FDIC
Federal Register Citations MBNA America Bank N.A.
May 4, 2005
Re: Request for Burden
Reduction Recommendations
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.
