We
appreciate the opportunity to respond to the
request for comments on how to help you eliminate
outdated, unnecessary, or unduly burdensome regulatory
requirements relating to Money Laundering, Safety
and Soundness and/or Securities.
Money
Laundering
Reporting
thresholds
The
current reporting limits are burdensome to the
financial institutions and result in excessive
reporting that diminishes the purpose of the
laws. Therefore we recommend the following changes:
· Increase
the Currency Transaction Report (CTR) threshold
from $10,000.00 to $25,000.00. There are many
businesses that have legitimate cash transactions
as a normal part of their operations. Increasing
the CTR threshold would result in fewer unnecessary
CTRs and would allow the financial institutions
to focus their time and effort on more necessary
BSA activities.
· Increase
the amount of the Monetary Instrument Sales (MIS)
transaction threshold to $10,000.00. As stated
above, there are many businesses that have legitimate
cash transactions as a normal part of their operations.
This would allow the financial institutions to
focus their time and effort on more necessary
BSA activities.
· Increase
the Suspicious Activity Report (SAR) threshold
of $5000.00 to $25,000.00. From conversations
with law enforcement agencies, it appears that
they are very interested in SARs where the financial
institution has incurred losses of at least $100,000.00
or SARs of a more significant amount than $5,000.00.
Interagency
Guidance
The
recent Interagency Guidelines issued for Money
Service Business Accounts was helpful and should
be used as an example of the type of guidance
the agencies should issue concerning other BSA
requirements for the financial institutions.
The guidance as far as risk assessments that
was issued in the Guidance for Money Service
Business was also very helpful and should also
be used as an example of guidance that should
be issued in the areas of risk assessment for
areas such as CIP and the risk rating of accounts.
Further guidance is requested as to whether all
accounts should be rated or only those accounts
that you have determined to be of higher risk.
SAR
Guidelines
The
SAR Reviews issued as guidance are very helpful.
I do believe further guidance concerning SAR
filing should be issued to ensure consistency
and understanding. There are far too many interpretations
out there not only among financial institutions,
but regulators as well. We would like to see
SAR guidance concerning the following:
· Once
suspicious activity is found, how far back must
you research the account for similar activity?
We would recommend 1 to 3 months.
· Whether
to report only the suspicious cash amount(s)
or all cash transactions, such as in the case
of structuring. For example, if you have someone
who is withdrawing an amount just under the current
CTR threshold, do you then need to report all
the withdrawals? We recommend reporting only
those amounts that are suspicious. However, this
is still an interpretation as to what amounts
are suspicious. It would be nice for the agencies
to agree on an amount that they feel is indicative
of structuring.
· What
to report to the Board of Directors of the Financial
Institution and the Audit Committee. There seems
to be differing opinions; one is that the Board
needs to be fully aware of all the customer information,
including related accounts, in addition to the
detailed SAR activity; the other opinion is that
the Board only needs to have reasons SARs were
filed and the amount of SARs for each reason.
We recommend the reason and number of SARs.
MSB
Accounts
The
threshold for the MSB category of “check cashers” should
be expanded to reduce the regulatory burden on
the independent “mom and pop” grocery stores,
especially those that have limited check cashing
services as an ancillary component to their primary
business. For example a mom and pop grocery
store cashes one payroll check once a month for
one customer that is slightly over $1,000.00
and cashes no other checks singly or in aggregate
over $1000.00. This mom and pop store would have
to comply with the full range of BSA requirements.
They should not have to comply with the requirement
to have a full blown compliance program. They
should still be required to comply with the CTR
and SAR reporting.
CTR
Exemptions
The
time period of 12 months to establish a relationship
for purposes of CTR exemption should be set
at 3 to 6 months. In many cases,
3 months is sufficient to create a relationship
and understand the account activity. In all cases
6 months is ample time to accomplish this and
would save on excessive CTR filing.
The
biennial renewal is unnecessary. The financial
institutions are required to do an annual review
to determine that the exempt customer remains
eligible for exemption. As long as the requirement
for the annual review exists, the financial institution
should only be required to notify for the initial
exemption and then to revoke the exemption should
it be warranted based on their annual review
or at any time that they determine the customer
is no longer eligible.
Burden
on Small Insured Institutions
With
the current regulatory requirements, the small
community banks are being forced to pay for high
priced BSA software in addition to hiring additional
staff to analyze the reports created. We talk
a lot about privacy however delving as far into
the customer’s transactions as we are now required
to do is an invasion of their privacy. When an
account has suspicious activity we are not allowed
to go merely on the apparent activity, we have
to dig deeper and look at all the customer’s
transactions, which includes looking at and recording
who they are writing checks to. We end up finding
out more than is our business to know. This type
of investigation should be left up to the law
enforcement agencies to do at such time that
the information we have provided warrants further
investigation. The requirements of just how far
an investigation should go and exactly what kind
of information you expect the financial institutions
to provide should be made much clearer, so that
we do not spend needless amounts of money time
and resources looking into information that is
not going to be used and is unnecessary and for
the protection of the customer’s privacy. Additionally
the need to question our customers constantly
has a negative impact on customers and has caused
some of those customers to turn to the Money
Service Businesses for financial services.
USA
PATRIOT Act
The
USA PATRIOT Act has worthwhile intentions however
it has placed the bank in the position of having
to act like a law enforcement agency. We are
asked to invade our customer’s privacy, yet we
are not allowed to inform the customer. We recommend
that at the least a disclosure should be made
to the public informing them of the investigative
requirements placed on the financial institutions.
Thank
You
Priscilla Jewell
VP/Compliance Officer
California Oaks State Bank
