FinCEN And Federal Reserve Board Request Comments On Expansion Of Recordkeeping And Travel Rules

Published date16 November 2020
Subject MatterFinance and Banking, Technology, Financial Services, Security, Fin Tech
Law FirmTroutman Pepper Hamilton Sanders
AuthorMs Brittany Sadler Berky and David N. Anthony

The Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board (referred to as 'the Agencies') are soliciting comments on or by November 27, 2020, on a proposed rule that would significantly expand the 'Recordkeeping Rule' and 'Travel Rule' regulations under the Bank Secrecy Act. The purpose is to fight terrorism, narcotics trafficking, and other illegal activities.

The proposed rule makes two major changes - it lowers the monetary threshold for the Recordkeeping and Travel Rules to apply, and it expands the definition of 'money' to include virtual currencies.

Lower Threshold

The Recordkeeping Rule ( 31 CFR 1020.410(a) and 1010.410(e)) and the Travel Rule ( 31 CFR 1010.410(f)) are complementary. The Recordkeeping Rule requires the collection and retention of information about payments or transmittal orders. This information includes:

  • Name and address of the originator
  • Amount and date of the payment
  • Any payment instructions
  • Identity of the beneficiary's financial institution

If the originator's financial institution receives identifying information about the beneficiary from the originator, it must retain that information as well. Both the originator's and the beneficiary's financial institutions must verify identities if the parties are not already established customers and they are placing or receiving the order in person. Intermediary financial institutions, as well as that of the beneficiary, must retain originals or copies of payments and transmittal orders.

The Travel Rule functions similarly. The originator's financial institution must include information (including that required by the Recordkeeping Rule) in a payment or transmittal order. Intermediary financial institutions also must send the information to any other institutions in the payment chain.

Presently, the threshold for complying with the Recordkeeping and Travel Rules is $3,000. The proposed rule would lower it to $250 for transactions that the institution has 'reason to know' begin or end outside the United States (the threshold for domestic transfers would remain at $3,000). 'Reason to know' is based on the information the institution collects or receives in the process of the transaction.

The Agencies consider this change necessary because of 'malign actors' using small transfers of funds to facilitate terrorist activities, narcotics trafficking, and other illegal activities. The Agencies are particularly relying on the Suspicious Activity Reports, filed by money...

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