FinCEN Seeks To Expand Scope Of Information Collection And Recordkeeping Requirements For Money Transmitters And Other Financial Institutions

• Published date: 12 November 2020
• Subject Matter: Finance and Banking, Financial Services, Fund Management/ REITs
• Law Firm: Morrison & Foerster LLP
• Author: Mr Sean Ruff and Adam J. Fleisher

A new proposed rulemaking (the 'NPRM') would lower the current $3,000 threshold for the applicability of the Bank Secrecy Act ('BSA') Recordkeeping Rule and Travel Rule to $250 for covered funds transfers that begin or end outside the United States. This proposed change would'among other things'require nonbank financial institutions, such as money transmitters, to obtain information, including Social Security number, from all consumers that initiate covered transfers in an amount of $250 or more. If finalized as proposed, the change would have a significant impact on financial services providers that offer cross-border funds transfer services. In addition, the NPRM would modify the definition of 'money'as the term is used in connection with the Recordkeeping and Travel Rules'to include convertible virtual currency ('CVC') and to clarify that funds transfers involving CVC are also covered. This change would be the first recognition of virtual currency in the regulations implementing the BSA.

Comments on the NPRM are due on November 27, 2020.

Recordkeeping Rule and Travel Rule - Background

The Recordkeeping Rule requires bank and nonbank financial institutions to collect and retain information related to funds transfers and transmittals of funds in amounts of $3,000 or more.¹ While determining whether a transfer is covered by this rule is complex, it generally applies to transfers of funds that any person requests a financial institution make to a beneficiary unless the transfer is made 'through an automated clearinghouse, an automated teller machine, or a point‑of-sale system.'² For a covered transaction (i.e., a transaction of $3,000 or more), the financial institution must obtain and record information about the transaction (e.g., amount and execution date), as well as name and address. Additional information'including Social Security number and, for in-person transactions, driver's license or other similar identification'is required if the funds transfer is for a person other than an 'established customer' of the financial institution.³ An 'established customer' is a person that has established an account with a financial institution or from which the financial institution has otherwise 'obtained and maintains on file the person's name and address, as well as taxpayer identification number (e.g., social security or employer identification number),' and the financial institution provides financial services relying on that information.⁴

The Travel Rule...