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FinCEN Considers Proposed Rule to Require Reporting of Cross-Border Electronic Fund Transfers

29 November 2010

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Comments are due December 29 on a proposal that would require banks and money transmitters to report information to the U.S. government regarding international fund transfers, including the Social Security numbers of individuals that send or receive such funds.  

On September 30, 2010, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, published a Notice of Proposed Rulemaking (NPRM)   for public comment.  The proposal would amend Bank Secrecy Act (BSA) regulations to add two new requirements.  First, banks and money transmitters would be required to report transmittal information on cross-border electronic transmittals of funds (CBETFs) on an ongoing basis; banks would have to report transfers of any amount, while money transmitters would have to report transfers of at least $1,000.   For reportable transactions of $3,000 or more, money transmitters would have to include in the report the taxpayer identification number (TIN), alien identification number, or passport number of the transmitter or recipient.  Second, the proposal would require all banks to file an annual report with FinCEN of the account numbers and TINs associated with each  account that initiated or received a CBETF. 

The information that would be reported is largely information that banks and money transmitters already collect, even though they currently are not required to report it as they would be under the proposed rule.

The proposal is aimed at furthering the government’s efforts to combat money laundering, terrorist financing, and other violations of law such as tax evasion and customs fraud.  The reports, FinCEN asserts, would greatly facilitate the ability of authorities to investigate and prosecute such activity.  The reports would be submitted to FinCEN, but could be accessed by other federal and state authorities.  This is already the case with other data currently collected pursuant to BSA.   

However, the affirmative reporting of information on all CBETFs – including account numbers and TINs – would be a significant change.  FinCEN would be given the Social Security number of every individual that uses a U.S. bank to either send or receive funds electronically across U.S. borders, and of many other persons that use money transmitters for such transfers.  This raises possible privacy and data security concerns – due both to the fact of the government having such data and to the need to prevent improper access to or misuse of the data.    

FinCEN has acknowledged the privacy and security concerns raised by the proposal and states that it will maintain sufficient procedures to keep such information safe and secure.   The data, FinCEN observes in the NPRM, “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[.]” 

FinCEN is statutorily prohibited from issuing a final rule until it has established adequate, secure systems to accept the required reports.  For that reason, FinCEN does not expect to issue a final rule before January 1, 2012, because it does not expect to have the information technology systems in place to accept the reports before that time.  Even after a final rule is issued, FinCEN anticipates delaying the mandatory compliance date for some period to allow time for financial institutions to implement procedures to comply with the rule.

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