This comment letter is submitted on behalf of MBNA
America Bank, N.A. ("MBNA") in response to
the notice of regulatory review ("Notice")
and request for public comment by the Federal Reserve
Board, Office of the Comptroller of the Currency, Federal
Deposit Insurance Corporation, and the Office of Thrift
Supervision, (collectively the "Agencies")
published in the Federal Register on February 3, 2005. The
Notice was published pursuant to the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA)
and requested recommendations on how to reduce the
burden of rules pertaining to Money Laundering, Safety
and Soundness, and Securities.
Cash Transaction Reporting
MBNA recommends that Treasury increase the Cash Transaction
Reporting (31 CFR 103.22) threshold from the current
$10,000 to $25,000 to reflect the impact of inflation
and economic changes over the last 35 years. The
Cash Transaction Reporting threshold was established
in 1970 under the Bank Secrecy Act in response to increasing
reports of illegally obtained cash entering the nation's
financial system. It takes over $50,000 to equal
the same buying power today as the $10,000 did in 1970
when adjusted for inflation. Many customers and
legitimate businesses routinely transact in amounts
over $10,000 in cash today compared to 1970 as a result
of inflation. MBNA suggests a $25,000 threshold,
which is equal to just over $5,000 in 1970 dollars
when adjusted for inflation. Additionally, MBNA
recommends the Treasury establish a specific timeframe
for reviewing the reporting thresholds for Cash Transaction
Reports (CTR), Suspicious Activity Reporting (12 CFR
12.11 and 31 CFR 103.18) and Monetary Instrument Sales
Records (31 CFR 103.29) established under the Bank
Secrecy Act and make adjustments for inflation on a
regular basis to ensure that reporting requirements
are more indicative of the types of transaction associated
with money laundering and criminal activity.
Customer Identification Program
MBNA recommends that Treasury review the requirement
to obtain and perform verification of a business entity's
Employer Identification Number (EIN) as part of the
Customer Identification Program (31 CFR 103.121(b)(2)(i)
and (ii)) under the USA PATRIOT Act requirements. The
IRS relies upon the EIN in connection with the payment
of taxes by business entities and the withholding of
payroll taxes by businesses with employees. The purpose
of the EIN is not for identification of the business
entity. The EIN is relatively easy to obtain
from the IRS and third parties on behalf of the requesting
party can file the application. In contrast,
the EIN is very difficult to verify and very few resources
such as trusted third party databases and credit reporting
agencies are available to perform the verification. Frequently,
the resources that are available to verify information
on a business entity cannot provide EIN verification
for small to mid-size businesses. Other sources
such as State business registries, licensing websites
or copies of business licenses do not provide the EIN
as well. MBNA recommends that Treasury consider
replacing the requirement to obtain and verify the
business EIN with language similar to that for foreign
nationals under the Customer Identification Program. Treasury
should enable financial institutions to obtain and
verify a government issued identification number, such
as a State issued business license number or other
government (federal, state, local) issued business
identification number in lieu of the EIN.
MBNA suggests that Treasury review the requirement
to obtain a physical street address for all applicants
under the Customer Identification Program (31 CFR 103.121(b)(2)(i))
implemented under the USA PATRIOT Act. Many of
our customers, to minimize their exposure to identity
theft and as recommended by government and private
consumer advocates, have opened a post office boxes
to ensure secure delivery of their mail. When
opening a post office box it is necessary to register
your physical address with the postal service. Therefore
any need to determine the physical location of the
post office box owner can be satisfied through the
postal service. Financial institutions are interested
in ensuring that customers receive their access devices,
contracts, terms and agreements and monthly statements
at the address where they receive mail. It serves
no purpose to require financial institutions to verify
a customer's physical address if the customer does
not receive mail at that address. Any need for
law enforcement or the government to locate a customer
with a post office box should be directed to the postal
service, which is a government agency.
MBNA also recommends that Treasury eliminate the split
Record Retention requirement imposed by the Customer
Identification Program (31 CFR 103.121(b)(3)) under
the USA PATRIOT Act requirements. The need to
maintain the name, physical address, date of birth
and tax identification number information on the account
for 5 years after the date the account is closed creates
an undue burden on financial institutions. MBNA
suggests the Treasury consolidate the record retention
requirements in the Customer Identification Program
and require that financial institutions maintain this
information for 5 years from the date the account is
opened (which is the same requirement for the verification
documentation). Financial institutions maintain
the name, date of birth and tax identification number
on the account as long as the account is opened and
for period of time after the account is closed under
normal business practices. The physical street
address at the time the account is opened does not
provide financial institutions with information of
practical value, as a customer may change his/her address
several times during the life of an account. The
current record retention requirements force many financial
institutions to maintain the account opening information
and verification documentation indefinitely to ensure
compliance.
MBNA additionally requests that Treasury review the
examination procedure covering Reliance on Another
Financial Institution and provide clarification as
to what a financial institution must do to satisfy
the requirements. It should be clear that upon
satisfying the elements of this provision, that a financial
institution has completed the requirements under 31
CFR 103.121(b)(6) including verifying that the other
financial institution is subject to 31 USC 5318(h);
is regulated by a federal functional regulator; reliance
is reasonable; entering into a contract; and obtaining
annual certification. Upon satisfying these requirements
it should not be necessary for one financial institution
to obtain and maintain copies of the applications and
documents (passport, utility bills, banking statements,
etc.) relied upon by the other financial institution
when opening an account for a mutual customer. A
reference to the reliance provision in the account
opening documents should be suitable for this section
of the exam. Requiring the relied-upon financial
institution to provide the documents is both unnecessary
and burdensome.
Competitive Disadvantage
Currently, finance companies that are not subsidiaries
of a national bank have no specific USA PATRIOT Act
compliance requirements. It is recognized that
future rule making in this area will occur but until
such time, financial institutions with a federal functional
regulator are at a competitive disadvantage. The
insurance premium finance industry is an example of
this situation. The insurance premium finance
industry relies on agents to collect and submit borrower
information for financing. This information is
derived from the property and casualty insurance application
and underwriting process. Insurance agents generally
do not collect TIN or EIN information because it is
not required to place insurance with carriers. The
U.S. Treasury Department exempted property and casualty
insurers from the Customer Identification Program requirements
due to the low risk of money laundering and terrorist
financing associated with this product. Insurance
agents place their premium financing arrangements exclusively
with finance companies and not national banks because
of the additional burden placed on national banks to
obtain and verify TIN or EIN. Requiring
only national banks and national bank's subsidiaries
to collect the borrower's TIN / EIN places them at
a competitive disadvantage to finance companies.
Politically Exposed Persons
MBNA suggests that Treasury provide an enhanced definition
of politically exposed persons (PEPs) or senior foreign
political figures. Section 312 of the USA PATRIOT
Act requires financial institutions to conduct enhanced
scrutiny of private banking accounts of current and
former senior foreign political figures and to ensure
that the methods are reasonably designed to detect
and report transactions that may involve the proceeds
of foreign corrupt acts. Financial institutions
are being required to identify not only current and
former senior foreign political figures but their family,
businesses, close associates and others. It is
not possible for financial institutions to verify all
possible relationships of current or former foreign
officials. There is no source available to identify
all possible relationships and not all of these relationships
are public information. MBNA also suggests the
Treasury provide a detailed definition of "senior
foreign political figures" and what constitutes
a relationship for purposes of these requirements. Additionally,
the Treasury should provide examples of demonstrated
best practices to provide the financial industry with
clear guidance and standards for reference.
MBNA appreciates the opportunity to comment on these
matters. If you have any questions concerning
these comments, or if we may otherwise be of assistance,
please do not hesitate to contact the undersigned.
MBNA America Bank, N.A.
Louis J. Freeh
General Counsel
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