Letter to the Agencies on Exemptions to SAR Requirements

FDIC: RIN 3064–AF56, 
Robert E. Feldman, Executive Secretary
Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429
[email protected] 

Federal Reserve: Docket No. R–1738 and RIN 7100–AG08
Ann E. Misback, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW, Washington, DC 20551
[email protected] 

OCC: Docket ID OCC–2020–0037
Chief Counsel’s Office
Attention: Comment Processing
Office of the Comptroller of the Currency
400 7th Street SW, Suite 3E–218
Washington, DC 20219.
 www.regulations.gov

Dear Sir or Madam:

The American Bankers Association (ABA) appreciates the opportunity to comment on the agencies’ proposals to adopt a special exemption process from Suspicious Activity Report (SAR) requirements. The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies) have each published separate proposals to allow the agencies to authorize special exemptions from SAR filing requirements while another separate proposal, not addressed in this comment letter, also was published by the NCUA. The Agencies are taking this step to encourage banks to explore innovative ways to monitor and report suspicious activity as well as to coordinate with similar Financial Crime Enforcement Network (FinCEN) requirements.

The Agencies issued this proposal because, despite FinCEN’s broad authority under the Bank Secrecy Act (BSA) to create exemptions from SAR filing requirements, that exemption authority does not extend automatically to the banking agencies’ SAR reporting rules. The FinCEN rule authorizes an exemption for innovative solutions to SAR monitoring and filing, but the Agencies’ rules do not offer a similar exemption. As a result, if FinCEN grants a special exemption when approving an innovative solution to BSA compliance, a bank that uses that innovation could be cited by its prudential regulator for not complying with the banking agency’s rule. These proposals will establish the Agencies’ authority to issue exemptions for SAR filings when the bank has been approved to adopt an innovative practice. Clearly, this is an important step to encourage financial institutions to take advantage of innovative processes, and one which ABA supports.

Summary of the Comment

ABA appreciates the steps being taken by the Agencies to encourage innovation. As banks work to streamline BSA compliance and make the system more effective and efficient, innovation will be at the heart of those efforts. Agency encouragement and support for innovation is important and welcome. However, we also recommend a number of changes to make the proposed SAR special exemption process more effective. First, the proposed changes provide a good opportunity for the Agencies to streamline the process through a single interagency rulemaking that will facilitate innovation while a series of separate, similar rules may undermine that effort. Second, when a bank requests an exemption, it should only have to submit a single application to its primary prudential supervisor and not multiple agencies. Third, there should be clear procedures for how the process will work, including a template for applications and a defined timeline for the agency to respond. In addition, applications and responses should be published and made available to other banks so they, too, can take advantage of the exemption without having to apply separately.

Download the comment letter to read the full text.