Counterterrorism Blog

Developments on the regulatory and legislative front signal at least a temporary halt to efforts to ease Bank Secrecy Act compliance burdens within the U.S. and to broaden its scope to include international wire transfers.

Beginning last year after Hurricane Katrina, I tracked the progress of a regulatory relief bill which included a provision exempting financial institutions from filing Currency Transaction Reports (CTRs) for "seasoned customers," those businesses which have been customers for at least 12 months. Katrina destroyed the systems infrastructure of numerous Southeast banks, adding to the burden of meeting Bank Secrecy Act filing requirements which were toughened by the USA Patriot Act. Federal finanical regulators issued guidance easing the burdens in the affected areas, but bankers and supportive Congressmen wanted some form of permanent relief through the legislation. I wrote then that "Absent Hurricane Katrina, his bill would have had difficulty winning passage" (referring to the bill's sponsor, Rep. Jeb Hensarling). Dennis Lormel posted his comments on the bill's chances here, after posting earlier on the burdens and benefits of BSA regulations. The bill passed the U.S. House, but the CTR proposal was unacceptable to law enforcement, as attested to by the FBI and DHS/ICE before the Senate Banking Committee in April. Right before Memorial Day, the Senate passed a regulatory relief bill without the CTR proposal, and the House sponsors passed a separate "Seasoned Customer CTR Exemption Act of 2006" through committee (and criticized law enforcement for their late opposition). At this point, the CTR proposal has virtually no chance of final approval this year.

Meanwhile, attempts to enable government agencies to electronically access and analysis BSA data, as mandated by the USA Patriot Act, have run into technial and bureaucratic glitches and are in peril. "BSA Direct" would enable government agencies to access and analyze CTRs and Suspicious Activity Reports (SARs) more easily. But the project hasn't been effectively implemented, so the director of Treasury's Financial Crimes Enforcement Network (FinCEN) stopped development pending a study, and this week extended the study period. The extension was probably related to a Treasury Inspector General report on May 18 (Acrobat file) that FinCEN has made "limited progress" in implementing improved data mining and analysis techniques and cannot ensure that BSA data is protected from unauthorized access.

But it looks as if BSA/Patriot Act filing requirements might not be broadened to apply to international wire transfers. The 2004 intel reform act included a provision (section 6302) for the Treasury Secretary to study the feasibility of requiring the reporting of international wire transfers and report on the study to Congress. FinCEN requested comments on the idea on March 10 of this year. The "American Banker" (subscription only) reports that the idea was favored by now-departed senior officials at FinCEN, but new leaders there have indicated a more cautious approach to the addition of such a new burden, and incoming Treasury Secretary Henry Paulson might be opposed to the idea altogether.