (2/10/2010), 

http://www.fincen.gov/financial_institutions/msb/ 

msbstateselector.html (Sort list by entities that 

engage in money transmission and remove repeat 

registrations). 

93 Implications and Benefits Study, App. C, 11 fig. 

13. The number of annual reportable transactions 

per large bank (as defined under the RFA) covered 

a wide range, with few very large institutions 

processing tens of millions of reportable 

transactions, and a large number of relatively 

smaller institutions processing reportable 

transactions in the tens of thousands or fewer. The 

average of 2 million transactions per large bank 

compensates both extremes of this wide range. 

94 Implications and Benefits Study at 45 tbl. 6–1. 

As indicated in table 6–1, the annual cost for 

medium sized banks (92 institutions) is $20,100 and 

the annual cost for small banks (150 institutions) is 

$6,800. For purposes of the Regulatory Flexibility 

Act analysis, FinCEN is considering both medium 

and small banks to be small banks. Therefore, the 

weighted average annual effect on these institutions 

is $11,900. These figures, which assume use of the 

hybrid model (supra III. Sec. B.), were based on 

separate, but limited follow-up information 

received from industry and not the numbers 

pertaining to cost estimates received from industry 

through FinCEN’s CFI survey per se. The hybrid 

model was conceived based on some of the general 

survey responses, but was not a targeted matter of 

inquiry with respect to costs in the CFI survey 

(supra III. Sec. B.). Given the evolution of services 

available to the financial sector within the context 

of third-party centralized messaging systems since 

then, FinCEN, as emphasized infra (X. Request for 

Comments), is soliciting comment from industry on 

the current validity of these cost estimates. 

95 Id. The cost estimates in table 6–1 were derived 

in consideration of a $3,000 reporting threshold. 

IX. Regulatory Flexibility Act 

When an agency issues a rulemaking 

proposal, the Regulatory Flexibility Act 

(RFA) requires the agency to ‘‘prepare 

and make available for public comment 

an initial regulatory flexibility analysis’’ 

that will ‘‘describe the impact of the 

proposed rule on small entities.’’ (5 

U.S.C. 603(a)). Section 605 of the RFA 

allows an agency to certify a rule, in lieu 

of preparing an analysis, if the proposed 

rulemaking is not expected to have a 

significant economic impact on a 

substantial number of small entities. 

Reporting of Cross-Border Electronic 

Transmittals of Funds 

Estimate of the number of small 

entities to whom the proposed rule will 

apply: 

The reporting requirement proposed 

pursuant to the IRTPA, requires certain 

banks and money transmitters to report 

to FinCEN information associated with 

individual CBETFs on a periodic basis. 

For purposes of the RFA, both banks 

and credit unions are considered small 

entities if they have less than $175 

million in assets.86 Of the estimated 

8,000 banks, 80% have less than $175 

million in assets and are considered 

small entities.87 Of the estimated 7,000 

credit unions, 90% have less than $175 

million in assets.88 FinCEN estimates 

that this rule will impact 300 banks and 

credit unions. Of these 300 banks and 

credit unions, FinCEN estimates that no 

more than 190 are small entities.89

While all banks 90 can maintain 

customer accounts that are used to 

originate or receive CBETFs, not all 

banks are equipped to complete a 

CBETF on their own: for example, in the 

case of an outgoing CBETF the actual 

transaction may have to be channeled 

from small/medium banks to large, 

internationally active banks with whom 

they maintain correspondent banking 

relationships (last-out banks), and from 

these to a foreign bank. As part of the 

ordinary process of a transaction (and, 

in the case of outgoing CBETFs for 

amounts of $3,000 or higher, also 

because of BSA/AML regulatory 

requirements),91 these larger first-in/ 

last-out banks receive from the typically 

smaller originating bank all the data 

points FinCEN has deemed necessary to 

request. Therefore, FinCEN estimates 

that this reporting requirement will only 

impact 1.5% of all small banks and 

credit unions because, as stated above, 

these smaller institutions rely on large 

banks to process CBETFs. 

For the purposes of the RFA, a money 

transmitter is considered small if it has 

less than seven million in gross receipts 

annually. Of the estimated 19,000 

money transmitters, FinCEN estimates 

95% have less than seven million in 

gross receipts annually.92 Generally, 

small money transmitters do not have 

the infrastructure and international 

network necessary to process CBETFs 

resulting in a relatively small percentage 

of the total population that act as firstin or last-out institutions. Therefore, 

FinCEN estimates, the proposed rule 

will impact an estimated 4% of these 

small money transmitters. Therefore, 

FinCEN has determined that neither a 

substantial number of small banks nor 

money transmitters will be significantly 

impacted by the proposal. 

Description of the projected reporting 

and recordkeeping requirements of the 

proposed rule: 

During a week that a bank processes 

at least one CBETF as a first-in or lastout institution, the bank must report to 

FinCEN up to 10 data items for each 

CBETF processed. These data items are 

necessary for the proper messaging and 

settlement of a CBETF, and also 

correspond to data banks are obligated 

to obtain, retain, and retransmit for 

transactions at or above $3,000. During 

a week that a money transmitter 

conducts a CBETF as a first-in or lastout institution, a money transmitter will 

be required to report up to 10 data items 

per transaction at or above $1,000 and 

an additional 11th data point for 

transactions at or above $3,000. The 

information money transmitters will be 

required to report is information that 

they already obtain either in the 

ordinary course of business or to 

comply with other regulatory 

obligations. 

For RFA analysis, and relying on its 

specific studies, FinCEN has determined 

that this requirement would impose a 

significant impact on these first-in and 

last-out institutions. However, as 

discussed above, this significant impact 

would be limited to a minimal number 

of small entities that conduct fewer 

CBETFs. In the year 2006, FinCEN 

estimates that each large bank (as 

defined above) conducted 2 million 

reportable transactions on average. 

FinCEN estimates that small banks (also 

as defined above) conducted only eight 

thousand reportable transactions on 

average.93

The specific studies revealed that the 

individual average estimated cost of 

implementing the CBETF periodic 

report would consist of $94,000 per year 

for large banks, and $11,900 for small 

banks.94 In the case of money 

transmitters, the same cost would be 

split into a set-up and an annual 

ongoing portion: $250,000 set-up cost 

and $52,000 annual costs for large 

money transmitters, and no set-up cost 

and $20,000 annual costs for small 

money transmitters.95


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60393 

The proposed rule anticipates a $1,000 reporting 

threshold for money transmitters and no reporting 

threshold for banks. This change will affect the cost 

estimate for small money transmitters because 

FinCEN anticipates that such transmitters will 

comply through discrete transaction-by-transaction 

reporting. FinCEN anticipates that the change in 

threshold will increase the number of reports and 

consequently increase the average annual effect on 

small money transmitters from $395 to $20,000. 

Alternatively, because FinCEN anticipates that 

banks and large money transmitters will utilize 

automated reporting systems, a change in the 

threshold does not change the estimated annual 

costs. See America’s Community Banker’s Ltr. 

supra n. 53; see Implications and Benefits Study at 

45 tbl. 6–1 (one-time implementation cost of 

developing automated reporting systems is 

estimated at $250,000). Furthermore, several new 

reporting services have evolved or been made more 

widely available by third-party centralized 

messaging systems such as SWIFT, since the 

research period of the Implications and Benefits 

Study, which could reduce the annual reporting 

cost of banks significantly below the figures 

calculated in the Study. 

96Table of Small Business Size Standards 

Matched to North American Industry Classification 

System Codes, Small Business Administration Size 

Standards 28 (SBA Aug. 22, 2008) [hereinafter SBA 

Size Standards]. 

97Federal Deposit Insurance Corporation, Bank 

Find, http://www2.fdic.gov/idasp/ 

main_bankfind.asp; select Size or Performance: 

Total Assets, type Equal or less than $: ‘‘175000’’, 

select Find [hereinafter FDIC Bank Find]. 

98National Credit Union Administration, Credit 

Union Data, http://webapps.ncua.gov/ 

customquery/;select Search Fields: Total Assets, 

select Operator: Less than or equal to, type Field 

Values: ‘‘175000000’’, select Go [hereinafter NCUA 

Data]. 

99See 31 CFR 103.121 (2009). 

100See Bureau of Labor Statistics, Occupational 

Employment and Wages, May 2006, http:// 

www.bls.gov/oes/2006/may/oes131041.htm. 

101See 31 CFR 103.11(c) (2009) (For purposes of 

the BSA, the term ‘‘bank’’ includes credit unions). 

102 Implications and Benefits Study at ii. 

103 Implications and Benefits Study, App. C, 11 

fig. 13. The number of annual reportable 

transactions per large bank (as defined under the 

RFA) covered a wide range, with few very large 

institutions processing tens of millions of reportable 

transactions, and a large number of relatively 

smaller institutions processing reportable 

transactions in the tens of thousands or fewer. The 

average of 2 million transactions per large bank 

compensates both extremes of this wide range. 

Although the impact of the proposal 

will, for purposes of the RFA, be 

significant, the proposal will not impact 

a substantial number of institutions. 

Additionally, the impact on small 

institutions will be much less than the 

impact on larger institutions. 

Reporting of Taxpayer Identification 

Numbers of Accountholders 

Estimate of the number of small 

entities to whom the proposed rule will 

apply: 

The second reporting requirement 

contained within this proposal would 

require all banks to report the account 

number and TIN information of 

accountholders that transmitted or 

received a CBETF required to be 

reported under this section. For 

purposes of the RFA, both banks and 

credit unions are considered small 

entities if they have less than $175 

million in assets.96 Of the estimated 

8,000 banks, 80% have less than $175 

million in assets and are considered 

small entities.97 Of the estimated 7,000 

credit unions, 90% have less than $175 

million in assets.98 Banks and credit 

unions that would not be considered 

first-in/last-out institutions may still be 

required to report under this second 

proposal. This is because they may have 

one or more customers that transmitted 

or received a CBETF during the year. 

Therefore FinCEN estimates that this 

rule will impact all banks and credit 

unions. 

Description of the projected reporting 

and recordkeeping requirements of the 

proposed rule: 

The second reporting requirement 

contained within this proposal would 

require all banks to report on an annual 

basis the account number and TIN 

information of accountholders that 

transmitted or received a CBETF 

required to be reported under this 

section. The economic impact of this 

proposal will not be significant. The 

information required to be reported is 

information that banks are already 

required to record as part of their 

customer identification procedures.99

FinCEN understands that banks will 

be able to leverage from automated 

systems already designed to address 

current regulatory requirements, make 

relatively inexpensive internal 

modifications to existing queries that 

extract information from their customer 

information and transactional databases, 

and produce a summary annual report 

when a customer account shows 

evidence of CBETF activity during the 

year. The cost of the TIN annual 

reporting is based on the burden 

(measured in hours) of running these 

queries and producing and formatting 

the report (at clerical level), and spotchecking the report prior to 

transmission (at supervisory level). 

FinCEN has determined that existing 

regulatory reports of a similar nature 

involve an annual burden of 1 hour. 

Therefore, FinCEN estimates that the 

impact on a small bank to produce this 

report would be $24.47 annually 100

with a collective impact on small banks 

of $7,000. As such, FinCEN does not 

believe the impact of generating such 

report is significant. 

Certification 

When viewed as a whole, FinCEN 

does not anticipate the proposals 

contained in this rulemaking will have 

a significant impact on a substantial 

number of small businesses. 

Accordingly, FinCEN certifies that this 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

FinCEN is seeking comments on this 

determination. 

X. Paperwork Reduction Act 

The collection of information 

contained in this proposed rule 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)). Under the 

Paperwork Reduction Act, an agency 

may not conduct or sponsor, and an 

individual is not required to respond to, 

a collection of information unless it 

displays a valid OMB control number. 

Comments on the information collection 

should be sent to the Desk Officer for 

the Department of Treasury, Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Paperwork Reduction Project (1506), 

Washington, DC 20503, or by the 

Internet to 

oira_submission@omb.eop.gov with a 

copy to the Financial Crimes 

Enforcement Network by mail or as part 

of the comments through the Internet. 

Comments are welcome and must be 

received by November 29, 2010. 

Cross-border Electronic Transmittals of 

Funds Report (the ‘‘CBETF Periodic 

Report’’) 

Description of Affected Financial 

Institutions: Banks as defined in 31 CFR 

103.11(c) and money transmitters as 

defined in 31 CFR 103.11(uu)(5). 

Estimate Number of Affected 

Financial Institutions: 1,000 (300 

banks 101 and 700 money transmitters 

operating as principals).102

Estimated Average Annual Burden 

Hours Per Affected Financial 

Institution: On a weekly basis, first-in 

and last-out institutions will be required 

to submit a report containing 

information on all CBETFs conducted 

during the week. Each institution will 

be required to submit a maximum of 52 

reports per year. For a large institution, 

FinCEN estimates that on the average 

each weekly report will contain 

information on 40,000 CBETFs.103 For a 

small institution, FinCEN estimates that 

each weekly report will contain 

information on 115 CBETFs. Despite the 

number of CBETFs contained in each 

report, FinCEN estimates that the 

average burden associated with 

verifying and filing the report is one 

hour for each weekly report. FinCEN is 

not considering the time necessary to 

gather the information required for the 


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104Federal Deposit Insurance Corporation, Bank 

Find, http://www2.fdic.gov/idasp/ 

main_bankfind.asp; select Find; Credit Union 

Directory 2009, NCUA Credit Union Directory 190– 

192 (NCUA, 2009). 

105Please note that the inclusion of this 

information is not a condition of FinCEN’s full 

consideration of your comment. However, this data 

will help FinCEN allocate the comment among the 

population of large and small business entities, and 

produce a better evaluation of the impact of the 

proposed rule in accordance with the Regulatory 

Flexibility Act. 

report because the gathering of this 

information is usual and customary in 

processing these transactions. For 

banks, this information is included in 

the message that is transmitted between 

institutions and only needs to be 

retransmitted to FinCEN in the same 

messaging format as was originally sent. 

For money transmitters, FinCEN 

understands that to be active in the 

highly competitive cross-border 

remittances market, and to comply with 

current BSA/AML monitoring 

requirements involving their own 

activity and the activity of their agents, 

all money transmitters covered by the 

proposed reporting requirement must 

already possess a degree of automation 

that will allow them to generate the 

CBETF periodic report with minimal 

manual intervention. Manual 

intervention at operator level will 

consist of running the queries on the 

transaction and customer information 

databases, and inserting a single FinCEN 

Uniform Resource Locator (URL) in the 

computer-generated report; manual 

intervention at supervisor level will 

consist of spot-checking the generated 

report prior to transmitting it to FinCEN. 

While the number of weekly CBETFs 

per individual money transmitter (large 

or small) might vary, the actual number 

of weekly CBETFs is not considered a 

burden-determinant factor: having an 

operator execute and address an 

automated weekly report would require 

substantially the same time regardless of 

the number of transactions. The time 

required by manual intervention at the 

supervisory level for quality assurance 

will be affected by the number of 

weekly transactions; however, the 

sample size required for spot-checking 

at an industry-standard confidence level 

will not have to be increased in direct 

proportion to the number of reported 

transactions. Furthermore, those money 

transmitters that process the largest 

portion of CBETFs subject to reporting 

are also those that currently possess 

enough technological resources to 

automate not only the generation of the 

report, but the spot-checking function as 

well. 

Estimated Average Total Number of 

CBETF Periodic Reports per Annum: 

52,000 (52 weekly reports submitted by 

1,000 reporting institutions). 

Estimated Total Annual Burden: 

52,000 hours (52,000 reports at 1 hour 

per report). 

The total number of reports to be filed 

per calendar year (or, in the case of 

banks, the number of times a year 

SWIFT retransmits their CBETF activity 

to FinCEN) is a function of the 

mandated periodicity of the reports. The 

proposal reflects the obligation to file a 

weekly report (an average of 52 reports 

per reporting institution per calendar 

year). Total number of weekly reports to 

be filed by all reporting banks is 15,600 

a year; total number of weekly reports 

to be filed by all reporting money 

transmitters is 36,400 a year. 

Annual Tax Identification Number 

Report (the ‘‘TIN Annual Report’’) 

Description of Affected Financial 

Institutions: Banks as defined in 31 CFR 

103.11(c). 

Estimate Number of Affected 

Financial Institutions: 15,000 banks. 

Estimated Average Total Number of 

TIN annual reports per Annum: 15,000 

(1 annual report submitted by 15,000 

reporting institutions). 

Estimated Total Annual Burden: 

15,000 hours (15,000 reports at 1 hour 

per report). 

Under the TIN annual reporting 

portion of this proposed rule, FinCEN 

estimates that the number of affected 

banks would increase to a maximum of 

15,000.104 FinCEN stipulates that the 

banks covered by the proposed TIN 

annual report requirement already 

possess the degree of automation 

required to search their transaction and 

customer information databases and 

generate the report with minimum 

manual intervention: the same bank 

population is currently subject to other 

regulatory reporting requirements, such 

as annual reporting on the IRS series of 

1099 forms that require substantially 

similar data processing capacity. The 

estimated average burden is one hour 

per reporting bank per year. Therefore, 

the average total annual burden hours 

would increase to 15,000. 

Request for Comments Regarding the 

Paperwork Reduction Act Analysis 

FinCEN is seeking comments on these 

estimates. Comments are specifically 

requested concerning: 

• Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of FinCEN, 

including whether the information will 

have practical utility; 

• The accuracy of the estimated 

burden associated with the proposed 

collection of information; 

• How the quality, utility, and clarity 

of the information to be collected may 

be enhanced; and, 

• How the burden of complying with 

the proposed collection of information 

may be minimized, including through 

the application of automated collection 

techniques or other forms of information 

technology. 

XI. Request for Comments 

FinCEN invites comments on any and 

all aspects of the proposal to require 

select financial institutions to report to 

FinCEN transmittal orders associated 

with certain CBETFs. If you are 

commenting on behalf of a bank, please 

indicate in your response whether you 

are a small institution (less than $175 

million in assets). If you are 

commenting on behalf of an MSB, 

please indicate in your response 

whether you are a small MSB (gross 

receipts are below $7 million 

annually).105

FinCEN specifically invites comment 

on requests above, as well as the 

following: 

Third-party Carriers: In the proposed 

rule, banks will be able to report by 

either submitting the complete copy of 

the transmittal order that it sends or 

receives or by submitting the ten data 

points listed in 103.14(c) of the 

proposed regulation. FinCEN anticipates 

that banks, which provide complete 

copies of the CBETF transmittal orders, 

will fulfill this obligation by using thirdparty carriers of the transmittal orders to 

submit the copy on behalf of the bank. 

Alternatively, for banks that submit the 

ten data points requested in 103.14(c) of 

the proposed regulation, FinCEN 

anticipates providing an Internet-based 

form to report the information. FinCEN 

requests comments on alternative 

formats for reporting the proposed 

information that FinCEN should 

consider in developing systems to 

accept CBETF reporting. Additionally, 

FinCEN requests comments on thirdparty carriers, other than SWIFT, that 

could make such reports on behalf of 

the bank. Although FinCEN is focusing 

on messaging systems, FinCEN 

welcomes comments from the public 

regarding possible payment or 

settlement systems that could provide 

the information requested under the 

proposed rule. 

Message Standards: If institutions that 

would be covered by this rule believe 

that there is a significant portion of their 

funds transfers that would be required 

to be reported under this proposed rule 

that would not be covered by reporting 

the identified standardized person-toperson transmittal orders (MT 103 and 


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106Supra IV. Sec. I Protection of Private Personal 

Financial Information. 

107Supra IX. Regulatory Flexibility Act. 

108Supra III. Sec. B. Implications of CBETF 

Reporting of the Financial Industry. 

MT 202–COV), FinCEN encourages 

comments in this area. 

Bank Proprietary Systems: FinCEN 

requests comment on the utility of 

reporting CBETFs that are processed 

solely through bank proprietary systems 

and on the potential costs of supplying 

such reports. At this time, FinCEN is not 

proposing to collect information on 

CBETFs that are processed through bank 

proprietary systems. FinCEN 

acknowledges that these systems are 

used in a limited context and that 

within these contexts there is a higher 

degree of transparency. When 

commenting, please note if you have 

information contrary to these 

acknowledgements. 

Duplicate Messages: FinCEN is 

requiring submissions of copies of 

transmittal orders or advices with the 

intention of collecting the evidence that 

a transmittal of funds has occurred or 

will occur. FinCEN is asking for advices 

in order to capture situations where a 

proprietary system may be used in order 

to execute the transmittal order but 

where a third-party system is used in 

addition to sending an advice to 

facilitate straight-through processing. It 

is not FinCEN’s intention to collect 

duplicate records in the rare cases 

where a transmittal order and an advice 

are both covered under this proposed 

regulation. As such, FinCEN is seeking 

comments on situations where the 

regulations as proposed might result in 

duplicate reporting and, if so, whether 

institutions view this duplication as 

something that they believe is less 

costly to simply report (with FinCEN 

reconciling the two reports) or whether 

they believe that it would be of value to 

exempt duplicate filings, with 

suggestions as to how to avoid such 

duplication. 

Frequency of Reports: FinCEN 

requests comments on the frequency 

that reports are required to be provided 

including the feasibility of requiring 

daily reporting. FinCEN is aware that 

other countries require daily reporting 

with significant benefits accruing to law 

enforcement from the access to near 

real-time information. FinCEN is 

interested in receiving information from 

financial institutions about the impacts 

that this would have on their 

operations. In determining the costs of 

compliance with this proposal, FinCEN 

has relied on feedback from banks 

stating that the reporting requirements 

of the proposal can be fulfilled by 

copying FinCEN on a SWIFT message. 

Thus, FinCEN anticipates that the costs 

of compliance for banks would not be 

significantly increased if these messages 

are sent to FinCEN daily as opposed to 

batch-sent to FinCEN weekly. If your 

institution (including any money 

transmitter) has information suggesting 

otherwise, please include that 

information within your comment. 

Effects of the Rule on Customer 

Privacy: FinCEN has included an 

extensive discussion of its proposal for 

ensuring the security of the information 

in this NPRM.106 In addition, it is also 

seeking comments regarding the impact 

of this information collection on 

customer privacy and on the ability of 

banks and MSBs to continue to fulfill 

their obligations to preserve their 

customer’s privacy while implementing 

the provisions of this rule. 

Effects of FinCEN’s Proposed 

Reporting Requirements: To establish an 

efficient reporting system that not only 

meets the goal of providing information 

that is needed by law enforcement but 

does not require significant changes in 

the business and payment systems of 

banks and MSBs, FinCEN is proposing 

that first-in/last-out banks report all 

CBETFs and that first-in/last-out money 

transmitters report all CBETFs at or 

above $1,000. FinCEN discussed its 

estimates of the implications of the 

proposed rule in its Regulatory 

Flexibility Analysis 107 and its 

discussion of the Implications and 

Benefits Study.108 Considering these 

discussions and the reporting 

requirements defined by FinCEN in the 

NPRM, FinCEN is seeking comments 

from banks and MSBs on the costs and 

impact of these broad parameters on the 

funds transfer operations and systems of 

the banks and MSBs affected by this 

rule. 

Migration to other CBETF Channels: 

FinCEN would like to solicit comments 

from institutions regarding specific 

instances where they believe that, as a 

result of such a reporting requirement, 

financial institutions or their customers 

may move to execute CBETFs by some 

other means that would not be subject 

to the proposed reporting requirement, 

including informal value transfer 

mechanisms or non-U.S. based payment 

mechanisms (please provide details). 

Effect of the Rule on Remittances: 

FinCEN requests comments on the effect 

any such reporting is likely to have on 

retail consumers of cross-border 

remittances, including how any such 

reporting may change the relationship 

between the remittance consumer and 

the money transmitter and how such 

reporting may produce cost or price 

effects likely to be passed on to such 

consumers. Please be specific in 

identifying any such monetary effects, 

as well as any non-monetary effects 

caused by such a proposed rule, if 

adopted. 

Reporting Channels: In the proposed 

rule, FinCEN requires reporting from 

money transmitters for transactions of 

$1,000 or more. FinCEN anticipates that 

large money transmitters will 

implement automated systems to 

provide the information requested in 

103.14(c) of the proposed regulation. 

FinCEN requests comments on possible 

formats for this reporting to assist 

FinCEN in developing a user-friendly 

format to reduce the implications on 

money transmitters. FinCEN 

understands that smaller institutions 

might benefit from submitting reports 

on an Internet-based form provided by 

FinCEN. For those institutions with a 

lower volume of CBETF transactions, 

FinCEN believes that use of the Internetbased form would allow cost savings 

versus self-implemented automated 

reporting systems and requests 

comments from the industry on this 

proposal. 

Foreign-Exchange Conversions: In the 

proposed rule, FinCEN requires 

reporting from money transmitters for 

transactions of $1,000 or more or the 

equivalent in other currencies. FinCEN 

would like to solicit comments on how, 

with respect to non-U.S. dollar 

denominated transactions, institutions 

would perform the currency exchange 

rate calculations in practice and what 

systems or approaches may be available 

to facilitate compliance with this 

requirement. 

Effect of TIN Reporting on the 

Banking Industry: FinCEN requests 

comments on how the annual TIN 

reporting requirement will impact the 

banking industry and how the industry 

will comply with this requirement, 

including how reportable accounts 

would be identified for reporting under 

this methodology. FinCEN understands 

that banks will be able to leverage from 

automated systems already designed to 

address current regulatory requirements, 

and make relatively inexpensive 

internal modifications to existing 

queries that extract information from 

their customer information and 

transactional databases, and produce a 

summary annual report when a 

customer account shows evidence of 

CBETF activity during the year. These 

automated systems are used to comply 

with other regulatory requirements 

including the filing of the IRS series of 

Form 1099. If you have information 

suggesting that banks are unable to 

leverage off of these systems, please 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
60396 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

include that information within your 

comment. 

Effect of TIN Reporting on the Money 

Transmitter Industry: FinCEN is 

interested in soliciting comments from 

the money transmitter industry 

regarding the additional requirement of 

providing the TIN of the transmittor or 

recipient for transactions of $3,000 or 

more. As stipulated above, in order to be 

active in the highly competitive crossborder remittances market, and to 

comply with current BSA monitoring 

requirements involving their own 

activity and the activity of their agents, 

all money transmitters covered by the 

proposed periodic reporting 

requirement must already possess a 

degree of automation that will allow 

them to generate the CBETF periodic 

report with minimal manual 

intervention. If you have information 

suggesting that money transmitters that 

process CBETFs are unable to rely on 

automated systems coupled with 

minimal manual transaction testing, 

please include that information in your 

comment. 

TIN Reporting Threshold for the 

Money Transmitter Industry: Lastly, 

FinCEN solicits comments on whether 

the money transmitters required to 

report under these proposals would 

prefer to consolidate the reporting 

thresholds ($1,000 for CBETF reports 

and the $3,000 level for including the 

taxpayer identification number in the 

report) into a single $1,000 threshold for 

both reporting the transaction and 

reporting the taxpayer identification 

number (meaning that a TIN would be 

required with every CBETF reported). 

List of Subjects in 31 CFR Part 103 

Administrative practice and 

procedure, Banks, Banking, Brokers, 

Currency, Foreign banking, Foreign 

currencies, Gambling, Investigations, 

Penalties, Reporting and recordkeeping 

requirements, Securities, Terrorism. 

Authority and Issuance 

For the reasons set forth in the 

preamble, part 103 of title 31 of the 

Code of Federal Regulations is proposed 

to be amended as follows: 

PART 103—FINANCIAL 

RECORDKEEPING AND REPORTING 

OF CURRENCY AND FINANCIAL 

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. 5311–5314, 5316–5332; title III, 

secs. 311, 312, 313, 314, 319, 326, 352, Pub. 

L. 107–56, 115 Stat. 307. 

2. Add new § 103.14, to read as 

follows: 

§ 103.14 Reporting relating to crossborder electronic transmittal of funds. 

(a) Periodic Reports. Each reporting 

financial institution shall file periodic 

reports with FinCEN with respect to any 

cross-border electronic transmittal of 

funds, denominated in any currency, for 

an amount equal to or exceeding the 

applicable reporting threshold, to the 

extent and in the manner required by 

this section. 

(b) Definitions— In general. For 

purposes of this section, the following 

terms shall have the meanings set forth 

below: 

(1) Account shall have the meaning 

set forth in 31 CFR 103.90(c). 

(2) Bank shall have the meaning set 

forth in 31 CFR 103.11(c). 

(3) Money transmitter shall have the 

meaning set forth in 31 CFR 

103.11(uu)(5). 

(4) Recipient shall have the meaning 

set forth in 31 CFR 103.11(cc). 

(5) Transmittor shall have the 

meaning set forth in 31 CFR 103.11(ll). 

(6) Transmittal order shall have the 

meaning set forth in 31 CFR 103.11(kk). 

(7) Transmittal of funds shall have the 

meaning set forth in 31 CFR 103.11 (jj). 

(8) Electronic means. Means that 

utilize technology that has electrical, 

digital, magnetic, wireless, optical, 

electromagnetic, or similar capabilities. 

(9) Financial institution shall have the 

meaning set forth in 31 CFR 103.11(n). 

(10) Foreign financial institution shall 

have the meaning set forth in 31 CFR 

103.175(h). 

(11) First-in financial institution. The 

first financial institution with respect to 

a transmittal of funds that receives a 

transmittal order or advice from a 

foreign financial institution. 

(12) Last-out financial institution. The 

last financial institution with respect to 

a transmittal of funds that sends a 

transmittal order or advice to a foreign 

financial institution. 

(13) Cross-border electronic 

transmittal of funds. A transmittal of 

funds where either the transmittal order 

or the advice is: 

(i) Communicated by electronic 

means; and 

(ii) Sent or received by either a firstin or last-out financial institution. 

(14) Reporting financial institution. 

Any bank (‘reporting bank’) or money 

transmitter (‘reporting money 

transmitter’) acting as a first-in or lastout financial institution. 

(15) Reporting threshold. For 

reporting banks, the reporting threshold 

is zero. For reporting money 

transmitters, the reporting thresholds for 

the periodic cross-border electronic 

transmittal of funds is $1,000 or more, 

or the equivalent in other currencies. 

(c) Filing procedures—(1) What to file. 

Reporting financial institutions shall 

discharge their reporting obligations 

with respect to cross-border electronic 

transmittals of funds required by 

paragraph (a) of this section by 

submitting a copy of the respective 

transmittal order or advice, provided 

that the transmittal order or advice is in 

a standardized format that has been 

approved for direct submission by 

FinCEN. If the reporting financial 

institution is unable to submit a copy of 

the respective transmittal order or 

advice in an approved format, then the 

reporting financial institution may 

discharge its reporting obligation by 

submitting the following information, if 

available, in a form specified by 

FinCEN: 

(i) Unique transaction identifier 

number; 

(ii) Either the name and address or the 

unique identifier of the transmittor’s 

financial institution; 

(iii) Name and address of the 

transmittor; 

(iv) The account number of the 

transmittor (if applicable); 

(v) The amount and currency of the 

transmittal of funds; 

(vi) The execution date of the 

transmittal of funds; 

(vii) The identity of the recipient’s 

financial institution; 

(viii) The name and address of the 

recipient; 

(ix) The account number of the 

recipient (if applicable); 

(x) Any other specific identifiers of 

the recipient or transaction, and 

(xi) For transactions of $3,000 or 

more, reporting money transmitters 

shall also include the U.S. taxpayer 

identification number of the transmittor 

or recipient (as applicable) or, if none, 

the alien identification number or 

passport number and country of 

issuance. 

(2) Where to file. A report required by 

paragraph (a) of this section shall be 

filed with FinCEN, unless otherwise 

specified. 

(3) When to file. A report required by 

paragraph (a) of this section shall be 

filed by the reporting financial 

institution within five business days 

following the day when the reporting 

financial institution sent or received the 

transmittal order. 

(4) Designated third-party filers. A 

reporting financial institution may 

designate a third party to file a report 

required under this section utilizing 

procedures prescribed by FinCEN. 

(d) Nature and form of reports. All 

reports required by paragraph (a) of this 


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Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60397 

section shall consist of electronic 

submissions filed in a format approved 

by FinCEN either discretely, on a 

transaction-by-transaction basis, or by 

batching transactions. FinCEN may 

authorize a designated reporting 

financial institution to report in a nonelectronic manner if the financial 

institution demonstrates to FinCEN that 

the form of the required report is 

unnecessarily onerous on the institution 

as prescribed; that a report in a different 

form will provide the information 

FinCEN deems necessary; and that 

submission of the information in a 

different manner will not unduly hinder 

the effective administration of this part. 

(e) Annual Reports. On an annual 

basis, all banks must submit to FinCEN 

a report that provides the following 

information: the number of the account 

that was credited or debited to originate 

or receive a cross-border electronic 

transmittal of funds, and the U.S. 

taxpayer identification number of the 

respective accountholder. This report 

shall be submitted to FinCEN no later 

than April 15 of the year following the 

transaction date of the cross-border 

electronic transmittal of funds. The 

report shall be in a form and manner to 

be determined by FinCEN. 

(f) Exemptions. The following crossborder electronic transmittals of funds 

are not subject to the reporting 

requirements of paragraphs (a) and (e) of 

this section: 

(1) Cross-border electronic 

transmittals of funds where either the 

transmittor is a bank and the recipient 

is a foreign bank, or the transmittor is 

a foreign bank and the recipient is a 

bank and, in each case, there is no thirdparty customer to the transaction; or 

(2) The transmittal order and advice 

of the transmittal order are 

communicated solely through systems 

proprietary to a bank. 

Dated: September 24, 2010. 

James H. Freis, Jr., 

Director, Financial Crimes Enforcement 

Network. 

[FR Doc. 2010–24417 Filed 9–29–10; 8:45 am] 

BILLING CODE 4810–02–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 285 

[DoD–OS–2010–0103; RIN 0790–AI51] 

DoD Freedom of Information Act 

(FOIA) Program 

AGENCY: Department of Defense. 

ACTION: Proposed rule. 

SUMMARY: The Department of Defense is 

proposing to update current policies 

and procedures to reflect the DoD FOIA 

Program as prescribed by Executive 

Order 13392. The changes will ensure 

appropriate agency disclosure of 

information and offer consistency with 

the goals of section 552 of title 5, United 

States Code. 

DATES: Submit comments on or before 

November 29, 2010. 

ADDRESSES: You may submit comments, 

identified by docket number and or RIN 

number and title, by any of the 

following methods: 

• Federal Rulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Federal Docket Management 

System Office, 1160 Defense Pentagon, 

Room 3C843, Washington, DC 20301– 

1160. 

Instructions: All submissions received 

must include the agency name and 

docket number or Regulatory 

Information Number (RIN) for this 

Federal Register document. The general 

policy for comments and other 

submissions from members of the public 

is to make these submissions available 

for public viewing on the Internet at 

http://www.regulations.gov as they are 

received without change, including any 

personal identifiers or contact 

information. 

FOR FURTHER INFORMATION CONTACT: Mr. 

James Hogan, (703) 696–468 fax 

number: (703) 696–4506. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’ 

It has been certified that 32 CFR part 

285 does not: 

(1) Have an annual effect on the 

economy of $100 million or more or 

adversely affect in a material way the 

economy; a section of the economy; 

productivity; competition; jobs; the 

environment; public health or safety; or 

state, local, or tribal governments or 

communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs, or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in this Executive Order. 

Sec. 202, Pub. L. 104–4, ‘‘Unfunded 

Mandates Reform Act’’ 

It has been certified that 32 CFR part 

285 does not contain a Federal mandate 

that may result in the expenditure by 

state, local and tribal governments, in 

aggregate, or by the private sector, of 

$100 million or more in any one year. 

Public Law 96–354, ‘‘Regulatory 

Flexibility Act’’ (5 U.S.C. 601) 

It has been certified that 32 CFR part 

285 is not subject to the Regulatory 

Flexibility Act (5 U.S.C. 601) because it 

would not, if promulgated, have a 

significant economic impact on a 

substantial number of small entities. 

Public Law 96–511, ‘‘Paperwork 

Reduction Act’’ (44 U.S.C. Chapter 35) 

It has been certified that 32 CFR part 

285 does not impose reporting or 

recordkeeping requirements under the 

Paperwork Reduction Act of 1995. 

Executive Order 13132, ‘‘Federalism’’ 

It has been certified that this rule does 

not have federalism implications, as set 

forth in Executive Order 13132. This 

rule does not have substantial direct 

effects on: 

(1) The States; 

(2) The relationship between the 

National Government and the States; or 

(3) The distribution of power and 

responsibilities among the various 

levels of government. 

List of Subjects in 32 CFR Part 285 

Freedom of information. 

Accordingly, 32 CFR part 285 is 

proposed to be amended as follows. 

PART 285—[AMENDED] 

1. The authority citation for part 285 

continues to read as follows: 

Authority: 5 U.S.C. 552. 

2. Section 285.1 is amended by 

revising paragraph (c) to read as follows: 

§ 285.1 Purpose. 

* * * * * 

(c) Implements E.O. 13392, 

Presidential Memorandum, ‘‘Freedom of 

Information Act,’’ January 21, 2009 

(available at http:// 

www.whitehouse.gov/the_press_office/ 

Freedom_of_Information_Act/), and 

Attorney General Memorandum, ‘‘The 

Freedom of Information Act (FOIA),’’ 

March 19, 2009 (available at http:// 

www.justice.gov/ag/foia-memomarch2009.pdf) within the Department 

of Defense. 

* * * * * 

3. Section 285.2 is amended by 

revising paragraph (a) to read as follows: 

§ 285.2 Applicability. 

* * * * * 

(a) The Office of the Secretary of 

Defense (OSD), the Military 


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