ABA's Letter to FinCEN on Currency Transaction Reports on Sole Proprietors and Legal Entities

Kenneth A. Blanco, Director
Financial Crimes Enforcement Network
P. O. Box 39
Vienna, Virginia, 22183

Dear Director Blanco,

The American Bankers Association (ABA) appreciates the collaborative relationship that we have had with FinCEN since its founding. The public-private partnership is critical to combatting money launderers and terrorists. We also welcome FinCEN’s recent work to make the Bank Secrecy Act (BSA) reporting more effective and efficient. However, on February 10, FinCEN issued a ruling, FIN-2020-R001, that we believe is inconsistent with these efforts.

The ruling primarily addresses banks’ reporting of large currency transactions involving sole proprietorships and that section of the ruling is generally appropriate. However, on the second page, the ruling directs that when a bank prepares a CTR for a legal entity customer, a Part 1 should be prepared for the home office/headquarters in addition to completing a separate Part 1 for each location involved in the aggregation.

On its face, this seems innocuous, but our members have concerns about the changes in the ruling for a variety of reasons discussed below. To our knowledge, FinCEN developed the ruling without consultation with industry representatives or the vendors that support the compliance efforts of the financial sector. As a result, the ruling is inconsistent with bank operations and will require substantial changes to procedures and software to comply.

As a result, the April 6 compliance date is very likely to be a date that most banks, particularly community banks, will be unable to meet. Many bankers have been informed by their software providers that the necessary system changes will not be completed on time. And now, with the current national emergency, it is increasingly likely that systems will not be ready on April 6. With the significant changes that the ruling would require, updates would have been extremely challenging in the best of times.

Specific Issues

The ruling rests on several flawed factual assumptions. First, when a business customer establishes an account, it might be for deposits and process transactions for a single location, not the headquarters. As such, listing the headquarters address would be misleading.

In other cases, a business may have a single account into which it deposits funds generated by multiple locations. For example, if a business operates three restaurants in a metropolitan area, the business may have a single account and might combine the deposits into one transaction when making a deposit. As a result, the bank would have no way of knowing the amount of the deposit generated by each location. To comply with the ruling, banks will have to re-calibrate their systems to create sub-accounts for each location and then require customers to make deposits associated with specific locations. The costs associated with such re-structuring of bank deposit account relationships will be significant and burdensome to both bankers and customers.

In addition, as systems are currently configured, when a bank reports a headquarters location, if available, and then each individual location within the business, there is a risk of duplicate reporting (i.e., the system would generate two reports, one for the location and another for headquarters).

These are the challenges our members have identified to date, and more are likely to surface. However, all indications are that compliance with the new reporting requirements will require significant procedural and software changes. I would be happy to arrange a call with a group of bankers to discuss the ruling and work collaboratively to further our shared goals of promoting efficiency and effective reporting.

Sincerely,

Robert G. Rowe, III
Vice President & Senior Counsel, Regulatory Compliance and Policy