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FDIC Federal Register Citations First National Bank of Osceola County From: CNakashige@aol.com Sent: Thursday, April 28, 2005 10:59 PM To: regs.comments@federalreserve.gov; comments@fdic.gov; regs.comments@occ.treas.gov; regs.comments@ots.treas.gov Cc: Cheryl Nakashige Subject: EGRPRA
Dear Regulators and Mr. Reich:
In viewing the comments thus far, almost everyone has commented on the
burdens placed on financial institutions in the area of the Bank Secrecy
Act and related regulations. I saw few, if any, comments regarding the
safety and soundness or securities regulations where comments were
encouraged. As you are keenly aware, the BSA and USA Patriot Act have
been a huge strain on financial institutions' resources since 9-11. Our
bank is a $225 million community bank in Florida (making BSA even more
burdensome). My duties include compliance, BSA, and CRA. The
effectiveness of my bank's compliance program has suffered, in my opinion,
due to all the risk that has been placed in the BSA area and the vast
amount of resources that I have to devote to it on a daily basis. While
we do our part to fight terrorism, money laundering, and other financial
crimes, examiners continue to add more and more recommendations for BSA--despite
a strong program that we have in place.
As many others have commented, the $10,000 reporting threshold needs to
certainly be increased in order to reduce the regulatory burden of
financial institutions (and IRS personnel who have to enter BSA
reports into their systems). We suggest that the threshold be increased
to at least $25,000. It is also recommended that a study be done to
determine how many CTRs can be eliminated from the IRS database if the
threshold is increased to $25,000 or even a higher figure. My guess is
that at least 50% of the CTRs could be eliminated at this higher threshold
figure. CTRs, in our opinion, are no longer useful for the prosecution
and investigation of criminal activity, money laundering,
counter-intelligence and international terrorism--the goal of the BSA.
Just as important, the filing threshold for Suspicious Activity Reports
needs to be increased. We recommend that reports be filed for
violations aggregating $25,000 or more where a suspect can be identified
(to coincide with the CTR reporting requirement). SARs should also be
filed for any violations aggregating $50,000 or more regardless of
potential suspects. The insider abuse amount also should be revised to a
recommended $5,000 level. It is foolish to have to file a SAR on an
insiders who may have pilfered a few dollars, which I have had to do in
the past. It serves absolutely no purpose. Personally, a local
investigator stated that they won't even touch a BSA case unless there is
at least $100,000 involved. It would be beneficial to get financial crime
investigators recommendations for SAR thresholds since banks seem to be
doing most of the investigative work to begin with.
The major reasons for increasing the SAR filing thresholds is to reduce
the burden on financial institution personnel, in addition to reducing the
unnecessary SARs that are cluttering up FinCEN's database. This also may
eliminate a lot of the "defensive filing" that is occurring, and actually
help investigative personnel weed out the SAR activity that is worth
pursuing. A majority of the SARs that are being filed is for
structuring. By increasing the CTR amount to at least $25,000, I would
imagine the structuring incidents would contrastly be reduced. This would
prove beneficial to financial institutions who have to track structuring
for SAR purposes (manual tracking is very time consuming).
More specific guidance from the regulatory agencies or FinCEN also is
recommended on when to file SARs, what documentation to retain, etc.
Guidance has been provided on how to more accurately complete a SAR but
further clarification is needed in the industry as to when to file the
SARs and not do them defensively.
It also is recommended that the timeframe for filing be increased to file
a SAR no later than 60 days after the date of the initial detection of
facts and delay for an additional 30 days to identify a suspect. In
speaking with local investigators, they stated that it is at least three
months after an institution has submitted a SAR before they may even look
at the local ones filed. It is extremely burdensome to gather all the
facts and prepare SARs in such a short timeframe, and then investigators
may not even review them for months--if they are even reviewed at all. It
takes years for some of the money laundering or terrorism cases to be
heard in a courtroom as well so increasing the timeframes to file SARs
would not burden investigators (only financial institutions).
It is also extremely burdensome to file a follow-up SAR every 90 days if
the activity continues. While this is FinCEN guidance, this basically is
the rule for examiners and auditors. In many cases, it is just easier to
close out the accounts--even when the activity may be purely legitimate
but a defensive SAR filing is done just in case. It is recommended that
FinCEN readdress this area and possibly eliminate this 90-day rule. If a
follow-up SAR is required when a pattern changes, that is sufficient in
our opinion.
Further, we would like to see the monetary instrument log requirement for
non-customers increased to at least $10,000 from $3,000. The $3,000
threshold does not seem to serve any purpose. It is difficult enough to
determine if customers are structuring transactions, much less
non-customers who may be trying to purchase monetary instruments and
structure below the $3,000 threshold. In fact, most institutions may have
eliminated selling monetary instruments to non-customers in the first
place when the regulations initially went into affect since this proved to
be a big regulatory burden. By increasing the amount to $10,000 this would
certainly reduce the burden in this area for institutions who still sell
to non-customers.
If banks that exempt customers are required to monitor them on an annual
basis, it is recommended that the biannual filing of exempt customers be
eliminated. The initial exemption filing could be in place until the
financial institution revokes the exemption. Auditors and examiners
review exemption status each time to ensure banks are still complying so
eliminating this reporting would reduce the regulatory burden in this
area.
We won't even touch the Money Service Business issue, but we are at
least thankful that additional regulatory guidance has been provided to
the industry recently. The BSA interagency groups are a useful tool and
we hope that it is used to its fullest potential to give more guidance to
financial institutions and bring about more consistency in examinations.
Well, it is almost 11:00 P.M. This means that I had no time to finish
this comment letter at the office due to all my other compliance duties
that are overwhelming my desk. Implementing any of these recommendations
would be a great start to helping compliance and BSA officers more
effectively do their jobs and reduce the regulatory burden that is
consuming our work weeks (and weekends). Thank you for your consideration
of these recommendations.
Sincerely,
Cheryl A. Nakashige, AVP
Compliance Officer
First National Bank of Osceola County
Kissimmee, FL
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Last Updated 05/03/2005 | regs@fdic.gov |