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(5) If the Commission determines that Dated: August 21, 2020. 22183. Include 1506–AB44 in the body a dispute exists regarding the authority Vanessa A. Countryman, of the text. Refer to Docket Number to make submissions on behalf of a filer, Secretary. FINCEN–2020–0011. the Commission may prevent a filer’s [FR Doc. 2020–18825 Filed 9–16–20; 8:45 am] Please submit comments by one ability to make submissions until the BILLING CODE P method only. All comments submitted dispute is resolved by the disputing in response to this ANPRM will become parties or by a of competent a matter of public record. Therefore, you ; DEPARTMENT OF THE TREASURY should submit only information that you wish to make publicly available. (6) If the Commission has reason to FOR FURTHER INFORMATION CONTACT: believe that an attempted submission Financial Enforcement Network The may be misleading or manipulative, the FinCEN Regulatory Support Section at 1–800–767–2825 or electronically at Commission may prevent acceptance or 31 CFR Chapter X [email protected]. dissemination of the submission while [Docket No. FinCEN–2020–0011] evaluating the circumstances SUPPLEMENTARY INFORMATION: RIN 1506–AB44 surrounding the submission. The I. Scope of ANPRM Commission may allow acceptance or Anti-Money Laundering Program The scope of program rules under dissemination if its concerns are Effectiveness consideration for amendment in this satisfactorily addressed; AGENCY: Financial Crimes Enforcement ANPRM includes those applicable to all (7) If the Commission has reason to Network (FinCEN), Treasury. of the industries that have anti-money believe that a filer has made an laundering (AML) program ACTION: Advance of proposed unauthorized submission or attempted requirements under FinCEN’s rulemaking (ANPRM). to make an unauthorized submission, , including banks (which the Commission may prevent any SUMMARY: This document seeks public includes credit unions and other further submissions by the filer or comment on potential regulatory depository institutions, as defined in 31 otherwise remove the filer’s access to amendments to establish that all CFR 1010.100(d)); casinos and card EDGAR; and covered financial institutions subject to clubs; money services businesses; (8) If the Commission otherwise has an anti-money laundering program brokers or dealers in securities; mutual reason to believe that, to promote the requirement must maintain an ‘‘effective funds; insurance companies; futures reliability and integrity of submissions and reasonably designed’’ anti-money commission merchants and introducing brokers in commodities; dealers in made through EDGAR, it must address laundering program. Any such precious metals, precious stones, or a submission issue that cannot be amendments would be expected to jewels; operators of credit card systems; addressed solely by filer corrective further clarify that such a program loan or finance companies; and housing disclosure or by the actions set forth in assesses and manages risk as informed sponsored enterprises.1 paragraphs (a)(1) through (7) above, the by a financial institution’s risk FinCEN particularly requests comment Commission may take such further steps assessment, including consideration of regarding any industry-specific as are appropriate to address the matter anti-money laundering priorities to be considerations that FinCEN should and communicate as necessary with the issued by FinCEN consistent with the evaluate with regard to the scope of filer regarding the submission. proposed amendments; provides for compliance with Bank Secrecy Act possible rulemaking described in this (b) The Commission may act under requirements; and provides for the ANPRM. paragraph (a) without providing reporting of information with a high II. Background advance notice to the filer or any other degree of usefulness to government person. As soon as reasonably authorities. The regulatory amendments A. History of the Bank Secrecy Act practicable after taking action under under consideration are intended to (BSA) paragraph (a), the Commission will modernize the regulatory regime to The Currency and Foreign provide written notice and a brief address the evolving threats of illicit Transactions Reporting Act of 1970, factual statement of the basis for the finance, and provide financial generally referred to as the BSA,2 action to the filer and any other person institutions with greater flexibility in authorizes the Secretary of the U.S. the Commission determines is relevant the allocation of resources, resulting in Department of the Treasury (Secretary) to the matter (‘‘relevant persons’’). The the enhanced effectiveness and to require financial institutions to keep Commission will send the notice and efficiency of anti-money laundering records and file reports that ‘‘have a factual statement by electronic mail to programs. high degree of usefulness in criminal, the email address on record in the filer’s tax, or regulatory investigations or EDGAR account, and to the email DATES: Written comments are welcome, and must be received on or before proceedings, or in the conduct of address of any relevant persons. The intelligence or counterintelligence Commission may also send, if November 16, 2020. ADDRESSES: necessary, the notice and factual Comments may be 1 See 31 CFR 1020.210 (banks); 31 CFR 1021.210 statement by registered, certified, or submitted, identified by Regulatory (casinos and card clubs); 31 CFR 1022.210 (money express mail to the physical address on Identification Number (RIN) 1506– services businesses); 31 CFR 1023.210 (brokers or record in the filer’s EDGAR account and AB44, by any of the following methods: dealers in securities); 31 CFR 1024.210 (mutual • Federal E-rulemaking Portal: http:// funds); 31 CFR 1025.210 (insurance companies); 31 the physical address of any relevant CFR 1026.210 (futures commission merchants and persons. www.regulations.gov. Follow the introducing brokers in commodities); 31 CFR instructions for submitting comments. 1027.210 (dealers in precious metals, precious (c) Nothing in this rule prevents a filer Include RIN 1506–AB44 in the stones, or jewels); 31 CFR 1028.210 (operators of from addressing an error or mistake in submission. Refer to Docket Number credit card systems); 31 CFR 1029.210 (loan or the filer’s submission by making a filer finance companies); and 31 CFR 1030.210 (housing FINCEN–2020–0011. corrective disclosure. • government sponsored enterprises). Mail: Financial Crimes Enforcement 2 12 U.S.C. 1829b, 12 U.S.C. 1951–1959, and 31 By the Commission. Network, P.O. Box 39, Vienna, VA U.S.C. 5311–5314; 5316–5332.

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activities, including analysis to protect their supervision to establish and incorporation of minimum standards for against international terrorism.’’ 3 The maintain procedures ‘‘reasonably customer and the Secretary has delegated to the Director designed’’ to assure and monitor collection of beneficial ownership of FinCEN the authority to implement, compliance with the requirements of the information for depository institutions, administer, and enforce compliance BSA.13 broker-dealers, mutual funds, and with the BSA and its related The Uniting and Strengthening futures commission merchants and authorities.4 As a result, FinCEN may America by Providing Appropriate introducing brokers in commodities.17 require financial institutions to Tools Required to Intercept and B. Recent Efforts To Modernize the maintain procedures to ensure Obstruct Terrorism Act of 2001 (USA National AML Regime compliance with the BSA and its related PATRIOT Act) further amended the regulations and to guard against money BSA, reinforcing the framework Over the past several years, there have laundering, including AML program established earlier by Annunzio-Wylie, been significant innovations in the requirements.5 to require, among other things, customer financial sector and the development of The Money Laundering Control Act of identification requirements and new business models, products, and 1986 (MLCA) 6 made money laundering Treasury’s further expansion of AML services, fueled in part by rapid a Federal . It also amended the program rules to cover certain other technological change. As a result, BSA, underscoring the importance of industries.14 In 2003, FinCEN and the financial institutions have confronted reporting information with a high Federal Banking Agencies issued a joint new opportunities and challenges in degree of usefulness to government final rule on customer identification meeting BSA compliance obligations authorities. For example, Section 1359 program (CIP) requirements.15 The USA and providing information with a high of the MLCA amended section 8 of the PATRIOT Act also ushered in an degree of usefulness to government Federal Deposit Insurance Act 7 and expanded role for AML and other authorities in an efficient manner. section 206 of the Federal Credit Union financial and economic measures in FinCEN seeks to ensure that the BSA’s Act,8 among other similar , to countering threats to U.S. national AML regime adapts to address the require the Federal Banking Agencies 9 security and protecting the U.S. evolving threats of illicit finance, such to issue regulations for covered financial financial system. The range of as money laundering, terrorist institutions to ‘‘establish and maintain authorities and measures introduced in financing, and related crimes—some of procedures reasonably designed to Title III were intended to, among other which have changed considerably in assure and monitor the compliance’’ of purposes, ‘‘increase the strength of scope, nature, and impact since the such institutions with the reporting and measures to prevent, initial passage of the BSA—while some recordkeeping requirements of the detect, and prosecute international simultaneously providing financial BSA. money laundering and the financing of institutions with additional flexibility in The Annunzio-Wylie Anti-Money terrorism.’’ 16 addressing these threats. FinCEN, in Laundering Act of 1992 (Annunzio- FinCEN’s most recent significant collaboration with supervisory partners, Wylie) amended the BSA 10 by change to BSA regulations was the enforcement, and, where strengthening the sanctions for BSA implementation of customer due appropriate, the financial industry, has violations and Treasury’s role.11 diligence and beneficial ownership undertaken recent initiatives that Annunzio-Wylie authorized Treasury to requirements in 2016. These rules collectively re-examine the BSA issue regulations requiring all financial resulted in: (i) The expansion of regulatory framework and the broader institutions, as defined in BSA FinCEN’s AML program rules for national AML regime. The overall goal regulations, to maintain ‘‘minimum financial institutions regulated by a of these initiatives is to upgrade and standards’’ of an AML program.12 The Federal functional regulator to expressly modernize the national AML regime, minimum standards set forth in the incorporate the minimum statutory where appropriate, and to facilitate the were substantially similar to the elements of an AML program prescribed ability of the financial industry and standards set forth by the Federal by 31 U.S.C. 5318(h)(1); and (ii) the corresponding supervisory authorities to Banking Agencies in their BSA leverage new technologies and risk- 13 compliance program regulations, which The minimum standards for an AML program management techniques, share set forth in Annunzio-Wylie, and codified at 31 required depository institutions under U.S.C. 5318(h), include: ‘‘(A) the development of information, discard inefficient and internal policies, procedures, and controls, (B) the unnecessary practices, and focus 3 31 U.S.C. 5311. designation of a compliance officer, (C) an ongoing resources on fulfilling the BSA’s stated 4 Treasury Order 180–01 (Jan. 14, 2020). employee training program, and (D) an independent purpose of providing information with a audit function to test programs.’’ 5 31 U.S.C. 5318(a)(2), (h)(2). high degree of usefulness to government 14 107–56, 115 Stat. 272 (Oct. 26, 6 Public Law 99–570, 100 Stat. 3207 (Oct. 27, 2001). FinCEN issued interim final AML program authorities. This ANPRM is intended to 1986). rules for financial institutions regulated by a further these efforts. 7 12 U.S.C. 1818. Federal functional regulator, money services 8 12 U.S.C. 1786. businesses, mutual funds, and operators of credit 1. The Bank Secrecy Act Advisory 9 The Federal Banking Agencies include the card systems. 67 FR 21113 (Apr. 29, 2002). Group’s AML Effectiveness Working Board of Governors of the Federal Reserve System, FinCEN’s rule originally cross-referenced the Group and Recommendations the Federal Deposit Insurance Corporation (FDIC), regulations of the Federal functional regulator and the National Credit Union Administration, and the provided that satisfaction of the Federal functional Annunzio-Wylie required the Office of the Comptroller of the Currency. regulator’s AML program rule requirements would Secretary to establish a Bank Secrecy 10 Title XV of Public Law 102–550, 106 Stat. 3672 be deemed to satisfy the requirements of Treasury’s Act Advisory Group (BSAAG).18 The (Oct. 28, 1992). rule. 11 See Title XV, sec. 1503 (authorizing the 15 68 FR 25090 (May 9, 2003). FinCEN issued statutory purposes of the BSAAG are to termination of FDIC insurance of insured joint CIP rules separately with the U.S. Securities keep private sector representatives depository institutions convicted of a criminal and Exchange Commission, 68 FR 25113 (May 9, informed on a regular basis of the ways violation of the BSA), sec. 1504 (authorizing the 2003) (brokers or dealers in securities) and 68 FR in which BSA reports filed by financial removal officers or directors of such institutions 25131 (May 9, 2003) (mutual funds), and the U.S. found to have violated a BSA requirement), and sec. Commodity Futures Trading Commission, 68 FR institutions, including suspicious 1517 (authorizing Treasury to require the reporting 25149 (May 9, 2003) (futures commission of suspicious transactions) of Public Law 102–550. merchants and introducing brokers). 17 81 FR 29398 (May 11, 2016). 12 Title XV, sec. 1517 of Public Law 102–550. 16 Title III, sec. 302(b)(1) of Public Law 107–56. 18 Title XV, sec. 1564 of Public Law 102–550.

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activity reports (SARs), are being used, priorities, in order to promote effective d. Enhancing Information Sharing and to receive advice regarding the outputs over auditable processes and to Information sharing among financial modification of those reporting ensure clearer standards for measuring institutions, regulators, and law requirements to enhance the ability of effectiveness in evaluating AML enforcement through partnerships and agencies to use the programs. The AMLE WG recommended other existing mechanisms is a key information provided for law that the relevant government agencies component of an effective BSA/AML enforcement purposes. The Director of consider: regime. The AMLE WG recommended FinCEN chairs the BSAAG, and its • Publishing a regulatory definition of steps for enhancing information sharing membership includes representatives AML program effectiveness; mechanisms to communicate national from financial institutions, Federal and • Developing and communicating AML priorities, related typologies, and state regulatory and law enforcement national AML priorities as set by emerging threats, such as: agencies, and trade groups whose government authorities; and • Forming a BSAAG-established members are subject to the requirements • working group with members from law of the BSA and its regulations, or Issuing clarifying guidance for enforcement agencies, regulators, and Section 6050I of the Internal Revenue financial institutions on the elements of financial institutions to identify, Code of 1986. The purposes and an effective AML program. prioritize, and recommend national membership of the BSAAG make it an b. Reallocation of Compliance Resources important forum for understanding AML priorities and advise on stakeholder views in efforts to reform The AMLE WG recommended that opportunities to communicate and modernize the national AML stakeholders facilitate BSA compliance typologies, red flags, and other regime. resource reallocation by reducing or information related to national AML eliminating activities that are not priorities; The BSAAG created an Anti-Money- • Laundering Effectiveness Working required by law or , make Leveraging existing information- Group (AMLE WG) in June 2019 to limited contributions to meeting risk- sharing initiatives between the public develop recommendations for management objectives, and supply less and private sectors, including enhanced strengthening the national AML regime useful information to government use of the BSA’s information sharing by increasing its effectiveness and authorities. Resources freed from these provisions, sections 314(a) and (b) of the efficiency. Member stakeholders worked activities could be reallocated to address USA PATRIOT Act, and sharing with collaboratively throughout 2019 and areas of risk and national AML foreign affiliates and global institutions, into 2020 to identify regulatory priorities. The AMLE WG recommended as appropriate; and • initiatives that would allow financial that the relevant government agencies Assessing options for FinCEN and institutions to reallocate resources to consider: law enforcement agencies to provide better focus on national AML priorities • Clarifying current requirements and more feedback to financial institutions set by government authorities, increase supervisory expectations with respect to related to the use and utility of BSA information sharing and public-private risk assessments, negative media reports. partnerships, and leverage new searches, customer risk categories, and e. Advance Regulatory Innovations technologies and risk-management initial and ongoing customer due techniques—and thus increase the diligence; and The AMLE WG recommended the continued enhancement of the national efficiency and effectiveness of the • Revising existing guidance or nation’s AML regime. AML regime to promote the use of regulations in areas such as Politically responsible innovations to address new The resulting recommendations, Exposed Persons and the application of summarized below in broad categories, and emerging money laundering and existing model-risk-management terrorist financing risks and the evolving are a collective set of complementary guidance to AML systems, in order to efforts.19 The October 2019 BSAAG industry landscape, as well as to improve clarity, effectiveness, and encourage financial institutions to plenary received and endorsed the compliance. recommendations from the AMLE WG. pursue more effective and efficient BSA This ANPRM is a result of FinCEN’s c. Monitoring and Reporting compliance practices. Measures evaluation of those recommendations recommended include steps that The AMLE WG recommended that financial institutions could take to and a step toward considering their AML monitoring and reporting practices implementation. FinCEN anticipates better use responsible innovation in be modernized and streamlined to meeting CIP requirements—such as taking additional steps, such as issuing maximize efficiency, quality, and speed guidance where appropriate, as FinCEN third-party software and service of providing data to government providers—and studying the impact of continues to evaluate the full set of authorities with due consideration for BSAAG recommendations. financial technology and other emerging privacy and data security. The AMLE non-bank financial service providers on a. Developing and Focusing on AML WG recommended that the relevant the AML regime. Priorities government agencies consider: III. Elements of an ‘‘Effective and The AMLE WG recommended that • Clarifying expectations and Reasonably Designed’’ AML Program stakeholders refocus the national AML updating practices for keep-open letters regime to place greater emphasis on and suspicious activity monitoring, FinCEN, after consulting with the providing information with a high investigation, and reporting, including staffs of various supervisory agencies, degree of usefulness to government SARs based on grand subpoenas or and having considered the BSAAG authorities based on national AML negative media; and recommendations and other BSA • Supporting potential automation modernization efforts, is publishing this 19 The subsections which follow summarize opportunities for high-frequency/low- ANPRM seeking comment on whether it recommendations issued by the BSAAG and do not complexity SARs and currency is appropriate to clearly define a necessarily reflect current regulatory initiatives, nor requirement for an ‘‘effective and do they imply endorsement of, nor commitment by, transaction reports (CTRs), and the relevant government agencies to implement exploring the possibility of streamlined reasonably designed’’ AML program in these recommendations. SARs on continuing activity. BSA regulations. Increasing the

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‘‘effectiveness’’ of the national AML called FinCEN’s ‘‘Strategic Anti-Money [AML] compliance program enables a regime is a core objective of recent AML Laundering Priorities.’’ bank to allocate compliance resources modernization efforts. This term often commensurate with its risk.’’ 23 It A. Identifying and Assessing Risks refers to the implementation and further clarifies that a well-developed maintenance of a compliant AML The current AML program rules risk-assessment process assists program, but has no specific, consistent generally require each financial examiners in understanding a bank’s definition in existing regulation. institution to implement a system of risk profile and evaluating the adequacy FinCEN believes that incorporating an internal controls to ‘‘assure ongoing of its AML program. The statement also ‘‘effective and reasonably designed’’ compliance’’ 22 with the BSA. This explains that, as part of their risk- AML program requirement with a clear system of internal controls includes the focused approach, examiners review a definition of ‘‘effectiveness’’ 20 would policies, procedures, and processes that bank’s risk-management practices to allow financial institutions to more not only mitigate the risks associated evaluate whether a bank has developed efficiently allocate resources and would with the products and services the and implemented a reasonable and impose minimal additional burden on financial institution offers and the effective process to identify, measure, existing AML programs that already customers it serves, but also ensures the monitor, and control risks. Recognizing comply under the existing supervisory financial institution meets regulatory that many financial institutions are approach. This requirement would also requirements under the BSA. Under conducting risk assessments, FinCEN seek to implement a common current practice for most financial seeks comment on the effect to financial understanding between supervisory institutions, the design of an AML institutions’ efforts to comply with AML agencies and their supervised financial program is based on the risks identified program requirements of adding a institutions on the necessary AML and assessed by the financial institution regulatory requirement to conduct a risk program elements. through a risk-assessment process. assessment, and the effect, if any, on FinCEN and other supervisory agencies Specifically, FinCEN is considering burden to financial institutions’ have traditionally viewed a risk regulatory amendments that would processes for complying with AML assessment as a critical element of a explicitly define an ‘‘effective and program requirements. reasonably designed program, because a reasonably designed’’ AML program as program cannot be considered B. Consideration of the Strategic AML one that: reasonably designed to achieve Priorities in the Risk-Assessment • Identifies, assesses, and reasonably compliance with the recordkeeping and Process mitigates the risks resulting from illicit reporting requirements of the BSA This ANPRM also seeks comment on financial activity—including terrorist unless the institution understands its whether regulatory amendments should financing, money laundering, and other risk profile. be made so that an ‘‘effective and related financial crimes—consistent Even though a financial institution’s reasonably designed’’ AML program with both the institution’s risk profile risk-assessment process is key to would require financial institutions to and the risks communicated by relevant ensuring an effective AML program, it is consider and integrate national AML government authorities as national AML not an explicit regulatory requirement priorities into their risk-assessment priorities; for all types of institutions. Given the processes, as appropriate. FinCEN is • Assures and monitors compliance importance of the risk-assessment considering whether the Director of with the recordkeeping and reporting process to establishing an ‘‘effective and FinCEN should issue national AML requirements of the BSA; and reasonably designed’’ AML program, priorities, to be called its ‘‘Strategic • Provides information with a high FinCEN believes that it warrants explicit Anti-Money Laundering Priorities,’’ degree of usefulness to government incorporation. FinCEN is considering every two years (or more frequently as authorities consistent with both the whether its AML program regulations appropriate to inform the public and institution’s risk assessment and the should be amended to require the private sector of new priorities). This risks communicated by relevant establishment of a risk-assessment ANPRM also seeks comment on whether government authorities as national AML process that includes the identification these priorities should be considered, priorities. and analysis of money laundering, among other information, in a financial As explained in more detail in the terrorist financing, and other illicit institution’s risk assessment. sections that follow, this ANPRM also financial activity risks faced by the FinCEN does not expect that its seeks comment on whether the AML financial institution based on an Strategic AML Priorities would capture program regulations 21 should be evaluation of various factors, including the universe of all AML priorities, nor amended to establish an explicit its business activities, products, would they be intended to serve as the requirement for a risk-assessment services, customers, and geographic only priorities informing a risk- process, as well as whether the Director locations in which the financial assessment process. Rather, they would of FinCEN should issue every two years institution does business or services seek to articulate FinCEN’s existing a list of national AML priorities, to be customers. AML priorities, informed by a wide FinCEN and the Federal Banking range of government and private sector Agencies issued a Joint Statement on stakeholders, leveraging the broader 20 There is some variance in the specific AML program requirements for different types of Risk-Focused Bank Secrecy Act/Anti- priorities established by the National financial institutions, but current AML program Money Laundering Supervision in 2019 regulations for most financial institutions subject to that underscored the importance of a 23 See Board of Governors of the Federal Reserve such requirements contain a requirement that either risk-based approach. The statement System, Federal Deposit Insurance Corporation, the AML program as a whole, or the Financial Crimes Enforcement Network, National implementation of internal controls, is ‘‘reasonably clarifies that these agencies’ long- Credit Union Administration, and Office of the designed.’’ In addition, current AML program standing supervisory approach to Comptroller of the Currency, Joint Statement on requirements vary as to whether a financial examining for compliance with the BSA Risk-Focused Bank Secrecy Act/Anti-Money institution must implement an AML program that considers a financial institution’s risk Laundering Supervision (July 22, 2019), available at is ‘‘reasonably designed’’ to achieve compliance https://www.fincen.gov/sites/default/files/2019-10/ with the BSA, ‘‘reasonably designed’’ to prevent profile and notes that ‘‘[a] risk-based Joint%20Statement%20on%20Risk-Focused money laundering or terrorist financing, or both. %20Bank%20Secrecy%20Act-Anti-Money 21 See supra note 1. 22 See, e.g., 31 CFR 1020.210(b)(1). %20Laundering%20Supervision%20FINAL1.pdf.

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Illicit Finance Strategy as determined by local law enforcement and other institutions provide information with a the Secretary of the Treasury—in government officials to better high degree of usefulness to government consultation with the Departments of understand and address risks within authorities consistent with the financial , State, and Homeland Security, that jurisdiction. This might improve institution’s risk assessment and the Office of the Director of National information sharing, to include requests Strategic AML Priorities, among other Intelligence, the Office of Management from FinCEN or other government relevant information. FinCEN and Budget, and the staffs of the Federal authorities, as well as participation in recognizes that many financial functional regulators—to better aid U.S. public-private information sharing institutions have developed specialized institutions in effectively complying forums. units that focus on complex with BSA obligations. Other relevant FinCEN recognizes that financial investigations. In addition, financial information that the Director of FinCEN institutions may utilize different means institutions of all sizes may collaborate may consider in determining Strategic to demonstrate effectiveness and with Federal, state, and local law AML Priorities includes, for example, anticipates that some financial enforcement, receive outreach from the FinCEN Advisories to financial institutions may determine that their government’s SAR Review Teams, and institutions, which identify emerging AML programs already sufficiently often be willing to engage on relevant risks and provide red flags and assess and mitigate the risks identified issues in their community. FinCEN typologies that assist financial as Strategic AML Priorities. FinCEN also expects that any future regulatory institutions in identifying and reporting anticipates that many financial amendments to incorporate a suspicious activity; other relevant institutions may determine that their requirement for an ‘‘effective and Treasury Department communications, business models and risk profiles reflect reasonably designed’’ AML program including the National Risk limited exposure to risks posed by the would seek to provide a framework to Assessments; and information from law threats identified as Strategic AML recognize that these and other enforcement and other government Priorities, but may reflect greater collaborative efforts may provide agencies, and others. exposure to significant and legitimate information with a high degree of risks that may not be identified as usefulness to government authorities. C. Risk Management and Mitigation Strategic AML Priorities. FinCEN Informed by Strategic AML Priorities This recognition, in turn, may provide recognizes and appreciates financial further incentive for financial Building upon the prior two institutions must continue to identify, institutions to undertake and apply concepts—an explicit risk-assessment reasonably manage, and mitigate these resources towards these important requirement and the publication of risks consistent with financial initiatives to combat money laundering, Strategic AML Priorities—this ANPRM institutions’ risk-management processes. terrorist financing, and other related also seeks comment as to whether an illicit financial crime. Such an approach ‘‘effective and reasonably designed’’ D. Assuring and Monitoring Compliance has the potential to increase the overall AML program should require that With the Recordkeeping and Reporting effectiveness of the national AML financial institutions reasonably manage Requirements of the BSA regime by better enabling law and mitigate the risks identified in the FinCEN does not expect that any enforcement and other users of BSA risk-assessment process by taking into regulatory changes made in response to reporting to address priority threats to consideration the Strategic AML this ANPRM would alter the the U.S. financial system. Priorities, as appropriate and among recordkeeping and reporting other relevant information. FinCEN requirements contained in existing BSA IV. Issues for Comment believes that the vast majority of regulations. However, this ANPRM financial institutions are effectively and seeks comment as to whether financial Based on the foregoing, FinCEN is reasonably managing and mitigating the institutions’ AML program obligations seeking comment from the public, risks that they have identified. Under should be based on the risks identified including industry, law enforcement, any proposal to incorporate a by the financial institution, to include regulators, other consumers of BSA requirement for an ‘‘effective and consideration of Strategic AML data, and any other interested parties, reasonably designed’’ AML program, Priorities, where appropriate and among concerning a potential rulemaking to FinCEN understands that institutions other information. For example, a incorporate a requirement for an may reallocate resources from other financial institution’s process for the ‘‘effective and reasonably designed’’ lower-priority risks or practices to implementation of certain requirements, AML program into AML program manage and mitigate higher-priority such as monitoring for suspicious regulations and to provide clarity on its risks, including any identified as activity, is based on risk. Making clear application. Specifically, FinCEN Strategic AML Priorities. that compliance with this aspect of the requests public comment on the Financial institutions may consider AML program requirement is risk-based following: how FinCEN’s Strategic AML Priorities is consistent with the objectives of Question 1: Does this ANPRM make impact and inform the risk assessment increasing effectiveness and efficiency. clear the concept that FinCEN is based on the institution’s size, It also reflects long-standing supervisory considering for an ‘‘effective and complexity, business activities, approaches and expectations. reasonably designed’’ AML program products, services, customers, and through regulatory amendments to the geographic locations in which the E. Providing Information With a High AML program rules? If not, how should financial institution does business or Degree of Usefulness the concept be modified to provide services customers. This might enhance FinCEN believes that the proposed greater clarity? the financial institution’s engagement regulatory approach in this ANPRM Question 2: Are this ANPRM’s three with law enforcement and FinCEN to furthers the statutory BSA purpose of proposed core elements and objectives provide information with a high degree providing information with a high of an ‘‘effective and reasonably of usefulness to government authorities. degree of usefulness to government designed’’ AML program appropriate? In addition, a financial institution may authorities. These regulatory Should FinCEN make any changes to be better able to engage with the amendments would explicitly define as the three proposed elements of an appropriate level of Federal, state, or a goal of the AML program that financial ‘‘effective and reasonably designed’’

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AML program in a future notice of would impact their industry. consider any regulatory changes to proposed rulemaking? Furthermore, FinCEN invites comment appropriately reflect such differences in As described above, FinCEN is as to whether any industry-specific risk profile? For example, should considering regulatory amendments that modifications would be appropriate to regulatory amendments to incorporate would define an ‘‘effective and consider in future rulemaking. the requirement for an ‘‘effective and reasonably designed’’ program as one Question 5: Would it be appropriate reasonably designed’’ AML program be that: to impose an explicit requirement for a proposed for all financial institutions • Identifies, assesses, and reasonably risk-assessment process that identifies, within each industry type, or should this mitigates the risks resulting from illicit assesses, and reasonably mitigates risks requirement differ based on the size or financial activity, including terrorist in order to achieve an ‘‘effective and operational complexity of these financing, money laundering, and other reasonably designed’’ AML program? If financial institutions, or some other related financial crimes, consistent with not, why? Are there other alternatives factors? Should smaller, less complex both the institution’s risk profile and the that FinCEN should consider? Are there financial institutions, or institutions risks communicated by relevant factors unique to how certain that already maintain effective BSA government authorities as national AML institutions or industries develop and compliance programs with risk priorities; apply a risk assessment that FinCEN assessments that sufficiently manage • Assures and monitors compliance should consider? Should there be carve- and mitigate the risks identified as with the recordkeeping and reporting outs or waivers to this requirement, and Strategic AML Priorities, have the ability requirements of the BSA; and if so, what factors should FinCEN to ‘‘opt in’’ to making changes to AML • Provides information with a high evaluate to determine the application programs as described in this ANPRM? degree of usefulness to government thereof? FinCEN appreciates that financial authorities consistent with both the Question 6: Should FinCEN issue institutions vary considerably in size institution’s risk assessment and the Strategic AML Priorities, and should it and complexity, and even well- risks communicated by relevant do so every two years or at a different intentioned regulatory actions that government authorities as national AML interval? Is an explicit requirement that impact such a diverse collection of risk assessments consider the Strategic priorities. financial institutions can result in AML Priorities appropriate? If not, why? Question 3: Are the changes to the unintended consequences. Accordingly, Are there alternatives that FinCEN AML regulations under consideration in FinCEN specifically requests comment should consider? this ANPRM an appropriate mechanism on how the practical impact of the to achieve the objective of increasing the Question 7: Aside from policies and procedures related to the risk- regulatory proposals described in this effectiveness of AML programs? If not, ANPRM could vary in implementation what different or additional assessment process, what additional changes to AML program policies, for institutions of differing size and mechanisms should FinCEN consider? complexity, and whether changes in Question 4: Should regulatory procedures, or processes would financial institutions need to implement approach—such as an opt-in decision— amendments to incorporate the would be advisable. If greater flexibility requirement for an ‘‘effective and if FinCEN implemented regulatory changes to incorporate the requirement is recommended, FinCEN requests reasonably designed’’ AML program be comments as to whether any resultant proposed for all financial institutions for an ‘‘effective and reasonably designed’’ AML program, as described divergence in AML program currently subject to AML program rules? implementation might present financial Are there any industry-specific issues in this ANPRM? Overall, how long of a period should FinCEN provide for crime vulnerabilities, and if so, how that FinCEN should consider in a future such vulnerabilities could be mitigated. notice of proposed rulemaking to further implementing such changes? FinCEN seeks comment on specific If different requirements are define an ‘‘effective and reasonably recommended based on the size and/or designed’’ AML program? programmatic changes. For example, how might the allocation of personnel operational complexity of financial FinCEN notes that, as regulations for institutions, please describe what different segments of the financial change because of the possible regulatory amendments discussed in thresholds and parameters might be industry have been promulgated at appropriate, and why. different times in the past, such AML this ANPRM, and what processes would Question 9: Are there ways to program regulations have evolved and, be required to reallocate AML articulate objective criteria and/or a consequently, contain provisions that compliance resources for different rubric for examination of how financial differ among the various industries responsibilities? How long would such institutions would conduct their risk- subject to AML program requirements. programmatic changes take to conceive, assessment processes and report in For example, the AML program test, and implement? Would this vary by accordance with those assessments, requirement for money services size of institution or across industry based on the regulatory proposals under businesses (31 CFR 1022.210(a)) already segments? If so, how? In addition to due consideration in this ANPRM? contains an effectiveness component.24 diligence and monitoring processes, FinCEN appreciates that, in order for FinCEN invites comments from all what other methods to mitigate risks are the regulatory proposals as described in covered industries subject to AML financial institutions engaged in? this ANPRM to achieve the objective of program regulations as to how a Should FinCEN add via future increased effectiveness of the overall requirement for an ‘‘effective and regulation more specific risk-mitigation U.S. AML regime, the supervisory reasonably designed’’ AML program requirements to ensure that controls are commensurate with the risks process must support and reinforce this objective. Indeed, FinCEN has consulted 24 Specifically it provides that each money undertaken, and how might these risk- services business, as defined by § 1010.100(ff), shall mitigation requirements vary by with the staffs of various Federal develop, implement, and maintain an effective anti- industry? supervisory agencies in developing this money laundering program. An effective anti- Question 8: As financial institutions ANPRM, and FinCEN requests money laundering program is one that is reasonably comments on how the supervisory designed to prevent the money services business vary widely in business models and risk from being used to facilitate money laundering and profiles, even within the same category regime could best support the objectives the financing of terrorist activities. of financial institution, should FinCEN as identified in this ANPRM.

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Question 10: Are there ways to VI. Special Analysis • Mail: Written comments may be articulate objective criteria and/or a This advance notice of proposed submitted to: Office of Child Support rubric for independent testing of how rulemaking is a significant regulatory Enforcement, Attention: Director of financial institutions would conduct action under Order 12866 and Policy and Training, 330 C Street SW, their risk-assessment processes and has been reviewed by the Office of Washington, DC 20201. report in accordance with those Management and Budget. Instructions: All submissions received assessments, based on the regulatory must include the agency name and proposals under consideration in this Dated: September 14, 2020. docket number or RIN for this ANPRM? Michael Mosier, rulemaking. All comments received will FinCEN appreciates that the Deputy Director, Financial Crimes be posted without change to https:// regulatory proposals described in this Enforcement Network. www.regulations.gov, including any ANPRM may require changes in the [FR Doc. 2020–20527 Filed 9–16–20; 8:45 am] personal information provided. implementation of independent testing BILLING CODE 4810–02–P FOR FURTHER INFORMATION CONTACT: by financial institutions in order to Anne Miller, Division of Policy and achieve the objectives as described in Training, OCSE, telephone (202) 401– this ANPRM. Therefore, FinCEN also DEPARTMENT OF HEALTH AND 1467. Email inquiries to ocse.dpt@ seeks comments on how a future HUMAN SERVICES acf.hhs.gov. Deaf and hearing impaired rulemaking could best facilitate effective individuals may call the Federal Dual Administration for Children and independent testing of risk assessments Party Relay Service at 1–800–877–8339 Families and other financial institution between 8 a.m. and 7 p.m. Eastern Time. processes, as may be revised consistent SUPPLEMENTARY INFORMATION: 45 CFR Part 302 with the proposals set forth in this Submission of Comments ANPRM. RIN 0970–AC81 Question 11: A core objective of the Comments should be specific, address incorporation of a requirement for an Optional Exceptions to the Prohibition issues raised by the proposed rule, and ‘‘effective and reasonably designed’’ Against Treating Incarceration as explain reasons for any objections or AML program would be to provide Voluntary Unemployment Under Child recommended changes. Additionally, financial institutions with greater Support Guidelines we will be interested in comments that indicate agreement with the proposals. flexibility to reallocate resources AGENCY: Office of Child Support towards Strategic AML Priorities, as We will not acknowledge receipt of the Enforcement (OCSE), Administration for comments we receive. However, we will appropriate. FinCEN seeks comment on Children and Families (ACF), whether such regulatory changes would review and consider all comments that Department of Health and Human are germane and are received during the increase or decrease the regulatory Services (HHS). comment period. We will respond to burden on financial institutions. How ACTION: Notice of proposed rulemaking. these comments in the preamble to the can FinCEN, through future rulemaking final rule. or any other mechanisms, best ensure a SUMMARY: The Office of Child Support clear and shared understanding in the Enforcement proposes to provide States Statutory Authority financial industry that AML resources the flexibility to incorporate in their This NPRM is published under the should not merely be reduced as a result State child support guidelines two authority granted to the Secretary of of such regulatory amendments, but optional exceptions to the prohibition Health and Human Services by section rather should, as appropriate, be against treating incarceration as 1102 of the Social Security Act (the Act) reallocated to higher priority areas? voluntary unemployment. Under the (42 U.S.C. 1302). Section 1102 of the FinCEN specifically encourages proposal, States have the option to Act authorizes the Secretary to publish commenters to provide quantifiable exclude cases where the individual is regulations, not inconsistent with the data, if available, that supports any incarcerated due to intentional Act, as may be necessary for the views on whether the regulatory nonpayment of child support resulting efficient administration of the functions proposals under consideration would from a criminal case or civil contempt with which the Secretary is responsible impact financial institutions’ regulatory action in accordance with guidelines under the Act. burden. FinCEN also invites comment established by the state and/or with regard to how FinCEN and other incarceration for any offense of which Background supervisory authorities could best the individual’s dependent child or the The purpose of the Flexibility, reinforce the importance of maintaining child support recipient was a victim. Efficiency and Modernization in Child an appropriate level of BSA compliance The State may apply the second Support Programs (FEM) final rule resources if regulatory amendments are exception to the individual’s other child published in the Federal Register on promulgated as described in this support cases. December 20, 2016 (81 FR 93492) was ANPRM. DATES: Consideration will be given to to make Child Support Enforcement written comments on this notice of program operations and enforcement V. Conclusion proposed rulemaking (NPRM) received procedures more flexible, more With this ANPRM, FinCEN is seeking on or before November 16, 2020. effective, and more efficient by building input on the questions set forth above. ADDRESSES: You may submit comments, on the strengths of existing State FinCEN is soliciting comments on the identified by [docket number ACF– enforcement programs, recognizing impact to the public, including 2020–0002 and/or Regulatory advancements in technology, and industry, law enforcement, regulators, Information Number (RIN) number incorporating technical fixes. The final other consumers of BSA data, and any 0970–AC81], by one of the following rule was intended to improve and other interested parties, and welcomes methods: simplify program operations and comments on all aspects of the ANPRM. • Federal eRulemaking Portal: http:// remove outmoded limitations to All interested parties are encouraged to www.regulations.gov. Follow the program innovations, in order to better provide their views. instructions for submitting comments. serve families.

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