Office of the Comptroller of the
Currency
Federal Deposit Insurance Corporation
Board of Governors of the Federal Reserve
System
Office of Thrift Supervision
EGRPRA Burden Reduction Comment
RE: Request for Burden Reduction
Recommendations
Thank you for the opportunity to present
recommendations on how to reduce the burden of rules categorized
as Money Laundering, Safety and Soundness and Securities. Wells
Fargo is pleased to comment on this important topic. We
therefore respectfully request the Agencies to consider
implementing changes in the following areas:
Currency Transaction Reports (CTR)
The current CTR threshold is $10,000, and
has been at that level for many years. It is our belief that
this level is no longer representative of a cash transaction
that is “large” or out of the ordinary for many customers. We
recommend raising the CTR threshold to $20,000. A higher
reporting threshold would reduce the burden both on banks and
government agencies by eliminating the need to report cash
transactions of a size that have become too commonplace to
warrant close government attention.
We believe that many financial institutions
consider the time and expense associated with identifying and
documenting exempt persons and the compliance risk of making an
error when granting an exemption and many times conclude that it
is easier and less risky to file a CTR than it is to grant an
exemption. Therefore, in addition to raising the reporting
threshold, we recommend that the process for granting CTR
exemptions be made less burdensome and that a safe harbor be
provided to protect financial institutions from good faith
errors.
Suspicious Activity Reports (SAR)
As with many institutions and commentators,
we are concerned with the escalating number of SARs being
filed. These increasing number impose burdens both on financial
institutions and FinCEN. We believe these increasing numbers
are the result of a number of factors, including regulatory
pressure, unclear requirements and an expectation that if a
financial institution cannot prove activity reviewed by an
examiner was not suspicious, the institution may be at a
heightened risk of being cited for failing to file a SAR.
For example, an elderly customer seeks to
open a new account with a “large” cash deposit of $25,000. The
customer states that the money was “kept under my mattress,”
which appears to be a reasonable explanation given the age of
customer, the community in which the person lives, as well as
the appearance and mannerisms of the customer. In this example,
because there is no proof the money was indeed kept under the
mattress or we do not know where the money originally came from
an institution will need to consider how an examiner will view
the transaction in retrospect. The resulting uncertainty will
likely cause the institution to error on the side of caution and
file a SAR, even though the banker did not view the transaction
as suspicious.
If a customer presents a reasonable
explanation given the surrounding circumstances, a banker should
be able to exercise sound, informed judgment and decide whether
or not to file a SAR without risk of being second guessed. We
recommend guidance that provides a safe harbor for decisions
made in good faith and that give proper deference to the person
in the best position to consider all of the factors involved in
the transaction: the banker who personally conducted the
transaction with the customer.
Money Service Businesses (MSB)
MSBs are currently the “hot topic” in the
banking community. Regulators are applying enhanced scrutiny to
MSB accounts, and new Guidance has recently been issued. While
the guidance has helped to clarify some issues, it will still be
a costly and burdensome task to accept and maintain MSB
accounts. There is still considerable risk to banks that decide
to maintain MSB accounts. And while the guidance did provide
some factors to consider in the risk ranking, much of this area
remains unclear.
The type of account monitoring that is
necessary and the expectations of examiners also need to be very
clearly defined. This will help banks to better understand the
consequences of accepting and maintaining account relationships
with MSBs. Moreover, this will help to prevent MSBs from
advancing claims of discrimination and unfair competition by
providing a regulatory basis for implementing stringent
requirements. Our recommendation is to issue rules and
regulations on MSBs that are very specific and precise as to
what should be considered high or low risk types of MSBs and MSB
activity. We believe that the comment period that is available
through the process of implementing regulations helps to clarify
issues that are missed when guidance is issued through
bulletins, advisory letters, etc.
Enhanced Due Diligence for Private
Banking Customers with Required $1 million
The definition for the enhanced due
diligence customers indicates that it is for accounts that
require a minimum aggregate deposit of $1 million. Yet most
banks understand that the actual amount is less than $1
million. It has been publicly stated by the regulators that
banks “cannot hang their hats” on the million dollar
requirement. We recommend that the Agencies more clearly define
the conditions that trigger enhanced due diligence for high risk
customers, including private banking customers.
Politically Exposed Person (PEP)
Monitoring
Currently the regulatory requirement for
PEPs is to apply enhanced scrutiny for high net worth
customers. However, the expectation from examiners is that
enhanced scrutiny is applied to any account or transaction
involving a PEP regardless of the associated risk. We recommend
clarification as to whether the same of level of monitoring is
expected for PEPs associated with low risk lines of business and
products as it is for high risk.
Customer Identification Program (CIP)
The current exception for existing
customers does not provide as much relief as it could. Banks
are now allowed to use the “existing customer exception” as long
as they are able to establish that they have a reasonable belief
that they know the true identity of the customer. While there
has been some guidance issued as to what constitutes a
“reasonable belief,” this area is still unclear. We recommend
that guidance be issued to further define the factors
constituting a “reasonable belief” as it pertains to the
existing customer exception. We recommend that specific
guidelines be issued that provide a “safe harbor” for banks to
exempt existing customers from the CIP requirements. It is
difficult for large banks with multiple acquisitions to identify
all the procedures in place at any given point in time for every
customer.
Section 352 Effective Anti-Money
Laundering Program
As we all know, banks must have an AML
program. However, it is unclear as to what exactly constitutes
an effective program.
We recommend the issuance of guidance on
assessing, identifying, and managing the risk, as well as what
are effective controls.
