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Independent Bank Corporation
April 19, 2005
Mr. Robert E. Feldman
RE: EGRPRA Burden Reduction Comment Request Issued 2/3/2005
Dear Representative Ehlers,
Independent Bank Corporation appreciates the opportunity provided by the federal banking and thrift regulatory agencies to offer burden-reducing recommendations concerning Anti-Money Laundering.
Independent Bank Corporation is a bank holding company, with assets over $3 billion, consisting of four state-chartered banks comprising over a hundred branches, which meet the financial needs of individuals and businesses within both rural and suburban communities in Michigan.
The implementation, continual monitoring, periodic due diligence, and ongoing training of personnel associated with the Bank Secrecy Act compliance creates a substantial financial burden for our financial institution. In the last year, we hired three additional employees to comply with the regulatory requirements that the Bank Secrecy Act and USA Patriot Act have imposed on or corporation. We are confident that further staff will be needed as customers migrate to the smaller, community banks and we continue to grow.
Customer Identification Program (CIP) USA PATRIOT Act
Though the federal banking and thrift regulatory agencies issued an interpretive guidance on CIP in January 2004, many banks still would benefit from clear and concise direction as to what constitutes an acceptable form of identification. As most of our branches are located in predominantly rural areas, some potential and existing customers do not posses government issued photo identification, particularly citizens working in agriculture or similar trades. Must we deny opening accounts for individuals who do not posses government issued photo identification, yet branch employees fellow town citizens can identify these individuals by name? Ultimately, compliance with this regulation results in a tremendous amount of paperwork, as far as physical recordkeeping maintenance of customer identification information, costing employee time and money, but we are also losing the opportunity to financially serve law abiding individuals who do not have appropriate identification to the competition of small town Money Service Businesses.
MSB Due Diligence for BSA
The time and cost associated with conducting due diligence for Money Service Businesses is exorbitant and the risk of failing to identify money laundering activity for these businesses is substantial; many large banks have discontinued operating accounts for businesses which qualify as an MSB. Therefore, smaller banks are left to incur the high costs of handling the regulatory burden associated with the challenge of due diligence in monitoring the account activity of MSBs for money laundering activity. Most of the MSBs our bank services are located in remote areas and provide financial services to customers who would otherwise be unable to obtain a banking account due to failure to posses identification mandated by CIP. Unfortunately, the cost of manpower and time required to monitor MSBs may eventually pass onto all customers. It is unfair to require banks to simulate the role of a federal regulator through MSB monitoring practices, forcing our valued customers to prove the legitimacy of these businesses, yet not receiving compensation from federal and state governments for participating in this monitoring program. Because of our geographic spread, we will have to train our branch staff to conduct MSB monitoring. While we believe our employees are very skilled and dedicated to the task, they cannot become expert regulatory examiners.
SAR Filing Requirements
As banks are familiar with the harsh consequences for failure to file a SAR, and interpretive guidance issued by FinCEN establishing situations stipulating when a SAR should be filed are unclear, and examiners have adopted a zero tolerance policy, many banks have accepted the mantra, When in doubt, file a SAR. FinCEN has complained that the deluge of SARs filed defensively by institutions is problematic, yet the consequences for non-compliance are daunting. Not only are banks held accountable for oversights, but bank employees are in danger of being found personally liable and may incur regulatory fines, even criminal prosecution. The loss of sales and revenue for a bank attributed to reputation damage due to non-compliance can be just as financially devastating for a bank. Moreover, banks are now required to maintain a file and document situations that do not meet SAR-filing criteria. This redundant practice is time consuming, creating not only more paperwork, but further doubt as to weather a SAR should be filed just to be safe.
CTR Reporting Threshold
The current Currency Transaction Reporting threshold of $10,000.00 is certainly antiquated; this threshold was established almost forty years ago and has not been adjusted for inflation. Creating reports at the current low threshold creates an undue burden upon banks to maintain extraneous and inconsequential CTR files which are not useful in detecting true money laundering or suspicious activity. Similarly, it may be proposed to increase the Monetary Instrument Log reporting guidelines from $3,000.00 to a more appropriate level.
Independent Bank Corporation acknowledges there is a balance between effective government monitoring and oversight while sustaining efficient operation of a community bank. Many regulations included in BSA are appropriate for larger urban-based financial institutions; the personal relationships we have with our law abiding customers are strained in our obligation to comply with BSA and USA PATRIOT Act as we must question their identity, scrutinize their account transactions, and obligate them to prove the legitimacy of their financial dealings. Our bank prides itself in possessing intimate knowledge of our community banking markets, as well as having the flexibility to provide a high level of customer service, and can anticipate and respond to the needs of our valued customers in an efficient manner. However, the costs of increasing staff to monitor transactions, train personnel, meet reporting requirements, and maintain documentation impedes our ability to compete with larger banks in our rural and suburban markets.
|Last Updated 04/20/2005||Regs@fdic.gov|