Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of the Bank Secrecy Act Reports by Financial Institutions of Suspicious Transactions at 31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, and 1029.320, and FinCEN Report 111-Suspicious Activity Report, 31598-31613 [2020-11247]

Download as PDF 31598 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices Additionally, to assist tribes with understanding requirements under the Tribal Transit Program, FTA has conducted Tribal Transit Technical Assistance Workshops and will continue those efforts in FY 2020. FTA has expanded its technical assistance to tribes receiving funds under this program. Through the Tribal Transit Technical Assistance Assessments Initiative, FTA collaborates with Tribal Transit Leaders to review processes and identify areas in need of improvement, and then assists to offer solutions to address these needs—all in a supportive and mutually beneficial manner that results in technical assistance. FTA has completed over fifty assessments to date and expects to conduct sixteen assessments in FY 2020. These assessments include discussions of compliance areas pursuant to the Master Agreement, a site visit, promising practices reviews, and technical assistance from FTA and its contractors. These workshops and assessments have received excellent feedback from Tribal Transit Leaders and provided FTA with invaluable opportunities to learn more about Tribal Transit Leaders’ perspectives and better honor the sovereignty of tribal nations. FTA will post information about upcoming workshops to its website and will disseminate information about the assessments through its regional offices. Contact information for FTA’s regional offices can be found on FTA’s website at www.transit.dot.gov. Applicants may also receive technical assistance by contacting their FTA regional Tribal Liaison. A list of Tribal Liaisons is available on FTA’s website at www.transit.dot.gov. K. Jane Williams, Acting Administrator. [FR Doc. 2020–11128 Filed 5–22–20; 8:45 am] BILLING CODE 4910–57–P DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network Agency Information Collection Activities; Proposed Renewal; Comment Request; Renewal Without Change of the Bank Secrecy Act Reports by Financial Institutions of Suspicious Transactions at 31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, and 1029.320, and FinCEN Report 111— Suspicious Activity Report Financial Crimes Enforcement Network (FinCEN), Treasury. AGENCY: VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 Notice and request for comments. ACTION: As part of its continuing effort to reduce paperwork and respondent burden, FinCEN invites comments on the proposed renewal, without change, of currently approved information collections relating to reports of suspicious transactions. Under the Bank Secrecy Act regulations, financial institutions are required to report suspicious transactions using FinCEN Report 111 (the suspicious activity report, or SAR). Although no changes are proposed to the information collections themselves, this request for comments covers a proposed updated burden estimate for the information collections. This request for comments is made pursuant to the Paperwork Reduction Act of 1995. DATES: Written comments are welcome, and must be received on or before July 27, 2020. ADDRESSES: Comments may be submitted by any of the following methods: • Federal E-rulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. Refer to Docket Number FINCEN–2020– 0004 and the specific Office of Management and Budget (OMB) control numbers 1506–0001, 1506–0006, 1506– 0015, 1506–0019, 1506–0029, 1506– 0061, and 1506–0065. • Mail: Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN–2020–0004 and OMB control numbers 1506–0001, 1506–0006, 1506–0015, 1506–0019, 1506–0029, 1506–0061, and 1506–0065. Please submit comments by one method only. Comments will also be incorporated into FinCEN’s review of existing regulations, as provided by Treasury’s 2011 Plan for Retrospective Analysis of Existing Rules. All comments submitted in response to this notice will become a matter of public record. Therefore, you should submit only information that you wish to make publicly available. FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section at 1–800–767–2825 or electronically at frc@fincen.gov. SUPPLEMENTARY INFORMATION: SUMMARY: I. Statutory and Regulatory Provisions The legislative framework generally referred to as the Bank Secrecy Act (BSA) consists of the Currency and Financial Transactions Reporting Act of 1970, as amended by the Uniting and Strengthening America by Providing PO 00000 Frm 00168 Fmt 4703 Sfmt 4703 Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) (Pub. L. 107–56) and other legislation. The BSA is codified at 12 U.S.C. 1829b, 12 U.S.C. 1951–1959, 31 U.S.C. 5311–5314 and 5316–5332, and notes thereto, with implementing regulations at 31 CFR Chapter X. The BSA authorizes the Secretary of the Treasury, inter alia, to require financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters, or in the conduct of intelligence or counter-intelligence activities, to protect against international terrorism, and to implement counter-money laundering programs and compliance procedures.1 Regulations implementing Title II of the BSA appear at 31 CFR Chapter X. The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN.2 Under 31 U.S.C. 5318(g), the Secretary of the Treasury is authorized to require financial institutions to report any suspicious transaction relevant to a possible violation of law or regulation. Regulations implementing 31 U.S.C. 5318(g) are found at 31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, 1029.320, and 1030.320. The information collected under these requirements are made available to appropriate agencies and organizations as disclosed in FinCEN’s Privacy Act System of Records Notice relating to BSA Reports.3 II. Paperwork Reduction Act (PRA) 4 Title: Reports by Financial Institutions of Suspicious Transactions (31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, and 1029.320). OMB Control Numbers: 1506–0001, 1506–0006, 1506–0015, 1506–0019, 1506–0029, 1506–0061, and 1506– 0065.5 1 Section 358 of the USA PATRIOT Act added language expanding the scope of the BSA to intelligence or counter-intelligence activities to protect against international terrorism. 2 Treasury Order 180–01 (re-affirmed January 14, 2020). 3 FinCEN’s System of Records Notice for the BSA Reports System was most recently published at 79 FR 20969 (April 14, 2014). 4 Public Law 104–13, 44 U.S.C. 3506(c)(2)(A). 5 The SAR regulatory reporting requirements are currently covered under the following OMB control numbers: 1506–0001 (31 CFR 1020.320—Reports by banks of suspicious transactions); 1506–0006 (31 CFR 1021.320—Reports by casinos of suspicious transactions); 1506–0015 (31 CFR 1022.320— Reports by money services businesses of suspicious transactions); 1506–0019 (31 CFR 1023.320— Reports by brokers or dealers in securities of suspicious transactions, 31 CFR 1024.320—Reports E:\FR\FM\26MYN1.SGM 26MYN1 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices Report Number: FinCEN Report 111— Suspicious Activity Report (SAR). Abstract: FinCEN is issuing this notice to renew the OMB control numbers for the SAR regulations and the SAR report. Type of Review: Renewal without change of currently approved information collections. Affected Public: Businesses or other for-profit institutions, and non-profit institutions. SAR Regulations Estimated Burden: An administrative burden of one hour is assigned to each of the SAR regulation OMB control numbers in order to maintain the requirements in force.6 The reporting and recordkeeping burden is reflected in FinCEN Report 111—SAR, under OMB control number 1506–0065. The rationale for assigning one burden hour to each of the SAR regulation OMB control numbers is that the annual burden hours would be double counted if FinCEN estimated burden in the industry SAR regulation OMB control numbers and in the FinCEN Report 111—SAR OMB control number. FinCEN Report 111—SAR Type of Review: • Propose for review and comment a re-calculation of the portion of the PRA burden that has been subject to notice and comment in the past (the ‘‘traditional annual PRA burden’’). • Propose for review and comment a method to estimate the portion of the PRA burden that FinCEN previously had not included (the ‘‘supplemental annual PRA burden’’). Frequency: As required. Estimated Number of Respondents: 12,148 financial institutions.7 by mutual funds of suspicious transactions, and 31 CFR 1026.320—Reports by futures commission merchants and introducing brokers in commodities of suspicious transactions); 1506–0029 (31 CFR 1025.320—Reports by insurance companies of suspicious transactions); and 1506–0061 (31 CFR 1029.320—Reports by loan or finance companies of suspicious transactions). The PRA does not apply to reports by one government entity to another government entity. For that reason, there is no OMB control number associated with 31 CFR 1030.320— Reports of suspicious transactions by housing government sponsored enterprises. OMB control number 1506–0065 applies to FinCEN Report 111— SAR. 6 One hour of burden is estimated under each of the following OMB control numbers: 1506–0001, 1506–0006, 1506–0015, 1506–0019, 1506–0029, and 1506–0061. 7 See Table 1 below for a breakdown of the types of financial institutions that filed SARs in 2019. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 Estimated Reporting and Recordkeeping Burden: In this notice, FinCEN introduces two substantial modifications to the scope and the methodology we previously used to estimate the annual PRA burden associated with the SAR. First, with respect to the scope of the estimate, FinCEN’s traditional annual PRA burden estimate associated with the SAR included only the filer’s annual operational burden and cost associated with (a) producing and filing the report, and (b) storing a copy of the filed report. Starting with this notice, FinCEN intends to add a supplemental annual PRA burden estimate that reflects the annual costs involved in (a) determining whether alerts that were elevated for further review merit filing a SAR, and (b) documenting the decision not to file a SAR when a case does not merit it.8 Second, with respect to the methodology underlying the PRA burden and cost estimates, rather than continuing to allocate a single PRA burden and cost to the completion, submission, and storage of any type of SAR, FinCEN proposes to estimate the individual PRA burden and cost of different categories of SARs, grouped by the SARs’ estimated degree of complexity. Because there is no direct way to measure the complexity and related effort and cost of producing each SAR, FinCEN uses key features of SARs filed in 2019 to categorize them based on similar combinations of those key features, under the assumption that such combinations of key features Note that all banks, casinos and card clubs, money services businesses, brokers or dealers in securities, mutual funds, providers of covered insurance products, futures commission merchants and introducing brokers in commodities, loan or finance companies, and housing government sponsored enterprises are required to comply with the SAR regulatory requirements; however, not all financial institutions identify suspicious activity that would warrant a SAR filing. See 31 CFR 1020.320 (banks), 31 CFR 1021.320 (casinos and card clubs), 31 CFR 1022.320 (money services businesses), 31 CFR 1023.320 (brokers or dealers in securities), 31 CFR 1024.320 (mutual funds), 31 CFR 1025.320 (insurance companies), 31 CFR 1026.320 (futures commission merchants and introducing brokers in commodities), 31 CFR 1029.320 (loan or finance companies), and 31 CFR 1030.320 (housing government sponsored enterprises). 8 Despite the expanded scope, FinCEN has not presented in this notice an estimate of the entire burden that is associated with SAR filings because, as described further in Part 2, FinCEN lacks the granular data to estimate the costs of certain steps in that process. PO 00000 Frm 00169 Fmt 4703 Sfmt 4703 31599 reflect similar levels of effort and cost necessary to produce the SARs. Part 1 below sets out the breakdown of the SARs filed during 2019 according to the key features that are used to group SARs into categories subject to similar PRA burden and cost. Part 1 also contains the analysis of how some combinations of key features worked or failed to work as proxies for a SAR’s complexity and, therefore, burden and cost. Part 2 uses the results of the analysis in Part 1 to estimate the individual and total annual PRA burden and cost of each category of SARs. The methodology described in Part 2 covers both the traditional and the supplemental annual PRA burden estimate. Part 1. Breakdown of the 2019 SAR Filings In 2019, 12,148 financial institutions (the ‘‘filing population’’) submitted 2,751,694 SARs (the 2019 SAR submissions).9 The distribution of the 2019 SAR submissions, by type of filing (original or continuing),10 type of financial institution,11 number of reports per filer per year, and method of filing (batch or discrete),12 is presented in Table 1 below: 9 Numbers are based on actual 2019 filings as reported to the BSA E-Filing System, as of 12/31/ 2019. Assumptions and estimates are also based on actual 2019 SAR filings. 10 An original (or initial) report is the first SAR filed on suspicious activity no later than 30 days after the date of initial detection by the filer. (See e.g., 31 CFR 1020.320(a)(3)). A continuing SAR must be filed on suspicious activity that continues after an initial SAR is filed. Continuing reports must be filed on successive 90-day review periods until the suspicious activity ceases, but may be filed more frequently if circumstances warrant. For more information on continuing reports, see page 142 of the FinCEN Suspicious Activity Report (FinCEN SAR) Electronic Filing Requirements—XML Schema 2.0. https://bsaefiling.fincen.treas.gov/ docs/XMLUserGuide_FinCENSAR.pdf. 11 In Table 1, the category ‘‘Securities/Futures’’ includes brokers or dealers in securities, mutual funds, futures commission merchants, and introducing brokers in commodities. The category ‘‘Undetermined’’ includes filers with missing, incomplete, or contradictory information about the type of financial institution to which they belong. 12 In batch filing, a filer submits a single electronic file containing several reports. In discrete filing, the filer fills in an electronic report individually, using a data entry screen that FinCEN provides. While exceptions apply, batch filing is generally used by large-volume filers that have automated the filing process, while discrete filing is generally employed by filers that submit fewer reports per year and rely more on manual data entry methods. E:\FR\FM\26MYN1.SGM 26MYN1 Table 1 shows that banks submitted slightly over half of the total number of SARs filed in 2019. Money services businesses (MSBs) and credit unions contributed 32.9% and 7.3% of the total, respectively. Approximately 85% of the filings from all financial institutions consisted of original reports. In addition, approximately 85% of the reports were batch filed. To determine the concentration of 2019 SAR submissions among the filing population, FinCEN grouped filers in tranches according to the number of SARs filed during the year. Table 2 sets out the number of reports per tranche,13 and Table 3 sets out (i) each tranche as a percentage of the total filer population, and (ii) each tranche’s reports as a percentage of the 2019 SAR submissions.14 13 The category ‘‘Other’’ in Table 2 includes securities and futures, housing government sponsored enterprises, providers of covered insurance products, and filers for which the type of financial institution was still being determined at the moment of publication of this notice, as defined above. We adopt the same criteria for the rest of the tables contained in the notice, such as in Tables 4A, 4B, and 5 below. 14 The percentage of filers contained in each tranche, and the percentage of reports submitted by those filers, are contained in the fields ‘‘pct_filers’’ and ‘‘pct_forms’’, respectively. The cumulative percentage of filers contained in all tranches up to and including the current one, and the cumulative percentage of reports submitted by such filers, are shown in the fields ‘‘cumm_pct_filers’’ and ‘‘cumm_pct_forms’’, respectively. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00170 Fmt 4703 Sfmt 4725 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.006</GPH> Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices EN26MY20.005</GPH> 31600 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices fraud typologies; (c) who the main persons involved in the activity are; and (d) how to explain in concise terms the rationale that led the filer to decide to file a SAR. As FinCEN has no direct way to gauge the amount of work involved in the production of each SAR, FinCEN broke down the 2019 SAR submissions by additional key features, so that, individually or in combination, these additional key features could serve as a proxy to group SARs with similar levels of estimated complexity, and therefore, with similar estimated PRA burden. The additional key features in the SARs that FinCEN has concentrated its analysis on are: (a) The number of persons identified as subjects; (b) the number of distinct suspicious activities selected; 15 (c) the length of the narrative section; and (d) whether or not the report contains an attachment.16 Once FinCEN identifies the combination of key features that are common to the 15 FinCEN Report 111—SAR contains checkboxes that allow filers to identify a variety of suspicious activities, such as structuring, terrorist financing, fraud, money laundering, and a cyber-event. FinCEN Report 111—SAR has 18 categories of suspicious activities. 16 Some filers attach a supplemental file to the report that in general contains a list of individual transactions that raised the alert about a potential suspicious transaction. The length of the narrative is sometimes impacted by whether the filer submits an attachment to the report listing these transactions, or uses the narrative section of the report to include such a list. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00171 Fmt 4703 Sfmt 4703 largest number of reports submitted by a given type of filer (the ‘‘standard content’’ for that type of filer), FinCEN may take such combination as a proxy for the content and estimated complexity of a ‘‘standard’’ SAR for that filer type. Reports submitted by filers of the same type that contain different features (more subjects, more suspicious activities, a longer narrative) may represent SARs with ‘‘extended content’’ that are more complex, and therefore carry a larger PRA burden and cost for that filer type. Based on the data available, FinCEN is considering only two levels of SAR complexity. Table 4A shows a breakdown of the 2019 SAR submissions by type of financial institution and narrative length. Table 4B shows the percentage of reports with and without attachments, by type of financial institution, and narrative length. E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.007</GPH> Ten filers (six banks and four MSBs) made up the first tranche (00_LARGEST FILERS). As set out in Table 3, these ten filers accounted for nearly half of the 2019 SAR submissions. Slightly less than 2% of the filing population (Tranches 00 to 03) submitted 81% of all the reports. Additionally, out of the filing population, 81% contributed slightly less than 4% of the filings, while 56% submitted fewer than 10 reports per year. Unlike currency transaction reports, for example, which are more easily categorized because they are filed based on objective criteria (i.e., transaction type and threshold), each SAR may require a widely disparate level of effort depending largely on the amount of research and subjective analysis required to determine: (a) Whether to file a report; (b) how to attribute the suspicious behavior to money laundering, financing of terrorism, or 31601 Table 5 breaks down the 2019 SAR submissions by type of financial institution and number of suspicious activities identified in each report.17 Approximately 44% of the SARs submitted by all filers have narratives not exceeding 2,000 characters (half a page), and another 39% have narratives above half a page but not exceeding one page. Most SARs (60%) identify up to two suspicious activities, while another 38% list between three and five. 17 The number of suspicious activities identified in each report represents the number of check boxes selected by the filer. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00172 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.009</GPH> Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices EN26MY20.008</GPH> 31602 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices FinCEN analyzed key features of the 2019 SAR submissions described in Tables 1 through 5 to generate a tractable segmentation of the SAR universe into different levels of burden. FinCEN based this segmentation on the following observations: • FinCEN was not able to limit the criteria for selecting categories of SAR burden to the type of financial institution or the tranche of a filer alone because of large variations in the combination of features within each type of financial institution or tranche. It was possible, however, to arrive at a small number of complexity categories by combining key features that highlight significant differences between depository institution filers (banks and credit unions), MSBs, and other types of financial institution filers (nondepository institutions). • Based on the analyzed complexity features as well as FinCEN’s extensive use of SARs in its work, in general and on average,18 the content of SARs shows the following general features: (a) There appears to be a positive correlation between the number and complexity of a financial institution’s main business lines, and the value registered by some of the key features selected: The higher the number and complexity of the filer’s business lines, the higher the number of suspicious transactions identified and the longer the narrative. (b) In general, non-depository institutions with a single primary business line (i.e., loan and finance companies or casinos) file reports that (a) list up to two suspicious transactions involving one subject and a single transaction or a small number of transactions over a short period of time, and (b) use relatively short narratives of up to half a page to explain the basis for their suspicion. (c) Some SARs filed by nondepository institutions have features indicating complexity, particularly longer narratives, despite the SARs not being complex. A sample of the SARs filed by two of the largest nondepository institutions showed that in 94% of the SARs with longer narratives, the increased length was due to listing transactions the filer appeared to have tracked automatically. Six percent of 18 By ‘‘in general, ’’ FinCEN is speaking without regard to outliers (e.g., reports exhibiting features that are uncommonly higher or lower than those of the population at large), or that apply to a very narrow type of filer or type of transaction. By ‘‘on average,’’ FinCEN means the mean of the distribution of each subset of the population (althoughFinCEN uses median labor cost data to calculate weighted hourly worker compensation allocated to each PRA burden hour in Table 6 below). VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 those SARs appeared to have required greater analytical effort. To estimate the number of SARs with extended content filed by non-depository institutions in 2019, FinCEN therefore applied the six percent threshold to the total number of SARs with narratives over one page filed by non-depository institutions. (d) Nearly three quarters of original SARs filed by depository institutions report only up to two subjects involved in up to five suspicious activities, described in a narrative that does not exceed one page, and on their face do not appear complex. Many SARs filed by depository institutions, however, have features indicating complexity. This may reflect any combination of the factors laid out in the tables above— number of subjects per SAR, number of suspicious transactions listed per SAR, length of the narrative, and presence of an attachment. However, some SARs that appear complex based on these features often are not in reality. Depository institutions, which in general tend to offer many business lines mostly to established customers, sometimes include in SARs a comparison of other information they maintain. This can increase the apparent complexity of SARs analyzed against the complexity factors FinCEN identified without necessarily being indicative of a SAR requiring extensive research. FinCEN controlled for this by removing from the complex category SARs that had a high ratio of digits to non-digit text in the SAR narrative, because a high ratio of digits often indicates the algorithmic inclusion of transaction data in the SAR narrative. • For all financial institutions, FinCEN estimates that the review of cases documenting the need to file continuing SARs, and the filing of the continuing SARs themselves, will require substantially less effort than the review of cases leading to the filing of original SARs, and the actual filing of such original SARs. • Lastly, FinCEN assumes that financial institutions that batch file SARs have a degree of automation they can employ to the partial filling of the report. Batch filers will also store electronic files that may contain several reports per file. Based on these assumptions, FinCEN allocates a lower PRA burden per report to these filers. This burden consists of the actual time of submission per report (which may be close to instantaneous), and the administrative and supervisory tasks involved in this stage. As noted, reflecting the observations above, FinCEN identified five categories of SARs to generate a tractable segmentation of complexity for PO 00000 Frm 00173 Fmt 4703 Sfmt 4703 31603 analyzing estimated PRA burden: (a) Continuing SARs; (b) original SARs with standard content filed by nondepository institutions; (c) original SARs with extended content filed by non-depository institutions; (d) original SARs with standard content filed by depository institutions; and (e) original SARs with extended content filed by depository institutions. Part 2. PRA Burden and Cost Estimates Based on industry input, including input obtained over the past year in a project assessing how to improve the effectiveness of BSA data and measure its value for each stakeholder group, FinCEN understands that the SAR filing process comes at the end of a larger process that varies in complexity depending on the type and size of the financial institution: 19 Stage 1—Maintaining a Monitoring System: Commensurate with the size of the filer and the complexity of its operations, each filer will run, update, and upgrade a monitoring system that reflects its assessment of risk. This monitoring system will vary in complexity from a manual review process to a fully automated one.20 Stage 2—Reviewing Alerts: When the monitoring system issues an alert, the filer will have to determine whether the alert reveals a true potential risk event, or is a false positive. Stage 3—Transforming Alerts into Cases: If, based on the filer’s analysis, the alert points to a true potential risk event, the filer will gather additional information to present the case to the reviewing level that will eventually 19 FinCEN acknowledges that the description of the SAR production process in this notice seems to imply that the process is always linear, with each stage following the previous one. While this situation may reflect a large proportion of the cases reviewed and SARs filed, certain situations will require the filer to return to an earlier stage (such as requiring additional information from the case managers, or drafting several versions of a narrative). The breakdown of the SAR production process in a discrete number of linear stages is intended as a conceptual framework to guide FinCEN’s estimates of the different levels of PRA burden. Such framework does not involve or imply any modification to, or new interpretation of the actual rule text of BSA regulations. The details provided in each stage of the framework serve only as a list of the features FinCEN did or did not consider when estimating the PRA burden of such stage. While FinCEN believes the tasks described in the framework represent the work generally required to produce a SAR, there is no obligation for a financial institution to adopt either formally or informally a process such as the one presented by the framework. 20 FinCEN recognizes that filers may use the monitoring system to comply with additional BSA and non-BSA regulatory requirements, as well as for other business purposes such as protecting against reputational risks of money laundering and fraud against the filer or the filer’s customers. E:\FR\FM\26MYN1.SGM 26MYN1 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices decide whether the event merits the filing of a SAR. Stage 4—Case Review: The appropriate level will review the case to determine whether or not the event constitutes a suspicious activity that must be reported. Stage 5—Documentation of Determination: This notice takes into account that filers document decisions they make as part of Stage 4 that lead them to conclude that an event does not warrant the filing of a SAR. Stage 6—SAR Filing Process: If an event warrants the filing of a SAR, the filer will follow its SAR filing process, including: (a) Selecting supporting documentation; (b) completing the report, including drafting the narrative; (c) filing the report through batch or discrete filing; and (d) storing the filed report and supporting documentation in physical or electronic form. Each stage requires the filer’s use of human and technological resources, which combination will vary according to the sophistication of the filer. Previously, FinCEN limited its annual SAR PRA burden estimate to Stage 6 mentioned above, the SAR filing process (the ‘‘traditional annual PRA burden’’). In this notice, FinCEN expands its PRA burden estimate to include Stages 4 and 5 listed above (the ‘‘supplemental annual PRA burden’’). FinCEN is not addressing the burden associated with Stages 1 to 3 above due to the lack of the necessary granular information. Notably, FinCEN would need information regarding: (i) The levels of burden and cost attributed to differing monitoring systems; (ii) varying levels of complexity in determining whether alerts represent true alerts; and (iii) the amount of research involved in assembling cases to determine whether true alerts warrant the filing of a SAR. Furthermore, FinCEN would need additional information to identify the proportion of these costs that are strictly connected to the filing of a SAR relative to the same costs associated with a filer’s other regulatory or business requirements. FinCEN intends to address the information required for the estimate of the burden and cost of Stages 1 to 3 in a future notice. FinCEN acknowledges that each stage of the SAR production contributes to the next (including those stages of the process not included in this notice). FinCEN assesses, however, that the information provided by this notice, though not a complete estimate of the SAR PRA burden, improves the estimate and creates a foundation for a future estimate of the costs of all six stages. FinCEN recognizes that SAR cases that are more complex may take a longer time to review at multiple stages, such as the case investigation point in Stage 4 and the SAR filing point in Stage 6. However, for ease of presentation, FinCEN calculated the extra burden of handling complex cases in our burden estimate for Stage 6, and attributed a burden that represents our estimate of the standard administrative work connected to continuing and original SARs to Stages 4 and 5. Therefore, the total estimate proposed in this notice will be the aggregate of the following estimates of the PRA burden related to: • Evaluating cases for potential SAR filing (Stage 4). This will be part of the supplemental annual PRA burden calculation. • Recordkeeping of cases not converted into SARs (Stage 5). This will be part of the supplemental annual PRA burden calculation. • The SAR filing process (Stage 6). This will be part of the traditional annual PRA burden calculation and will include the PRA burden associated with the filing of (i) continuing SARs, (ii) original SARs filed by non-depository financial institutions, and (iii) original SARs filed by depository financial institutions. FinCEN identified four staff positions and corresponding roles involved in the SAR process in order to estimate the hourly costs associated with the burden hour estimates calculated in this part. Those are: (i) General supervision (providing process oversight); (ii) direct supervision (reviewing operational-level work and cross-checking all or a sample of the filings against their supporting documentation); (iii) clerical work (engaging in case evaluation to support the determination of whether a SAR must be filed); and (iv) clerical work (engaging in producing, filing, and storing SARs and supporting documentation). FinCEN calculated the fully loaded hourly wage for each of these four roles by taking the median wage as estimated by the U.S. Bureau of Labor Statistics (BLS), and computing an additional benefits cost as follows: 21 21 See U.S. Bureau of Labor Statistics, Occupational Employment Statistics-National, May 2019, available at https://www.bls.gov/oes/ tables.htm. The most recent data from the BLS corresponds to May 2019. For the benefits component of total compensation, see U.S. Bureau of Labor Statistics, Employer’s Cost per Employee Compensation as of December 2019, available at https://www.bls.gov/news.release/ecec.nr0.htm. The ratio between benefits and wages for financial activities, credit intermediation and related activities is $15.80 (hourly benefits)/$31.45 (hourly wages) = 0.502. The benefit factor is 1 plus the benefit/wages ratio, or 1.502. Multiplying each hourly wage by the benefit factor produces the fully-loaded hourly wage per position. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00174 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.010</GPH> 31604 31605 1. Estimate of the Burden and Cost of Evaluating Cases for Potential SAR Filing To estimate the PRA burden involved in evaluating each case generated by one or more alerts, FinCEN starts with the number of cases that, after review, resulted in the filing of 2,751,694 SARs in 2019. As set out in Table 1 above, of that total number of filings, 2,335,559 reports were original SARs, and 416,135 were continuing SARs. In the case of continuing SARs, FinCEN assumes that the filer will be monitoring the specific transactions of the previously identified subject, and filing a continuing SAR every ninety days (if the subject did not discontinue the activity), and noting the cumulative monetary amount involved in the suspicious activity. FinCEN therefore assesses that the number of continuing suspicious activity cases will equal the number of continuing SARs. In the case of original SARs, however, a filer may need to review a large number of cases to determine which cases justify the filing of a report. A paper issued by the Bank Policy Institute in 2018 (the ‘‘BPI Paper’’) 22 contains the estimates of 13 large, midsize, and small banks (with assets under management of more than $500 billion, between $200 to $500 billion, and between $50 and $200 billion, respectively) about their average conversion rate 23 of cases to SARs. The BPI Paper states that, on average, banks filed SARs on 42% of alerts turned into cases (i.e., alerts that are not considered false positives).24 In the absence of similar data for other types of financial institutions, FinCEN adopts the bank average conversion rate from cases to SARs set out in the BPI Paper (42%) to approximate the number of cases that could have generated the number of original SARs filed in 2019. If 42% of cases result in the filing of a SAR, the total filing population would have had to review approximately 5,560,854 cases 25 to report the 2,335,559 original SARs submitted in 2019.26 FinCEN estimates that the average burden involved in considering whether a case merits filing an original SAR, for all types of financial institutions and for any type of suspicious transactions, would be 20 minutes per case. FinCEN estimates that the average burden involved in reviewing cases involving continuing SARs will be much lower, at 3 minutes per case. FinCEN assumes that the review of cases will involve the participation of three of the roles described above, as follows:27 The total annual PRA burden of this stage involving cases related to both continuing and original SARs would be 1,874,424 hours, at a total cost of $91,846,776, as described in Tables 8A and 8B below. 22 ‘Getting to Effectiveness—Report on U.S. Financial Institution Resources Devoted to BSA/ AML and Sanctions Compliance’, Bank Policy Institute, October 29, 2018, available at https:// bpi.com/wp-content/uploads/2018/10/BPI_AML_ Sanctions_Study_vF.pdf. See pages 5–7. 23 The average conversion rate represents the percentage of the total number of cases that, after receiving further review and consideration, warranted the filing of a SAR. 24 Ibid. The BPI Paper identifies several provisos regarding the correlation among the different metrics (such as the number of alerts related to AML issues only, while the number of SARs filed included both fraud and AML-related transactions). FinCEN considers that these qualifications do not affect the rationale of applying the bank conversion rate of cases into SARs to the full filer population. 25 The number of original SARs submitted in 2019 (2,335,559) divided by the 42% conversion rate. 26 FinCEN acknowledges that this estimate simplifies the conversion, stipulating that one case will generate or fail to generate one SAR, when in practice several cases may be reported in a single SAR. It is also possible, while not very probable, that a single case may require the filing of more than one simultaneous SAR. 27 FinCEN’s assumption is that the clerical work involved in the case review stage would include general administrative and coordination responsibilities, such as the maintaining of agendas, documentation of minutes, assembly of files to be presented to the appropriate authority (for example, a filer’s SAR Committee), and the summarization of the reasons not to file. FinCEN estimates that, in general and on average, each role would spend different amounts of time on each stage of the process covered by this notice, as described in the specific estimates below. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00175 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.011</GPH> Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices 31606 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices 2. Estimate of the Burden and Cost of Documenting Cases Not Converted Into SARs The total annual PRA burden of this stage would be 1,343,872 hours, at a total cost of $38,972,288, as described in Table 10 below: transactions, would be 25 minutes per report. FinCEN assumes that documenting the rationale for not filing a SAR and the storage of the case documents will involve the participation of three of the roles described above, as follows: VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00176 Fmt 4703 Sfmt 4725 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.012</GPH> EN26MY20.013</GPH> EN26MY20.014</GPH> With 2,335,559 cases resulting in SAR filings and an estimated conversion rate of 42%, out of the estimated 5,560,854 cases, 3,225,295 would be cases involving a decision not to file. FinCEN estimates that the average burden hours of documenting the rationale as to why a case does not merit filing a SAR, for all types of financial institutions and in the context of any type of suspicious 31607 3. Estimate of the Burden of the SAR Filing Process FinCEN’s prior estimate of the traditional average burden hours associated with the SAR filing process 28 was based on a 2010 assessment of the manual effort involved in the drafting, writing, filing, and storing of a paperbased SAR with a standard narrative of 4,000 characters (i.e., one page), and the storing or segregation of paper-based supporting documentation. Since 2011, financial institutions have been able to (a) file SARs electronically either in batch or discrete format, and (b) include with their SARs an attachment containing tabular data such as transaction data providing additional suspicious activity information not suitable for inclusion in the narrative. This attachment must be an MS Excelcompatible comma separated value (CSV) file with a maximum size of 1 megabyte. These new features contribute to a substantial decrease in the hourly burden of the mechanical aspects of the filing and storage of SARs and supporting documentation. As set out in the estimates above, the review of approximately 5,560,854 cases would result in the closing out of 3,225,295 cases, and the filing of 2,335,559 original and 416,135 continuing SARs. In the previous part, FinCEN identified a tractable segmentation of SAR complexity: (a) Continuing SARs; (b) original SARs with standard content filed by nondepository institutions; (c) original SARs with extended content filed by non-depository institutions; (d) original SARs with standard content filed by depository institutions; and (e) original SARs with extended content filed by depository institutions. In all cases, the estimate represents the administrative burden involved in producing and reviewing a SAR, overseeing the process of filing a SAR, and the actual filing of a SAR, and not just the mechanical process of generating, submitting, and storing the SAR (which might be very small for fully-automated filers using the batch-filing method). FinCEN assumes that the SAR filing process involves the following four roles described in Table 6, in varying proportions depending on whether the burden accounts for the reporting or the recordkeeping stage of the process: 3.1. Continuing SARs In the case of a suspicious transaction that continues over time, filers must submit continuing SARs every ninety days. Financial institutions filed 416,135 continuing SARs as part of the 2019 SAR submissions. FinCEN estimates that, on average, the burden involved in filing a continuing SAR will be relatively low, and will be substantially the same among all types of financial institutions. The estimated hourly burden and its cost for continuing SARs are as follows: 28 FinCEN’s estimate of the traditional average burden hours involved in the SAR filing process was 2 hours for SARs filed individually (60 minutes attributed to reporting, and 60 minutes attributed to recordkeeping), and 2.5 hours per SAR for joint filings (90 minutes attributed to reporting, and 60 minutes attributed to recordkeeping). Joint filings are a single SAR filed by two or more separate financial institutions. This type of filing constitutes less than 1% of total filings. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00177 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.015</GPH> Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices 31608 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices Original SARs Filed by Non-Depository Institutions (Standard Content) Based on the application of the percentage described in Part 1 to SARs with narratives over one page filed by non-depository institution, FinCEN identified 988,377 reports with standard content and 6,897 with extended content. For the purpose of calculating the burden of original SARs with standard content filed by non-depository institutions, FinCEN estimates that the average burden involved in the filing of original SARs will be higher than that of continuing SARs. Specifically, FinCEN uses an estimate of 40 minutes per batch-filed report and 60 minutes per discrete-filed report for drafting, writing, and submitting the SARs, and 5 minutes per batch-filed reports and 15 minutes per discrete-filed report for storing filed reports and supporting documentation. The estimated hourly burden and its cost for this subset of SARs are therefore as follows: VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00178 Fmt 4703 Sfmt 4725 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.016</GPH> EN26MY20.017</GPH> 3.2. Original SARs Filed by NonDepository Institutions Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices For the purpose of calculating the burden of original SARs with extended content filed by non-depository institutions, FinCEN estimates that the average burden will be several times higher than that of standard content SARs, and the related cost will include a larger proportion of the levels of the organization with higher fully-loaded hourly wages (those representing indirect and direct supervision). The estimated hourly burden and its cost for this subset of SARs are therefore as follows: 3.3. Original SARs Filed by Depository Institutions Based on the segmentation described in Part 1 of depository institution SARs into standard content and extended content, FinCEN identified 1,313,774 reports with standard content, and 26,513 that included extended content. The estimate of the reporting and recordkeeping burden of these two SAR subsets is as follows, using the per-SAR burden estimates included in the tables: Original SARs Filed by Depository Institutions (Standard Content) VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00179 Fmt 4703 Sfmt 4725 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.018</GPH> EN26MY20.019</GPH> Original SARs Filed by Non-Depository Institutions (Extended Content) 31609 31610 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices Original SARs Filed by Depository Institutions (Extended Content) reporting and recordkeeping burden by type of process and report is as follows: VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00180 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.020</GPH> EN26MY20.021</GPH> Estimated Reporting and Recordkeeping Burden: The estimated Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices As detailed in Table 22 below, the total estimated recordkeeping and reporting annual PRA burden for the case review and SAR filing process of the seven OMB control numbers covered by this notice is 5,462,026 hours, for a total cost of $206,422,989. VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 PO 00000 Frm 00181 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.022</GPH> EN26MY20.023</GPH> Estimated Total Annual Reporting and Recordkeeping Burden: The total estimated reporting and recordkeeping burden and cost per type of process and type of report are as follows: 31611 The distribution of the total estimated annual PRA burden and cost, by type of financial institution and SAR (original or continuing), and by SAR production process stage is as follows: 29 FinCEN acknowledges that some of the partial estimates may over- or understate the burden and cost of some the stages of the SAR production process covered by this notice, due to generalization and lack of more detailed information. FinCEN wishes to emphasize that the total burden presented in Table 22 is spread across a number of different SAR reporting requirements involving different types of financial institutions. Indeed, in the case of depository institutions, both FinCEN and the Federal banking agencies have regulations requiring SAR reporting.30 However, only one SAR form is filed in satisfaction of the rules of both FinCEN and the Federal banking agencies. FinCEN has historically never attempted to allocate the burden between agencies for SARs required by the rules of more than one agency. FinCEN intends to conduct more granular studies of the filing population in the near future, to arrive at more realistic estimates that take into consideration a more specific breakdown of the SAR production process, including estimating the burden to financial institutions of Stages 1 to 3, which may include the interagency burden allocation referred to above. The data obtained in these studies may result in a significant variation of the estimated total annual PRA burden. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Records required to be retained under the BSA must be retained for five years. a. Specific Requests for Comments: Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on the calculation of the total PRA burden of filing the SAR, under the current regulatory requirements. Specifically, comments are invited on the following issues: 1. FinCEN has based the estimates contained in this notice on the actual SARs filed in 2019. We have restricted the analysis to features we could measure and statements we were able to support with data extracted from the 2019 filers and submissions, using limited external data for estimates of parameters such as labor costs and conversion rates for alerts into filed SARs. FinCEN is not able to factor in its estimate of the PRA burden the burden of portions of the process for which FinCEN lacks information in filed reports or reliable existing studies. All requests for comments ask the public to suggest other factors that may affect the burden and cost of SAR reporting. Suggested factors that FinCEN could 29 FinCEN obtained the breakdown by applying the percentages of continuing and original SARs by type of financial institution listed in Table 1, to the burden and cost estimates contained in Tables 8A, 8B, 10, and 13 to 20. Financial institutions the type of which is ‘‘undetermined’’ are included in the ‘‘Other non-depository’’ category in Tables 23 and 24. 30 See 12 CFR 208.62, 211.5(k), 211.24(f), and 225.4(f) (Federal Reserve Board); 12 CFR 353.3 (Federal Deposit Insurance Corporation); 12 CFR 748.1(c) (National Credit Union Administration); 12 CFR 21.11 and 12 CFR 163.180 (Office of the Comptroller of Currency); and 31 CFR Chapter X (FinCEN). VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 Part 3. Request for Comments PO 00000 Frm 00182 Fmt 4703 Sfmt 4703 E:\FR\FM\26MYN1.SGM 26MYN1 EN26MY20.025</GPH> Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices EN26MY20.024</GPH> 31612 Federal Register / Vol. 85, No. 101 / Tuesday, May 26, 2020 / Notices quantify by analyzing the contents of the BSA database, or by referring to statistical information publicly available, and without conducting a formal survey of the reporting financial institutions would be especially appreciated. 2. FinCEN proposes to expand the annual PRA burden estimate to cover three stages of the SAR production process: (a) The review of cases based on monitoring alerts considered true positives; (b) the documentation of the decision not to turn a case into a SAR; and (c) the SAR filing process. A sample conversion rate of cases that lead to SARs for depository institutions was used to calculate how many total cases at all financial institutions would have to be evaluated to produce the total number of original SARs filed in 2019. FinCEN invites comments on the characterization of these three stages, the general case conversion rate utilized, and the existence of other generally available research documents that may show different case conversion rates for different financial institution types. 3. FinCEN estimates that, in general, the cost of labor involved in the three stages of the SAR production process covered by this notice will depend on the level of involvement in each stage of at least four different types of labor within the organization (general supervision, direct supervision, clerical work for evaluation, and clerical work for recordkeeping). Is this a reasonable identification of the roles involved in the SAR process? Has FinCEN calculated labor costs reasonably? Within the calculations of PRA burden, has FinCEN reasonably estimated the involvement of the different kinds of labor identified? 4. FinCEN arrived at estimates for (i) the hour burden of the review of all cases based on true positive alerts, and (ii) the decision not to file SARs based on the proportion of the cases that were not converted into original SARs. In general and on average, are these estimates reasonable? 5. FinCEN segmented the universe of SAR filings into several different categories for purposes of estimating SAR complexity: (a) Continuing SARs; (b) original SARs with standard content filed by non-depository institutions; (c) original SARs with extended content filed by non-depository institutions; (d) original SARs with standard content filed by depository institutions; and (e) original SARs with extended content filed by depository institutions. For each of these categories, FinCEN adjusted the estimated SAR filing burden depending on the filing method VerDate Sep<11>2014 19:08 May 22, 2020 Jkt 250001 (batch or discrete). Is this segmentation reasonable? Are there other categories of SARs which FinCEN could quantify by analyzing the contents of the BSA database and without conducting a formal survey of the reporting financial institutions? 6. Are the other assumptions FinCEN made to calculate the burden associated with filing the different categories of SARs reasonable, such as the number of minutes required for each category of report? b. General Request for Comments Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: (1) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (2) the accuracy of the agency’s estimate of the burden of the collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (5) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Dated: May 20, 2020. Derek Baldry, Deputy Chief of Staff, Financial Crimes Enforcement Network. [FR Doc. 2020–11247 Filed 5–22–20; 8:45 am] BILLING CODE 4810–02–P DEPARTMENT OF THE TREASURY Internal Revenue Service Proposed Extension of Information Collection Request Submitted for Public Comment; Comment Request Relating to Requests for Miscellaneous Determination Internal Revenue Service (IRS), Treasury. ACTION: Notice and request for comments. AGENCY: The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction SUMMARY: PO 00000 Frm 00183 Fmt 4703 Sfmt 4703 31613 Act of 1995. Currently, the IRS is soliciting comments concerning requests for miscellaneous determination by organizations exempt under section 501(c)(3). More specifically, the burden associated with filing Form 8940, Request for Miscellaneous Determination. DATES: Written comments should be received on or before July 27, 2020 to be assured of consideration. ADDRESSES: Direct all written comments to Kinna Brewington, Internal Revenue Service, Room 6529, 1111 Constitution Avenue NW, Washington, DC 20224. Requests for additional information or copies of the regulations should be directed to Ronald J. Durbala, at Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW, Washington DC 20224, or through the internet, at RJoseph.Durbala@irs.gov. SUPPLEMENTARY INFORMATION: Title: Request for Miscellaneous Determination. OMB Number: 1545–2211. Form Number(s): 8940. Abstract: Organizations exempt under section 501(c)(3) may file Form 8940 for miscellaneous determinations under sections 507, 509(a), 4940, 4942, 4945, and 6033. Nonexempt charitable trusts may also file a Form 8940 for an initial determination under section 509(a)(3). Current Actions: There is no change to the burden previously approved by OMB. This request is being submitted for renewal purposes only. Type of Review: Extension of a currently approved collection. Affected Public: Not-for-profit institutions. Estimated Number of Respondents: 2,100. Estimated Time per Respondent: 13 hours, 47 min. Estimated Total Annual Burden Hours: 28,959. The following paragraph applies to all the collections of information covered by this notice: An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained if their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Desired Focus of Comments: The Internal Revenue Service (IRS) is particularly interested in comments that: E:\FR\FM\26MYN1.SGM 26MYN1

Agencies

[Federal Register Volume 85, Number 101 (Tuesday, May 26, 2020)]
[Notices]
[Pages 31598-31613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11247]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network


Agency Information Collection Activities; Proposed Renewal; 
Comment Request; Renewal Without Change of the Bank Secrecy Act Reports 
by Financial Institutions of Suspicious Transactions at 31 CFR 
1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, 
and 1029.320, and FinCEN Report 111--Suspicious Activity Report

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Notice and request for comments.

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SUMMARY: As part of its continuing effort to reduce paperwork and 
respondent burden, FinCEN invites comments on the proposed renewal, 
without change, of currently approved information collections relating 
to reports of suspicious transactions. Under the Bank Secrecy Act 
regulations, financial institutions are required to report suspicious 
transactions using FinCEN Report 111 (the suspicious activity report, 
or SAR). Although no changes are proposed to the information 
collections themselves, this request for comments covers a proposed 
updated burden estimate for the information collections. This request 
for comments is made pursuant to the Paperwork Reduction Act of 1995.

DATES: Written comments are welcome, and must be received on or before 
July 27, 2020.

ADDRESSES: Comments may be submitted by any of the following methods:
     Federal E-rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. Refer to Docket Number 
FINCEN-2020-0004 and the specific Office of Management and Budget (OMB) 
control numbers 1506-0001, 1506-0006, 1506-0015, 1506-0019, 1506-0029, 
1506-0061, and 1506-0065.
     Mail: Policy Division, Financial Crimes Enforcement 
Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-
2020-0004 and OMB control numbers 1506-0001, 1506-0006, 1506-0015, 
1506-0019, 1506-0029, 1506-0061, and 1506-0065.
    Please submit comments by one method only. Comments will also be 
incorporated into FinCEN's review of existing regulations, as provided 
by Treasury's 2011 Plan for Retrospective Analysis of Existing Rules. 
All comments submitted in response to this notice will become a matter 
of public record. Therefore, you should submit only information that 
you wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section 
at 1-800-767-2825 or electronically at [email protected].

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Provisions

    The legislative framework generally referred to as the Bank Secrecy 
Act (BSA) consists of the Currency and Financial Transactions Reporting 
Act of 1970, as amended by the Uniting and Strengthening America by 
Providing Appropriate Tools Required to Intercept and Obstruct 
Terrorism Act of 2001 (USA PATRIOT Act) (Pub. L. 107-56) and other 
legislation. The BSA is codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-
1959, 31 U.S.C. 5311-5314 and 5316-5332, and notes thereto, with 
implementing regulations at 31 CFR Chapter X.
    The BSA authorizes the Secretary of the Treasury, inter alia, to 
require financial institutions to keep records and file reports that 
are determined to have a high degree of usefulness in criminal, tax, 
and regulatory matters, or in the conduct of intelligence or counter-
intelligence activities, to protect against international terrorism, 
and to implement counter-money laundering programs and compliance 
procedures.\1\ Regulations implementing Title II of the BSA appear at 
31 CFR Chapter X. The authority of the Secretary to administer the BSA 
has been delegated to the Director of FinCEN.\2\
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    \1\ Section 358 of the USA PATRIOT Act added language expanding 
the scope of the BSA to intelligence or counter-intelligence 
activities to protect against international terrorism.
    \2\ Treasury Order 180-01 (re-affirmed January 14, 2020).
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    Under 31 U.S.C. 5318(g), the Secretary of the Treasury is 
authorized to require financial institutions to report any suspicious 
transaction relevant to a possible violation of law or regulation. 
Regulations implementing 31 U.S.C. 5318(g) are found at 31 CFR 
1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, 
1029.320, and 1030.320. The information collected under these 
requirements are made available to appropriate agencies and 
organizations as disclosed in FinCEN's Privacy Act System of Records 
Notice relating to BSA Reports.\3\
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    \3\ FinCEN's System of Records Notice for the BSA Reports System 
was most recently published at 79 FR 20969 (April 14, 2014).
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II. Paperwork Reduction Act (PRA) \4\
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    \4\ Public Law 104-13, 44 U.S.C. 3506(c)(2)(A).
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    Title: Reports by Financial Institutions of Suspicious Transactions 
(31 CFR 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 
1026.320, and 1029.320).
    OMB Control Numbers: 1506-0001, 1506-0006, 1506-0015, 1506-0019, 
1506-0029, 1506-0061, and 1506-0065.\5\
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    \5\ The SAR regulatory reporting requirements are currently 
covered under the following OMB control numbers: 1506-0001 (31 CFR 
1020.320--Reports by banks of suspicious transactions); 1506-0006 
(31 CFR 1021.320--Reports by casinos of suspicious transactions); 
1506-0015 (31 CFR 1022.320--Reports by money services businesses of 
suspicious transactions); 1506-0019 (31 CFR 1023.320--Reports by 
brokers or dealers in securities of suspicious transactions, 31 CFR 
1024.320--Reports by mutual funds of suspicious transactions, and 31 
CFR 1026.320--Reports by futures commission merchants and 
introducing brokers in commodities of suspicious transactions); 
1506-0029 (31 CFR 1025.320--Reports by insurance companies of 
suspicious transactions); and 1506-0061 (31 CFR 1029.320--Reports by 
loan or finance companies of suspicious transactions). The PRA does 
not apply to reports by one government entity to another government 
entity. For that reason, there is no OMB control number associated 
with 31 CFR 1030.320--Reports of suspicious transactions by housing 
government sponsored enterprises. OMB control number 1506-0065 
applies to FinCEN Report 111--SAR.

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[[Page 31599]]

    Report Number: FinCEN Report 111--Suspicious Activity Report (SAR).
    Abstract: FinCEN is issuing this notice to renew the OMB control 
numbers for the SAR regulations and the SAR report.
    Type of Review: Renewal without change of currently approved 
information collections.
    Affected Public: Businesses or other for-profit institutions, and 
non-profit institutions.

SAR Regulations

    Estimated Burden: An administrative burden of one hour is assigned 
to each of the SAR regulation OMB control numbers in order to maintain 
the requirements in force.\6\ The reporting and recordkeeping burden is 
reflected in FinCEN Report 111--SAR, under OMB control number 1506-
0065. The rationale for assigning one burden hour to each of the SAR 
regulation OMB control numbers is that the annual burden hours would be 
double counted if FinCEN estimated burden in the industry SAR 
regulation OMB control numbers and in the FinCEN Report 111--SAR OMB 
control number.
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    \6\ One hour of burden is estimated under each of the following 
OMB control numbers: 1506-0001, 1506-0006, 1506-0015, 1506-0019, 
1506-0029, and 1506-0061.
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FinCEN Report 111--SAR

    Type of Review:
     Propose for review and comment a re-calculation of the 
portion of the PRA burden that has been subject to notice and comment 
in the past (the ``traditional annual PRA burden'').
     Propose for review and comment a method to estimate the 
portion of the PRA burden that FinCEN previously had not included (the 
``supplemental annual PRA burden'').
    Frequency: As required.
    Estimated Number of Respondents: 12,148 financial institutions.\7\
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    \7\ See Table 1 below for a breakdown of the types of financial 
institutions that filed SARs in 2019. Note that all banks, casinos 
and card clubs, money services businesses, brokers or dealers in 
securities, mutual funds, providers of covered insurance products, 
futures commission merchants and introducing brokers in commodities, 
loan or finance companies, and housing government sponsored 
enterprises are required to comply with the SAR regulatory 
requirements; however, not all financial institutions identify 
suspicious activity that would warrant a SAR filing. See 31 CFR 
1020.320 (banks), 31 CFR 1021.320 (casinos and card clubs), 31 CFR 
1022.320 (money services businesses), 31 CFR 1023.320 (brokers or 
dealers in securities), 31 CFR 1024.320 (mutual funds), 31 CFR 
1025.320 (insurance companies), 31 CFR 1026.320 (futures commission 
merchants and introducing brokers in commodities), 31 CFR 1029.320 
(loan or finance companies), and 31 CFR 1030.320 (housing government 
sponsored enterprises).
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    Estimated Reporting and Recordkeeping Burden:
    In this notice, FinCEN introduces two substantial modifications to 
the scope and the methodology we previously used to estimate the annual 
PRA burden associated with the SAR. First, with respect to the scope of 
the estimate, FinCEN's traditional annual PRA burden estimate 
associated with the SAR included only the filer's annual operational 
burden and cost associated with (a) producing and filing the report, 
and (b) storing a copy of the filed report. Starting with this notice, 
FinCEN intends to add a supplemental annual PRA burden estimate that 
reflects the annual costs involved in (a) determining whether alerts 
that were elevated for further review merit filing a SAR, and (b) 
documenting the decision not to file a SAR when a case does not merit 
it.\8\ Second, with respect to the methodology underlying the PRA 
burden and cost estimates, rather than continuing to allocate a single 
PRA burden and cost to the completion, submission, and storage of any 
type of SAR, FinCEN proposes to estimate the individual PRA burden and 
cost of different categories of SARs, grouped by the SARs' estimated 
degree of complexity. Because there is no direct way to measure the 
complexity and related effort and cost of producing each SAR, FinCEN 
uses key features of SARs filed in 2019 to categorize them based on 
similar combinations of those key features, under the assumption that 
such combinations of key features reflect similar levels of effort and 
cost necessary to produce the SARs.
---------------------------------------------------------------------------

    \8\ Despite the expanded scope, FinCEN has not presented in this 
notice an estimate of the entire burden that is associated with SAR 
filings because, as described further in Part 2, FinCEN lacks the 
granular data to estimate the costs of certain steps in that 
process.
---------------------------------------------------------------------------

    Part 1 below sets out the breakdown of the SARs filed during 2019 
according to the key features that are used to group SARs into 
categories subject to similar PRA burden and cost. Part 1 also contains 
the analysis of how some combinations of key features worked or failed 
to work as proxies for a SAR's complexity and, therefore, burden and 
cost.
    Part 2 uses the results of the analysis in Part 1 to estimate the 
individual and total annual PRA burden and cost of each category of 
SARs. The methodology described in Part 2 covers both the traditional 
and the supplemental annual PRA burden estimate.

Part 1. Breakdown of the 2019 SAR Filings

    In 2019, 12,148 financial institutions (the ``filing population'') 
submitted 2,751,694 SARs (the 2019 SAR submissions).\9\ The 
distribution of the 2019 SAR submissions, by type of filing (original 
or continuing),\10\ type of financial institution,\11\ number of 
reports per filer per year, and method of filing (batch or 
discrete),\12\ is presented in Table 1 below:
---------------------------------------------------------------------------

    \9\ Numbers are based on actual 2019 filings as reported to the 
BSA E-Filing System, as of 12/31/2019. Assumptions and estimates are 
also based on actual 2019 SAR filings.
    \10\ An original (or initial) report is the first SAR filed on 
suspicious activity no later than 30 days after the date of initial 
detection by the filer. (See e.g., 31 CFR 1020.320(a)(3)). A 
continuing SAR must be filed on suspicious activity that continues 
after an initial SAR is filed. Continuing reports must be filed on 
successive 90-day review periods until the suspicious activity 
ceases, but may be filed more frequently if circumstances warrant. 
For more information on continuing reports, see page 142 of the 
FinCEN Suspicious Activity Report (FinCEN SAR) Electronic Filing 
Requirements--XML Schema 2.0. https://bsaefiling.fincen.treas.gov/docs/XMLUserGuide_FinCENSAR.pdf.
    \11\ In Table 1, the category ``Securities/Futures'' includes 
brokers or dealers in securities, mutual funds, futures commission 
merchants, and introducing brokers in commodities. The category 
``Undetermined'' includes filers with missing, incomplete, or 
contradictory information about the type of financial institution to 
which they belong.
    \12\ In batch filing, a filer submits a single electronic file 
containing several reports. In discrete filing, the filer fills in 
an electronic report individually, using a data entry screen that 
FinCEN provides. While exceptions apply, batch filing is generally 
used by large-volume filers that have automated the filing process, 
while discrete filing is generally employed by filers that submit 
fewer reports per year and rely more on manual data entry methods.

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[[Page 31600]]

[GRAPHIC] [TIFF OMITTED] TN26MY20.005

    Table 1 shows that banks submitted slightly over half of the total 
number of SARs filed in 2019. Money services businesses (MSBs) and 
credit unions contributed 32.9% and 7.3% of the total, respectively. 
Approximately 85% of the filings from all financial institutions 
consisted of original reports. In addition, approximately 85% of the 
reports were batch filed.
    To determine the concentration of 2019 SAR submissions among the 
filing population, FinCEN grouped filers in tranches according to the 
number of SARs filed during the year. Table 2 sets out the number of 
reports per tranche,\13\ and Table 3 sets out (i) each tranche as a 
percentage of the total filer population, and (ii) each tranche's 
reports as a percentage of the 2019 SAR submissions.\14\
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    \13\ The category ``Other'' in Table 2 includes securities and 
futures, housing government sponsored enterprises, providers of 
covered insurance products, and filers for which the type of 
financial institution was still being determined at the moment of 
publication of this notice, as defined above. We adopt the same 
criteria for the rest of the tables contained in the notice, such as 
in Tables 4A, 4B, and 5 below.
    \14\ The percentage of filers contained in each tranche, and the 
percentage of reports submitted by those filers, are contained in 
the fields ``pct_filers'' and ``pct_forms'', respectively. The 
cumulative percentage of filers contained in all tranches up to and 
including the current one, and the cumulative percentage of reports 
submitted by such filers, are shown in the fields 
``cumm_pct_filers'' and ``cumm_pct_forms'', respectively.
[GRAPHIC] [TIFF OMITTED] TN26MY20.006


[[Page 31601]]


[GRAPHIC] [TIFF OMITTED] TN26MY20.007

    Ten filers (six banks and four MSBs) made up the first tranche 
(00_LARGEST FILERS). As set out in Table 3, these ten filers accounted 
for nearly half of the 2019 SAR submissions. Slightly less than 2% of 
the filing population (Tranches 00 to 03) submitted 81% of all the 
reports. Additionally, out of the filing population, 81% contributed 
slightly less than 4% of the filings, while 56% submitted fewer than 10 
reports per year.
    Unlike currency transaction reports, for example, which are more 
easily categorized because they are filed based on objective criteria 
(i.e., transaction type and threshold), each SAR may require a widely 
disparate level of effort depending largely on the amount of research 
and subjective analysis required to determine: (a) Whether to file a 
report; (b) how to attribute the suspicious behavior to money 
laundering, financing of terrorism, or fraud typologies; (c) who the 
main persons involved in the activity are; and (d) how to explain in 
concise terms the rationale that led the filer to decide to file a SAR. 
As FinCEN has no direct way to gauge the amount of work involved in the 
production of each SAR, FinCEN broke down the 2019 SAR submissions by 
additional key features, so that, individually or in combination, these 
additional key features could serve as a proxy to group SARs with 
similar levels of estimated complexity, and therefore, with similar 
estimated PRA burden.
    The additional key features in the SARs that FinCEN has 
concentrated its analysis on are: (a) The number of persons identified 
as subjects; (b) the number of distinct suspicious activities selected; 
\15\ (c) the length of the narrative section; and (d) whether or not 
the report contains an attachment.\16\ Once FinCEN identifies the 
combination of key features that are common to the largest number of 
reports submitted by a given type of filer (the ``standard content'' 
for that type of filer), FinCEN may take such combination as a proxy 
for the content and estimated complexity of a ``standard'' SAR for that 
filer type. Reports submitted by filers of the same type that contain 
different features (more subjects, more suspicious activities, a longer 
narrative) may represent SARs with ``extended content'' that are more 
complex, and therefore carry a larger PRA burden and cost for that 
filer type. Based on the data available, FinCEN is considering only two 
levels of SAR complexity.
---------------------------------------------------------------------------

    \15\ FinCEN Report 111--SAR contains checkboxes that allow 
filers to identify a variety of suspicious activities, such as 
structuring, terrorist financing, fraud, money laundering, and a 
cyber-event. FinCEN Report 111--SAR has 18 categories of suspicious 
activities.
    \16\ Some filers attach a supplemental file to the report that 
in general contains a list of individual transactions that raised 
the alert about a potential suspicious transaction. The length of 
the narrative is sometimes impacted by whether the filer submits an 
attachment to the report listing these transactions, or uses the 
narrative section of the report to include such a list.
---------------------------------------------------------------------------

    Table 4A shows a breakdown of the 2019 SAR submissions by type of 
financial institution and narrative length. Table 4B shows the 
percentage of reports with and without attachments, by type of 
financial institution, and narrative length.

[[Page 31602]]

[GRAPHIC] [TIFF OMITTED] TN26MY20.008

    Table 5 breaks down the 2019 SAR submissions by type of financial 
institution and number of suspicious activities identified in each 
report.\17\
---------------------------------------------------------------------------

    \17\ The number of suspicious activities identified in each 
report represents the number of check boxes selected by the filer.
[GRAPHIC] [TIFF OMITTED] TN26MY20.009

    Approximately 44% of the SARs submitted by all filers have 
narratives not exceeding 2,000 characters (half a page), and another 
39% have narratives above half a page but not exceeding one page. Most 
SARs (60%) identify up to two suspicious activities, while another 38% 
list between three and five.

[[Page 31603]]

    FinCEN analyzed key features of the 2019 SAR submissions described 
in Tables 1 through 5 to generate a tractable segmentation of the SAR 
universe into different levels of burden. FinCEN based this 
segmentation on the following observations:
     FinCEN was not able to limit the criteria for selecting 
categories of SAR burden to the type of financial institution or the 
tranche of a filer alone because of large variations in the combination 
of features within each type of financial institution or tranche. It 
was possible, however, to arrive at a small number of complexity 
categories by combining key features that highlight significant 
differences between depository institution filers (banks and credit 
unions), MSBs, and other types of financial institution filers (non-
depository institutions).
     Based on the analyzed complexity features as well as 
FinCEN's extensive use of SARs in its work, in general and on 
average,\18\ the content of SARs shows the following general features:
---------------------------------------------------------------------------

    \18\ By ``in general, '' FinCEN is speaking without regard to 
outliers (e.g., reports exhibiting features that are uncommonly 
higher or lower than those of the population at large), or that 
apply to a very narrow type of filer or type of transaction. By ``on 
average,'' FinCEN means the mean of the distribution of each subset 
of the population (althoughFinCEN uses median labor cost data to 
calculate weighted hourly worker compensation allocated to each PRA 
burden hour in Table 6 below).
---------------------------------------------------------------------------

    (a) There appears to be a positive correlation between the number 
and complexity of a financial institution's main business lines, and 
the value registered by some of the key features selected: The higher 
the number and complexity of the filer's business lines, the higher the 
number of suspicious transactions identified and the longer the 
narrative.
    (b) In general, non-depository institutions with a single primary 
business line (i.e., loan and finance companies or casinos) file 
reports that (a) list up to two suspicious transactions involving one 
subject and a single transaction or a small number of transactions over 
a short period of time, and (b) use relatively short narratives of up 
to half a page to explain the basis for their suspicion.
    (c) Some SARs filed by non-depository institutions have features 
indicating complexity, particularly longer narratives, despite the SARs 
not being complex. A sample of the SARs filed by two of the largest 
non-depository institutions showed that in 94% of the SARs with longer 
narratives, the increased length was due to listing transactions the 
filer appeared to have tracked automatically. Six percent of those SARs 
appeared to have required greater analytical effort. To estimate the 
number of SARs with extended content filed by non-depository 
institutions in 2019, FinCEN therefore applied the six percent 
threshold to the total number of SARs with narratives over one page 
filed by non-depository institutions.
    (d) Nearly three quarters of original SARs filed by depository 
institutions report only up to two subjects involved in up to five 
suspicious activities, described in a narrative that does not exceed 
one page, and on their face do not appear complex. Many SARs filed by 
depository institutions, however, have features indicating complexity. 
This may reflect any combination of the factors laid out in the tables 
above--number of subjects per SAR, number of suspicious transactions 
listed per SAR, length of the narrative, and presence of an attachment. 
However, some SARs that appear complex based on these features often 
are not in reality. Depository institutions, which in general tend to 
offer many business lines mostly to established customers, sometimes 
include in SARs a comparison of other information they maintain. This 
can increase the apparent complexity of SARs analyzed against the 
complexity factors FinCEN identified without necessarily being 
indicative of a SAR requiring extensive research. FinCEN controlled for 
this by removing from the complex category SARs that had a high ratio 
of digits to non-digit text in the SAR narrative, because a high ratio 
of digits often indicates the algorithmic inclusion of transaction data 
in the SAR narrative.
     For all financial institutions, FinCEN estimates that the 
review of cases documenting the need to file continuing SARs, and the 
filing of the continuing SARs themselves, will require substantially 
less effort than the review of cases leading to the filing of original 
SARs, and the actual filing of such original SARs.
     Lastly, FinCEN assumes that financial institutions that 
batch file SARs have a degree of automation they can employ to the 
partial filling of the report. Batch filers will also store electronic 
files that may contain several reports per file. Based on these 
assumptions, FinCEN allocates a lower PRA burden per report to these 
filers. This burden consists of the actual time of submission per 
report (which may be close to instantaneous), and the administrative 
and supervisory tasks involved in this stage.
    As noted, reflecting the observations above, FinCEN identified five 
categories of SARs to generate a tractable segmentation of complexity 
for analyzing estimated PRA burden: (a) Continuing SARs; (b) original 
SARs with standard content filed by non-depository institutions; (c) 
original SARs with extended content filed by non-depository 
institutions; (d) original SARs with standard content filed by 
depository institutions; and (e) original SARs with extended content 
filed by depository institutions.

Part 2. PRA Burden and Cost Estimates

    Based on industry input, including input obtained over the past 
year in a project assessing how to improve the effectiveness of BSA 
data and measure its value for each stakeholder group, FinCEN 
understands that the SAR filing process comes at the end of a larger 
process that varies in complexity depending on the type and size of the 
financial institution: \19\
---------------------------------------------------------------------------

    \19\ FinCEN acknowledges that the description of the SAR 
production process in this notice seems to imply that the process is 
always linear, with each stage following the previous one. While 
this situation may reflect a large proportion of the cases reviewed 
and SARs filed, certain situations will require the filer to return 
to an earlier stage (such as requiring additional information from 
the case managers, or drafting several versions of a narrative). The 
breakdown of the SAR production process in a discrete number of 
linear stages is intended as a conceptual framework to guide 
FinCEN's estimates of the different levels of PRA burden. Such 
framework does not involve or imply any modification to, or new 
interpretation of the actual rule text of BSA regulations. The 
details provided in each stage of the framework serve only as a list 
of the features FinCEN did or did not consider when estimating the 
PRA burden of such stage. While FinCEN believes the tasks described 
in the framework represent the work generally required to produce a 
SAR, there is no obligation for a financial institution to adopt 
either formally or informally a process such as the one presented by 
the framework.
---------------------------------------------------------------------------

    Stage 1--Maintaining a Monitoring System: Commensurate with the 
size of the filer and the complexity of its operations, each filer will 
run, update, and upgrade a monitoring system that reflects its 
assessment of risk. This monitoring system will vary in complexity from 
a manual review process to a fully automated one.\20\
---------------------------------------------------------------------------

    \20\ FinCEN recognizes that filers may use the monitoring system 
to comply with additional BSA and non-BSA regulatory requirements, 
as well as for other business purposes such as protecting against 
reputational risks of money laundering and fraud against the filer 
or the filer's customers.
---------------------------------------------------------------------------

    Stage 2--Reviewing Alerts: When the monitoring system issues an 
alert, the filer will have to determine whether the alert reveals a 
true potential risk event, or is a false positive.
    Stage 3--Transforming Alerts into Cases: If, based on the filer's 
analysis, the alert points to a true potential risk event, the filer 
will gather additional information to present the case to the reviewing 
level that will eventually

[[Page 31604]]

decide whether the event merits the filing of a SAR.
    Stage 4--Case Review: The appropriate level will review the case to 
determine whether or not the event constitutes a suspicious activity 
that must be reported.
    Stage 5--Documentation of Determination: This notice takes into 
account that filers document decisions they make as part of Stage 4 
that lead them to conclude that an event does not warrant the filing of 
a SAR.
    Stage 6--SAR Filing Process: If an event warrants the filing of a 
SAR, the filer will follow its SAR filing process, including: (a) 
Selecting supporting documentation; (b) completing the report, 
including drafting the narrative; (c) filing the report through batch 
or discrete filing; and (d) storing the filed report and supporting 
documentation in physical or electronic form.
    Each stage requires the filer's use of human and technological 
resources, which combination will vary according to the sophistication 
of the filer. Previously, FinCEN limited its annual SAR PRA burden 
estimate to Stage 6 mentioned above, the SAR filing process (the 
``traditional annual PRA burden''). In this notice, FinCEN expands its 
PRA burden estimate to include Stages 4 and 5 listed above (the 
``supplemental annual PRA burden'').
    FinCEN is not addressing the burden associated with Stages 1 to 3 
above due to the lack of the necessary granular information. Notably, 
FinCEN would need information regarding: (i) The levels of burden and 
cost attributed to differing monitoring systems; (ii) varying levels of 
complexity in determining whether alerts represent true alerts; and 
(iii) the amount of research involved in assembling cases to determine 
whether true alerts warrant the filing of a SAR. Furthermore, FinCEN 
would need additional information to identify the proportion of these 
costs that are strictly connected to the filing of a SAR relative to 
the same costs associated with a filer's other regulatory or business 
requirements. FinCEN intends to address the information required for 
the estimate of the burden and cost of Stages 1 to 3 in a future 
notice. FinCEN acknowledges that each stage of the SAR production 
contributes to the next (including those stages of the process not 
included in this notice). FinCEN assesses, however, that the 
information provided by this notice, though not a complete estimate of 
the SAR PRA burden, improves the estimate and creates a foundation for 
a future estimate of the costs of all six stages.
    FinCEN recognizes that SAR cases that are more complex may take a 
longer time to review at multiple stages, such as the case 
investigation point in Stage 4 and the SAR filing point in Stage 6. 
However, for ease of presentation, FinCEN calculated the extra burden 
of handling complex cases in our burden estimate for Stage 6, and 
attributed a burden that represents our estimate of the standard 
administrative work connected to continuing and original SARs to Stages 
4 and 5. Therefore, the total estimate proposed in this notice will be 
the aggregate of the following estimates of the PRA burden related to:
     Evaluating cases for potential SAR filing (Stage 4). This 
will be part of the supplemental annual PRA burden calculation.
     Recordkeeping of cases not converted into SARs (Stage 5). 
This will be part of the supplemental annual PRA burden calculation.
     The SAR filing process (Stage 6). This will be part of the 
traditional annual PRA burden calculation and will include the PRA 
burden associated with the filing of (i) continuing SARs, (ii) original 
SARs filed by non-depository financial institutions, and (iii) original 
SARs filed by depository financial institutions.
    FinCEN identified four staff positions and corresponding roles 
involved in the SAR process in order to estimate the hourly costs 
associated with the burden hour estimates calculated in this part. 
Those are: (i) General supervision (providing process oversight); (ii) 
direct supervision (reviewing operational-level work and cross-checking 
all or a sample of the filings against their supporting documentation); 
(iii) clerical work (engaging in case evaluation to support the 
determination of whether a SAR must be filed); and (iv) clerical work 
(engaging in producing, filing, and storing SARs and supporting 
documentation).
    FinCEN calculated the fully loaded hourly wage for each of these 
four roles by taking the median wage as estimated by the U.S. Bureau of 
Labor Statistics (BLS), and computing an additional benefits cost as 
follows: \21\
---------------------------------------------------------------------------

    \21\ See U.S. Bureau of Labor Statistics, Occupational 
Employment Statistics-National, May 2019, available at https://www.bls.gov/oes/tables.htm. The most recent data from the BLS 
corresponds to May 2019. For the benefits component of total 
compensation, see U.S. Bureau of Labor Statistics, Employer's Cost 
per Employee Compensation as of December 2019, available at https://www.bls.gov/news.release/ecec.nr0.htm. The ratio between benefits 
and wages for financial activities, credit intermediation and 
related activities is $15.80 (hourly benefits)/$31.45 (hourly wages) 
= 0.502. The benefit factor is 1 plus the benefit/wages ratio, or 
1.502. Multiplying each hourly wage by the benefit factor produces 
the fully-loaded hourly wage per position.
[GRAPHIC] [TIFF OMITTED] TN26MY20.010


[[Page 31605]]


    FinCEN estimates that, in general and on average, each role would 
spend different amounts of time on each stage of the process covered by 
this notice, as described in the specific estimates below.
1. Estimate of the Burden and Cost of Evaluating Cases for Potential 
SAR Filing
    To estimate the PRA burden involved in evaluating each case 
generated by one or more alerts, FinCEN starts with the number of cases 
that, after review, resulted in the filing of 2,751,694 SARs in 2019. 
As set out in Table 1 above, of that total number of filings, 2,335,559 
reports were original SARs, and 416,135 were continuing SARs.
    In the case of continuing SARs, FinCEN assumes that the filer will 
be monitoring the specific transactions of the previously identified 
subject, and filing a continuing SAR every ninety days (if the subject 
did not discontinue the activity), and noting the cumulative monetary 
amount involved in the suspicious activity. FinCEN therefore assesses 
that the number of continuing suspicious activity cases will equal the 
number of continuing SARs.
    In the case of original SARs, however, a filer may need to review a 
large number of cases to determine which cases justify the filing of a 
report. A paper issued by the Bank Policy Institute in 2018 (the ``BPI 
Paper'') \22\ contains the estimates of 13 large, midsize, and small 
banks (with assets under management of more than $500 billion, between 
$200 to $500 billion, and between $50 and $200 billion, respectively) 
about their average conversion rate \23\ of cases to SARs. The BPI 
Paper states that, on average, banks filed SARs on 42% of alerts turned 
into cases (i.e., alerts that are not considered false positives).\24\ 
In the absence of similar data for other types of financial 
institutions, FinCEN adopts the bank average conversion rate from cases 
to SARs set out in the BPI Paper (42%) to approximate the number of 
cases that could have generated the number of original SARs filed in 
2019. If 42% of cases result in the filing of a SAR, the total filing 
population would have had to review approximately 5,560,854 cases \25\ 
to report the 2,335,559 original SARs submitted in 2019.\26\
---------------------------------------------------------------------------

    \22\ `Getting to Effectiveness--Report on U.S. Financial 
Institution Resources Devoted to BSA/AML and Sanctions Compliance', 
Bank Policy Institute, October 29, 2018, available at https://bpi.com/wp-content/uploads/2018/10/BPI_AML_Sanctions_Study_vF.pdf. 
See pages 5-7.
    \23\ The average conversion rate represents the percentage of 
the total number of cases that, after receiving further review and 
consideration, warranted the filing of a SAR.
    \24\ Ibid. The BPI Paper identifies several provisos regarding 
the correlation among the different metrics (such as the number of 
alerts related to AML issues only, while the number of SARs filed 
included both fraud and AML-related transactions). FinCEN considers 
that these qualifications do not affect the rationale of applying 
the bank conversion rate of cases into SARs to the full filer 
population.
    \25\ The number of original SARs submitted in 2019 (2,335,559) 
divided by the 42% conversion rate.
    \26\ FinCEN acknowledges that this estimate simplifies the 
conversion, stipulating that one case will generate or fail to 
generate one SAR, when in practice several cases may be reported in 
a single SAR. It is also possible, while not very probable, that a 
single case may require the filing of more than one simultaneous 
SAR.
---------------------------------------------------------------------------

    FinCEN estimates that the average burden involved in considering 
whether a case merits filing an original SAR, for all types of 
financial institutions and for any type of suspicious transactions, 
would be 20 minutes per case. FinCEN estimates that the average burden 
involved in reviewing cases involving continuing SARs will be much 
lower, at 3 minutes per case.
    FinCEN assumes that the review of cases will involve the 
participation of three of the roles described above, as follows:\27\
---------------------------------------------------------------------------

    \27\ FinCEN's assumption is that the clerical work involved in 
the case review stage would include general administrative and 
coordination responsibilities, such as the maintaining of agendas, 
documentation of minutes, assembly of files to be presented to the 
appropriate authority (for example, a filer's SAR Committee), and 
the summarization of the reasons not to file.
[GRAPHIC] [TIFF OMITTED] TN26MY20.011

    The total annual PRA burden of this stage involving cases related 
to both continuing and original SARs would be 1,874,424 hours, at a 
total cost of $91,846,776, as described in Tables 8A and 8B below.

[[Page 31606]]

[GRAPHIC] [TIFF OMITTED] TN26MY20.012

2. Estimate of the Burden and Cost of Documenting Cases Not Converted 
Into SARs
    With 2,335,559 cases resulting in SAR filings and an estimated 
conversion rate of 42%, out of the estimated 5,560,854 cases, 3,225,295 
would be cases involving a decision not to file. FinCEN estimates that 
the average burden hours of documenting the rationale as to why a case 
does not merit filing a SAR, for all types of financial institutions 
and in the context of any type of suspicious transactions, would be 25 
minutes per report.
    FinCEN assumes that documenting the rationale for not filing a SAR 
and the storage of the case documents will involve the participation of 
three of the roles described above, as follows:
[GRAPHIC] [TIFF OMITTED] TN26MY20.013

    The total annual PRA burden of this stage would be 1,343,872 hours, 
at a total cost of $38,972,288, as described in Table 10 below:
[GRAPHIC] [TIFF OMITTED] TN26MY20.014


[[Page 31607]]


3. Estimate of the Burden of the SAR Filing Process
    FinCEN's prior estimate of the traditional average burden hours 
associated with the SAR filing process \28\ was based on a 2010 
assessment of the manual effort involved in the drafting, writing, 
filing, and storing of a paper-based SAR with a standard narrative of 
4,000 characters (i.e., one page), and the storing or segregation of 
paper-based supporting documentation. Since 2011, financial 
institutions have been able to (a) file SARs electronically either in 
batch or discrete format, and (b) include with their SARs an attachment 
containing tabular data such as transaction data providing additional 
suspicious activity information not suitable for inclusion in the 
narrative. This attachment must be an MS Excel-compatible comma 
separated value (CSV) file with a maximum size of 1 megabyte. These new 
features contribute to a substantial decrease in the hourly burden of 
the mechanical aspects of the filing and storage of SARs and supporting 
documentation.
---------------------------------------------------------------------------

    \28\ FinCEN's estimate of the traditional average burden hours 
involved in the SAR filing process was 2 hours for SARs filed 
individually (60 minutes attributed to reporting, and 60 minutes 
attributed to recordkeeping), and 2.5 hours per SAR for joint 
filings (90 minutes attributed to reporting, and 60 minutes 
attributed to recordkeeping). Joint filings are a single SAR filed 
by two or more separate financial institutions. This type of filing 
constitutes less than 1% of total filings.
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    As set out in the estimates above, the review of approximately 
5,560,854 cases would result in the closing out of 3,225,295 cases, and 
the filing of 2,335,559 original and 416,135 continuing SARs. In the 
previous part, FinCEN identified a tractable segmentation of SAR 
complexity: (a) Continuing SARs; (b) original SARs with standard 
content filed by non-depository institutions; (c) original SARs with 
extended content filed by non-depository institutions; (d) original 
SARs with standard content filed by depository institutions; and (e) 
original SARs with extended content filed by depository institutions. 
In all cases, the estimate represents the administrative burden 
involved in producing and reviewing a SAR, overseeing the process of 
filing a SAR, and the actual filing of a SAR, and not just the 
mechanical process of generating, submitting, and storing the SAR 
(which might be very small for fully-automated filers using the batch-
filing method).
    FinCEN assumes that the SAR filing process involves the following 
four roles described in Table 6, in varying proportions depending on 
whether the burden accounts for the reporting or the recordkeeping 
stage of the process:
[GRAPHIC] [TIFF OMITTED] TN26MY20.015

3.1. Continuing SARs
    In the case of a suspicious transaction that continues over time, 
filers must submit continuing SARs every ninety days. Financial 
institutions filed 416,135 continuing SARs as part of the 2019 SAR 
submissions. FinCEN estimates that, on average, the burden involved in 
filing a continuing SAR will be relatively low, and will be 
substantially the same among all types of financial institutions. The 
estimated hourly burden and its cost for continuing SARs are as 
follows:

[[Page 31608]]

[GRAPHIC] [TIFF OMITTED] TN26MY20.016

3.2. Original SARs Filed by Non-Depository Institutions
    Based on the application of the percentage described in Part 1 to 
SARs with narratives over one page filed by non-depository institution, 
FinCEN identified 988,377 reports with standard content and 6,897 with 
extended content.
Original SARs Filed by Non-Depository Institutions (Standard Content)
    For the purpose of calculating the burden of original SARs with 
standard content filed by non-depository institutions, FinCEN estimates 
that the average burden involved in the filing of original SARs will be 
higher than that of continuing SARs. Specifically, FinCEN uses an 
estimate of 40 minutes per batch-filed report and 60 minutes per 
discrete-filed report for drafting, writing, and submitting the SARs, 
and 5 minutes per batch-filed reports and 15 minutes per discrete-filed 
report for storing filed reports and supporting documentation. The 
estimated hourly burden and its cost for this subset of SARs are 
therefore as follows:
[GRAPHIC] [TIFF OMITTED] TN26MY20.017


[[Page 31609]]


Original SARs Filed by Non-Depository Institutions (Extended Content)
    For the purpose of calculating the burden of original SARs with 
extended content filed by non-depository institutions, FinCEN estimates 
that the average burden will be several times higher than that of 
standard content SARs, and the related cost will include a larger 
proportion of the levels of the organization with higher fully-loaded 
hourly wages (those representing indirect and direct supervision). The 
estimated hourly burden and its cost for this subset of SARs are 
therefore as follows:
[GRAPHIC] [TIFF OMITTED] TN26MY20.018

3.3. Original SARs Filed by Depository Institutions
    Based on the segmentation described in Part 1 of depository 
institution SARs into standard content and extended content, FinCEN 
identified 1,313,774 reports with standard content, and 26,513 that 
included extended content.
    The estimate of the reporting and recordkeeping burden of these two 
SAR subsets is as follows, using the per-SAR burden estimates included 
in the tables:
Original SARs Filed by Depository Institutions (Standard Content)
[GRAPHIC] [TIFF OMITTED] TN26MY20.019


[[Page 31610]]


Original SARs Filed by Depository Institutions (Extended Content)
[GRAPHIC] [TIFF OMITTED] TN26MY20.020

[GRAPHIC] [TIFF OMITTED] TN26MY20.021

    Estimated Reporting and Recordkeeping Burden: The estimated 
reporting and recordkeeping burden by type of process and report is as 
follows:

[[Page 31611]]

[GRAPHIC] [TIFF OMITTED] TN26MY20.022

    Estimated Total Annual Reporting and Recordkeeping Burden: The 
total estimated reporting and recordkeeping burden and cost per type of 
process and type of report are as follows:
    As detailed in Table 22 below, the total estimated recordkeeping 
and reporting annual PRA burden for the case review and SAR filing 
process of the seven OMB control numbers covered by this notice is 
5,462,026 hours, for a total cost of $206,422,989.
[GRAPHIC] [TIFF OMITTED] TN26MY20.023


[[Page 31612]]


    The distribution of the total estimated annual PRA burden and cost, 
by type of financial institution and SAR (original or continuing), and 
by SAR production process stage is as follows: \29\
---------------------------------------------------------------------------

    \29\ FinCEN obtained the breakdown by applying the percentages 
of continuing and original SARs by type of financial institution 
listed in Table 1, to the burden and cost estimates contained in 
Tables 8A, 8B, 10, and 13 to 20. Financial institutions the type of 
which is ``undetermined'' are included in the ``Other non-
depository'' category in Tables 23 and 24.
[GRAPHIC] [TIFF OMITTED] TN26MY20.024

[GRAPHIC] [TIFF OMITTED] TN26MY20.025

    FinCEN acknowledges that some of the partial estimates may over- or 
under-state the burden and cost of some the stages of the SAR 
production process covered by this notice, due to generalization and 
lack of more detailed information. FinCEN wishes to emphasize that the 
total burden presented in Table 22 is spread across a number of 
different SAR reporting requirements involving different types of 
financial institutions. Indeed, in the case of depository institutions, 
both FinCEN and the Federal banking agencies have regulations requiring 
SAR reporting.\30\ However, only one SAR form is filed in satisfaction 
of the rules of both FinCEN and the Federal banking agencies. FinCEN 
has historically never attempted to allocate the burden between 
agencies for SARs required by the rules of more than one agency.
---------------------------------------------------------------------------

    \30\ See 12 CFR 208.62, 211.5(k), 211.24(f), and 225.4(f) 
(Federal Reserve Board); 12 CFR 353.3 (Federal Deposit Insurance 
Corporation); 12 CFR 748.1(c) (National Credit Union 
Administration); 12 CFR 21.11 and 12 CFR 163.180 (Office of the 
Comptroller of Currency); and 31 CFR Chapter X (FinCEN).
---------------------------------------------------------------------------

    FinCEN intends to conduct more granular studies of the filing 
population in the near future, to arrive at more realistic estimates 
that take into consideration a more specific breakdown of the SAR 
production process, including estimating the burden to financial 
institutions of Stages 1 to 3, which may include the inter-agency 
burden allocation referred to above. The data obtained in these studies 
may result in a significant variation of the estimated total annual PRA 
burden.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number. Records required to be 
retained under the BSA must be retained for five years.

Part 3. Request for Comments

a. Specific Requests for Comments:
    Comments submitted in response to this notice will be summarized 
and/or included in the request for OMB approval. All comments will 
become a matter of public record. Comments are invited on the 
calculation of the total PRA burden of filing the SAR, under the 
current regulatory requirements. Specifically, comments are invited on 
the following issues:
    1. FinCEN has based the estimates contained in this notice on the 
actual SARs filed in 2019. We have restricted the analysis to features 
we could measure and statements we were able to support with data 
extracted from the 2019 filers and submissions, using limited external 
data for estimates of parameters such as labor costs and conversion 
rates for alerts into filed SARs. FinCEN is not able to factor in its 
estimate of the PRA burden the burden of portions of the process for 
which FinCEN lacks information in filed reports or reliable existing 
studies. All requests for comments ask the public to suggest other 
factors that may affect the burden and cost of SAR reporting. Suggested 
factors that FinCEN could

[[Page 31613]]

quantify by analyzing the contents of the BSA database, or by referring 
to statistical information publicly available, and without conducting a 
formal survey of the reporting financial institutions would be 
especially appreciated.
    2. FinCEN proposes to expand the annual PRA burden estimate to 
cover three stages of the SAR production process: (a) The review of 
cases based on monitoring alerts considered true positives; (b) the 
documentation of the decision not to turn a case into a SAR; and (c) 
the SAR filing process. A sample conversion rate of cases that lead to 
SARs for depository institutions was used to calculate how many total 
cases at all financial institutions would have to be evaluated to 
produce the total number of original SARs filed in 2019. FinCEN invites 
comments on the characterization of these three stages, the general 
case conversion rate utilized, and the existence of other generally 
available research documents that may show different case conversion 
rates for different financial institution types.
    3. FinCEN estimates that, in general, the cost of labor involved in 
the three stages of the SAR production process covered by this notice 
will depend on the level of involvement in each stage of at least four 
different types of labor within the organization (general supervision, 
direct supervision, clerical work for evaluation, and clerical work for 
recordkeeping). Is this a reasonable identification of the roles 
involved in the SAR process? Has FinCEN calculated labor costs 
reasonably? Within the calculations of PRA burden, has FinCEN 
reasonably estimated the involvement of the different kinds of labor 
identified?
    4. FinCEN arrived at estimates for (i) the hour burden of the 
review of all cases based on true positive alerts, and (ii) the 
decision not to file SARs based on the proportion of the cases that 
were not converted into original SARs. In general and on average, are 
these estimates reasonable?
    5. FinCEN segmented the universe of SAR filings into several 
different categories for purposes of estimating SAR complexity: (a) 
Continuing SARs; (b) original SARs with standard content filed by non-
depository institutions; (c) original SARs with extended content filed 
by non-depository institutions; (d) original SARs with standard content 
filed by depository institutions; and (e) original SARs with extended 
content filed by depository institutions. For each of these categories, 
FinCEN adjusted the estimated SAR filing burden depending on the filing 
method (batch or discrete). Is this segmentation reasonable? Are there 
other categories of SARs which FinCEN could quantify by analyzing the 
contents of the BSA database and without conducting a formal survey of 
the reporting financial institutions?
    6. Are the other assumptions FinCEN made to calculate the burden 
associated with filing the different categories of SARs reasonable, 
such as the number of minutes required for each category of report?
b. General Request for Comments
    Comments submitted in response to this notice will be summarized 
and/or included in the request for OMB approval. All comments will 
become a matter of public record. Comments are invited on: (1) Whether 
the collection of information is necessary for the proper performance 
of the functions of the agency, including whether the information shall 
have practical utility; (2) the accuracy of the agency's estimate of 
the burden of the collection of information; (3) ways to enhance the 
quality, utility, and clarity of the information to be collected; (4) 
ways to minimize the burden of the collection of information on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and (5) estimates 
of capital or start-up costs and costs of operation, maintenance, and 
purchase of services to provide information.

    Dated: May 20, 2020.
Derek Baldry,
Deputy Chief of Staff, Financial Crimes Enforcement Network.
[FR Doc. 2020-11247 Filed 5-22-20; 8:45 am]
BILLING CODE 4810-02-P