Exemptions to Suspicious Activity Report Requirements, 6580-6586 [2021-00037]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Proposed Rules]
[Pages 6580-6586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00037]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 353

RIN 3064-AF56


Exemptions to Suspicious Activity Report Requirements

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The FDIC is inviting comment on a proposed rule that would 
modify

[[Page 6581]]

the requirements for FDIC-supervised institutions to file Suspicious 
Activity Reports (SARs). The proposed rule would amend the FDIC's SAR 
regulation to allow the FDIC to issue exemptions from the SAR 
requirements. The proposed rule would make it possible for the FDIC to 
grant relief to FDIC-supervised institutions that develop innovative 
solutions to meet Bank Secrecy Act (BSA) requirements more efficiently 
and effectively.

DATES: Comments are due on or before February 22, 2021. Comments on the 
Paperwork Reduction Act burden estimates are due on or before March 23, 
2021.

ADDRESSES: You may submit comments, identified by RIN 3064-AF56, by any 
of the following methods:
     FDIC Website: https://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the agency 
website.
     FDIC Email: [email protected]. Include RIN 3064-AF56 on 
the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street building (located 
on F Street) on business days between 7 a.m. and 5 p.m.
    Please include your name, affiliation, address, email address, and 
telephone number(s) in your comment. All statements received, including 
attachments and other supporting materials, are part of the public 
record and are subject to public disclosure. You should submit only 
information that you wish to make publicly available.
    Please note: All comments received will be posted generally without 
change to https://www.fdic.gov/regulations/laws/federal, including any 
personal information provided.

FOR FURTHER INFORMATION CONTACT: Lisa Arquette, Associate Director, 
(202) 898-8633, [email protected], Division of Risk Management 
Supervision; John Dorsey, Acting Supervisory Counsel, (202) 898-3807, 
[email protected], Legal Division; or Constantine Lizas, Counsel, (202) 
898-6925, [email protected], Legal Division.

SUPPLEMENTARY INFORMATION:

I. Policy Objectives

    The policy objective of the proposed rule is to allow the FDIC to 
grant SAR filing exemptions, in conjunction with the Financial Crimes 
Enforcement Network of the Department of the Treasury (FinCEN), to 
FDIC-supervised institutions that develop innovative solutions to meet 
BSA requirements more efficiently and effectively. The FDIC is 
proposing this rule as a proactive measure to address the likelihood 
that FDIC-supervised institutions will leverage existing or future 
technologies to report information concerning suspicious activity in a 
different manner or time frame or to share SAR-related information. 
This change would more closely align the FDIC's regulation with 
FinCEN's regulation. FinCEN, unlike the FDIC, has broad statutory 
authority to issue exemptions from the SAR filing requirements. Because 
the FDIC's SAR regulations do not currently contain any provision by 
which the FDIC can issue case-by-case exemptions, a situation could 
arise in which FinCEN grants an exemption from the SAR filing 
requirements to an FDIC-supervised institution, but the institution 
would still need to file a SAR if the circumstance fell within the 
FDIC's SAR rule. The proposed rule would allow the FDIC to grant 
exemptions from SAR filing requirements in conjunction with FinCEN to 
reduce potential regulatory burden when a request involves the SAR 
filing requirements of both FinCEN and the FDIC.

II. Background

    The FDIC has long required its supervised institutions to report 
potential violations of law arising from transactions that flow through 
those institutions. From 1986 to 1996, FDIC-supervised institutions 
filed criminal referral forms with the FDIC, Federal Bureau of 
Investigation, and the local U.S. Attorney's office.\1\ The FDIC 
required reporting through criminal referral forms to facilitate the 
reporting of potential violations to law enforcement.
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    \1\ The FDIC first codified this requirement in 1986 at 12 CFR 
part 353 (1986), which required FDIC insured state non-member banks 
to report ``apparent violation[s]'' of federal criminal law. 51 FR 
16485, 16486 (May 5, 1986).
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    In 1992, Congress passed the Annunzio-Wylie Anti-Money Laundering 
Act, which redesigned the criminal referral process applicable to FDIC-
supervised institutions and made the reporting of certain suspicious 
transactions a requirement of the BSA.\2\ The Annunzio-Wylie Anti-Money 
Laundering Act permitted the Department of the Treasury to require 
financial institutions, including FDIC-supervised institutions, to 
``report any suspicious transaction relevant to a possible violation of 
law or regulation.'' \3\ Thereafter, the Department of the Treasury, in 
consultation with the FDIC, the other federal banking agencies, and law 
enforcement, developed the modern SAR form and reporting process, which 
standardized the reporting forms and created a centralized database 
that could be accessed by multiple law enforcement and regulatory 
agencies.
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    \2\ Public Law 102-550, 106 Stat. 3672 (Oct. 28, 1992).
    \3\ 31 U.S.C. 5318(g)(1). The quoted text is from section 1517 
of the Annunzio-Wylie Anti-Money Laundering Act, which was 
originally codified at 31 U.S.C. 5314(g). The text was moved as part 
of the Violent Crime Control and Law Enforcement Act of 1994.
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    To implement this new reporting system, FinCEN implemented its SAR 
regulation in 1996 \4\ for financial institutions subject to BSA 
requirements to address, among other things, the reporting of money 
laundering transactions and transactions designed to evade the 
reporting requirements of the BSA.\5\ To further implement this new 
reporting process and reduce unnecessary reporting burdens, the FDIC 
and the other federal banking agencies contemporaneously amended their 
criminal referral form regulations to incorporate the new SAR form and 
reporting database, align their regulatory reporting requirements with 
FinCEN's reporting requirements, and further refine the reporting 
processes.\6\
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    \4\ FinCEN is the Administrator of the Bank Secrecy Act.
    \5\ 61 FR 4326 (Feb. 5, 1996). Prior to the adoption of FinCEN's 
SAR regulation in 1996 and the accompanying revisions to the FDIC's 
regulation, the FDIC's criminal referral regulation had no specific 
provision requiring the reporting of money laundering transactions. 
See footnote 1. However, the FDIC's criminal referral regulation 
prior to the SAR regulation broadly encompassed money laundering and 
structuring transactions. See 58 FR 28757, 28772 (May 17, 1993).
    \6\ 61 FR 6095 (Feb. 16, 1996) (FDIC); 61 FR 6100 (Feb. 16, 
1996) (OTS); 61 FR 4326 (Feb. 5, 1996) (FinCEN).
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    As a result of this redesign and FinCEN's implementing regulation, 
FDIC-supervised institutions are currently required under both FDIC and 
FinCEN regulations to file SARs. These regulations are not identical 
but are substantially similar. Both SAR regulations require, among 
other things, FDIC-supervised institutions to file SARs relating to 
money laundering and transactions that are designed to evade the 
reporting requirements of the BSA, as well as maintain the 
confidentiality of a SAR in most circumstances.\7\ However, the FDIC's 
SAR regulation covers a slightly broader range of transactions, for 
example, by requiring SARs to be filed for any known or suspected 
instance of insider abuse in any amount, and further requiring the

[[Page 6582]]

prompt notification to the institution's board of directors when a SAR 
has been filed.
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    \7\ See 12 CFR part 353; 31 CFR 1020.320(a)(2).
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    FinCEN has general authority to grant exemptions from the BSA's 
requirements, which includes granting exemptions under its SAR 
reporting regulation.\8\ FinCEN's regulation provides that ``[t]he 
Secretary [of Treasury], in his sole discretion, may by written order 
or authorization make exceptions to or grant exemptions from the 
requirements of [the BSA]. Such exceptions or exemptions may be 
conditional or unconditional, may apply to particular persons or to 
classes of persons, and may apply to transactions or classes of 
transactions.'' The Secretary of Treasury delegated this exemption 
authority to FinCEN. In contrast, the FDIC's SAR regulations contain a 
discrete set of filing exemptions pertaining to physical crimes 
(robberies and burglaries), and lost, missing, counterfeit, or stolen 
securities.
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    \8\ See 31 U.S.C. 5318(a)(7), with implementing regulations at 
31 CFR 1010.970.
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    This disparity in exemptions makes it more difficult for the FDIC 
to grant relief if an FDIC-supervised institution has a novel SAR 
filing proposal that does not squarely fit within the FDIC's regulatory 
requirements, but would nonetheless be consistent with safe and sound 
banking and with the BSA. As financial technology and innovation 
continue to develop in the area of monitoring and reporting financial 
crime and terrorist financing, the FDIC will need the express 
regulatory flexibility to grant exemptive relief when appropriate in 
this area.
    Moreover, in 2018, the FDIC, the Board of Governors of the Federal 
Reserve System, the National Credit Union Administration, the Office of 
the Comptroller of the Currency, and FinCEN issued a statement 
encouraging banks to take innovative approaches to meet their BSA/Anti-
Money Laundering compliance obligations.\9\ The statement explained 
that banks \10\ are encouraged to consider, evaluate, and where 
appropriate, responsibly implement innovative approaches in this area. 
Today, innovative approaches and technological developments in the 
areas of SAR monitoring, investigation, and filing may involve, among 
other things: (i) Automated form population using natural language 
processing, transaction data, and customer due diligence information; 
(ii) automated or limited investigation processes depending on the 
complexity and risk of a particular transaction and appropriate 
safeguards; and (iii) enhanced monitoring processes using more and 
better data, optical scanning, artificial intelligence, or machine 
learning capabilities. Requests for exemptive relief pertaining to 
innovation or other matters may involve, among other things, expanded 
investigations and SAR timing issues, SAR disclosures and sharing, 
continued SAR filings for ongoing activity, SAR outsourcing of 
responsibilities and practices, the role of agents of FDIC-supervised 
institutions, the use of shared utilities and shared data, and the use 
and sharing of de-identified data (commonly referred to as anonymized 
data). The FDIC expects that new technologies will continue to prompt 
additional innovative approaches related to suspicious activity 
monitoring and SAR filing.
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    \9\ See https://www.fdic.gov/news/news/press/2018/pr18091a.pdf.
    \10\ Under the Bank Secrecy Act, the term ``bank'' is defined in 
31 CFR 1010.100(d) and includes each agent, agency, branch, or 
office within the United States of banks, savings associations, 
credit unions, and foreign banks.
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    If the FDIC adopts the proposed rule and uses it to grant 
exemptions, the exemptions would not relieve FDIC-supervised 
institutions from the obligation to comply with FinCEN's SAR regulation 
when applicable. To the extent an exemption request from an FDIC-
supervised institution involves both the FDIC's SAR regulation and 
FinCEN's SAR regulation, the FDIC-supervised institution would need an 
exemption from both the FDIC and FinCEN. The FDIC expects to coordinate 
with FinCEN when handling parallel exemptions. As explained above, 
however, the FDIC's SAR regulation imposes additional requirements not 
included in FinCEN's SAR regulation. To the extent an exemption request 
is subject to a requirement imposed by the FDIC's SAR regulation alone 
(and not a parallel FinCEN requirement), the proposed rule would allow 
the FDIC to exempt a supervised institution from that requirement.

III. Proposed Regulation Changes

    The proposed rule would add three paragraphs to 12 CFR 353.3(d) of 
the FDIC Rules and Regulations that would permit the FDIC to exempt a 
supervised institution from the requirements, in full or in part, of 12 
CFR 353.3. Under the proposed rule, the FDIC in evaluating an exemption 
request would determine whether the request is consistent with safe and 
sound banking, and may consider other appropriate factors. The FDIC 
would also seek FinCEN's determination whether the exemption request is 
consistent with the purposes of the BSA, as applicable, where an 
exemption request involves the filing of a SAR for potential money 
laundering, violations of the BSA, or other unusual activity covered by 
FinCEN's SAR regulation. When a request involves the SAR filing 
requirements of both FinCEN and the FDIC, the proposed rule would 
require the FDIC to seek FinCEN's concurrence. In addition, the 
proposed rule provides that the FDIC may grant an exemption for a 
specified time period. The supervised institution would then be able to 
rely on the exemption for a period of time as determined and 
communicated by the FDIC. Under the proposed rule, the FDIC could also 
extend or revoke previously granted exemptions if circumstances change 
related to the factors set out above (consistent with the BSA and 
safety and soundness), or any imposed conditions.

A. Part 353.3(d) Exemptions

    Section 353.3(d) sets forth exemptions from the FDIC's SAR 
regulation. Currently, Section 353.3(d)(1) exempts FDIC-supervised 
institutions from filing a SAR for a committed or attempted robbery or 
burglary that is reported to the appropriate law enforcement 
authorities. Section 353.3(d)(2) exempts an FDIC-supervised institution 
from filing a SAR for lost, missing, counterfeit, or stolen securities 
if the institution files a report pursuant to the reporting 
requirements of 17 CFR 240.17f-1. The proposed rule would add three 
paragraphs to Sec.  353.3(d).

B. Part 353.3(d)(3)

    The proposed paragraph (d)(3) would permit the FDIC to exempt any 
FDIC-supervised institution from the requirements of 12 CFR 353.3. Upon 
receiving a written request from an FDIC-supervised institution, the 
FDIC would determine whether the exemption is consistent with safe and 
sound banking. The FDIC would also seek FinCEN's determination whether 
the exemption is consistent with the purposes of the BSA, as 
applicable, where an exemption request also requires an exemption from 
FinCEN's SAR regulation. The exemptions may be conditional or 
unconditional, may apply to particular persons or to classes of 
persons, and may apply to transactions or classes of transactions.
    The proposed paragraph (d)(3) would require the FDIC to seek 
FinCEN's concurrence regarding an exemption request that also requires 
an exemption from FinCEN's SAR regulation. The proposed paragraph 
(d)(3) would permit the FDIC to consult with FinCEN regarding other 
exemption requests. The FDIC may also consult with the other

[[Page 6583]]

state and federal banking agencies before granting any exemption.

C. Part 353.3(d)(4)

    The proposed paragraph (d)(4) would require that, after the FDIC 
has received FinCEN's concurrence and consulted with appropriate 
agencies, the FDIC provide a written response to the FDIC-supervised 
institution that submitted the exemption request. An FDIC-supervised 
institution that has received an exemption under paragraph (d)(3) may 
rely on the exemption for a period of time to be communicated by the 
FDIC in its granting of the exemption, which may be indefinite.

D. Part 353.3(d)(5)

    The proposed paragraph (d)(5) would permit the FDIC to revoke or 
extend the period of time for an exemption granted under paragraph 
(d)(3). Under the proposed paragraph (d)(5), the FDIC would have 
discretion to revoke exemptions. The proposed paragraph (d)(5) would 
require the FDIC to provide written notice to the FDIC-supervised 
institution of the FDIC's intention to revoke an exemption. The 
proposed paragraph (d)(5) would require the written notice to include 
the basis for the revocation and provide the FDIC-supervised 
institution an opportunity to respond. The proposed paragraph (d)(5) 
would require the FDIC to consider the institution's response before 
deciding to revoke an exemption. The proposed paragraph (d)(5) would 
require the FDIC to notify, in writing, the FDIC-supervised institution 
of the FDIC's final decision to revoke an exemption.

IV. Summary

    If the proposal is finalized, 12 CFR 353.3(d) would be amended to 
add paragraphs (d)(3) through (5), and would apply to all FDIC-
supervised institutions. These initiatives would permit the FDIC to 
grant SAR exemptions to FDIC-supervised institutions to promote 
innovation, reduce burden, and meet BSA requirements more efficiently 
and effectively.

V. Expected Effects

    As explained previously, the proposed rule would amend 12 CFR 
353.3(d) to add paragraphs (d)(3) through (5), and would apply to all 
FDIC-supervised institutions. As of June 30, 2020, the FDIC supervised 
3,270 institutions.\11\ The proposal would permit the FDIC to grant 
relief to FDIC-supervised institutions that leverage existing or future 
technologies to gather and submit the information contained in SARs to 
the appropriate law enforcement authorities and regulatory agencies in 
a more efficient and cost effective manner. This change would more 
closely align the FDIC's regulations with those of FinCEN, which has 
broad statutory authority to issue exemptions from SAR filing 
requirements. Because the FDIC's SAR regulations do not currently 
contain any provision by which the FDIC can issue case-by-case 
exemptions, a situation could arise in which FinCEN grants an exemption 
from SAR filing requirements to an FDIC-supervised institution that has 
developed innovative methods for meeting SAR filing requirements, but 
the institution would still need to file a SAR. The proposed rule would 
allow the FDIC to grant exemptions from SAR filing requirements in 
conjunction with FinCEN to reduce potential regulatory burden.
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    \11\ FDIC-supervised institutions are set forth in 12 U.S.C. 
1813(q)(2).
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    The FDIC does not have the ability to forecast the number of 
requests for exemptions that FDIC-supervised institutions will file as 
a result of this rule, or the number of requests that the FDIC will 
grant. The proposed rule is likely to pose some increase in compliance 
costs associated with submitting an exemption request to the FDIC, 
however the FDIC believes that the costs are likely to be small. The 
FDIC expects this proposed rule will result in cost savings for FDIC-
supervised institutions that obtain exemptions from SAR filing 
requirements. However, the cost savings are projected to be relatively 
modest. For example, using the methodology for calculating the cost 
associated with filing SARs that FinCEN published in May 2020,\12\ the 
FDIC estimates that FDIC-supervised institutions incurred roughly $3.8 
million \13\ in costs in the second quarter of 2020 related to 
reviewing alerts, and drafting, writing, submitting, and storing SAR 
filings and documentation, which amounts to annual estimated costs of 
$15.2 million for FDIC-supervised institutions in aggregate.
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    \12\ See 85 FR 31598 (May 26, 2020).
    \13\ This estimate uses the May 2019 75th percentile hourly wage 
rate for Financial Managers ($73.48), Compliance Officers ($43.70), 
Financial Clerks ($18.20), and Tellers ($17.49) reported by the 
Bureau of Labor Statistics, National Industry-Specific Occupational 
Employment, and Wage Estimates. These wage rates have been adjusted 
for changes in the Consumer Price Index for all Urban Consumers 
between May 2019 and June 2020 (0.67 percent) and grossed up by 51 
percent to account for non-monetary compensation as reported by the 
June 2020 Employer Costs for Employee Compensation Data. The mix of 
professions varies depending on the task associated with filing SARs 
including reviewing alerts, documenting reasons why some alerts do 
not merit a SAR filing, drafting, writing, and submitting SARs, and 
storing SARs and supporting documentation. For this calculation the 
FDIC assumed that the mix of professions involved in each task, the 
percentage of SAR alerts that result in a SAR filing, and the 
percentage of SARs that are batch filed or filed discretely, and the 
percentage of SARs that contain extended content matches what FinCEN 
reported in its recent estimates of the costs associated with SAR 
filing requirements (85 FR 31598).
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    The FDIC estimated the recordkeeping, reporting, and disclosure 
costs of filing SARs for each FDIC-supervised institution in the second 
quarter of 2020 using data on SAR filings for each institution in 
combination with FinCEN's methodology for estimating costs associated 
with SAR filings.\14\ The annualized estimated recordkeeping, 
reporting, and disclosure costs of filing SARs in the second quarter of 
2020 do not represent more than 1.9 percent of annual non-interest 
expense for any FDIC-supervised institution. Additionally, only one 
FDIC-supervised institution incurred estimated annualized 
recordkeeping, reporting, and disclosure costs associated with SAR 
filing that amounted to more than 5 percent of annual wage and salary 
expense with the costs equaling 5.2 percent.\15\ Therefore, the 
economic benefit of this proposed rule on FDIC-supervised institutions 
is likely to be relatively small. Further, this proposed rule would 
only allow the FDIC to grant exemptions in instances where safety and 
soundness and Bank Secrecy Act regulatory requirements would not be 
compromised, so the proposed rule is also not expected to have any 
broader negative economic impacts.
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    \14\ FDIC analysts queried data on SAR filings by institution 
from a SAR database that FinCEN makes available to regulators and 
law enforcement agencies.
    \15\ This estimate uses FinCEN data on the SAR filings of each 
FDIC-supervised institution, in combination with FinCEN's 
methodology for estimating costs associated with SAR filings, to 
estimate the SAR-related costs that each FDIC-supervised institution 
incurred in the second quarter of 2020. That estimate is then 
multiplied by four, and compared to each institution's previous four 
quarters of merger-adjusted noninterest expense and wages and salary 
expense reported in Call Report filings from September 2019-June 
2020.
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    The FDIC invites comments on all aspects of this analysis. In 
particular, would the proposed rule have any costs or benefits to 
covered entities that the FDIC has not identified?

VI. Alternatives

    The FDIC has considered alternatives to the proposed rule but 
believes that the proposed amendments represent the most appropriate 
option for covered institutions. As discussed earlier,

[[Page 6584]]

FinCEN has statutory authority to grant relief from SAR filing 
requirements to FDIC-supervised institutions, and this proposed rule 
would amend the FDIC's regulations so that the FDIC may issue 
exemptions to SAR filing requirements in conjunction with FinCEN. This 
change could reduce regulatory burden for FDIC-supervised institutions 
by allowing institutions that develop innovative techniques for meeting 
BSA requirements to obtain exemptions from SAR filing requirements. The 
FDIC considered maintaining its regulations in their current form, but 
chose not to do so because the FDIC believes that doing so would be 
unnecessarily burdensome and may discourage institutions from 
developing innovative approaches to meeting BSA requirements.

VII. Request for Comments

    The FDIC invites comments on all aspects of this proposed 
rulemaking. In particular, the FDIC requests comments on the following 
questions:
    Question 1. The FDIC invites comments on the proposed exemptions to 
12 CFR 353.3.
    Question 2. The FDIC invites comments on whether any additional 
detail relating to the procedures that would be followed in 
considering, granting, or revoking exemptions are necessary.
    Written comments must be received by the FDIC no later than 
February 22, 2021.

VIII. Administrative Law Matters

A. The Paperwork Reduction Act

    Certain provisions of the proposed rule contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with 
the requirements of the PRA, the FDIC may not conduct or sponsor, and 
the respondent is not required to respond to, an information collection 
unless it displays a currently valid Office of Management and Budget 
(OMB) control number. The information collection requirements contained 
in this notice of proposed rulemaking have been submitted to OMB for 
review and approval by FDIC under section 3507(d) of the PRA and Sec.  
1320.11 of OMB's implementing regulations (5 CFR part 1320) as a new 
information collection. The proposed rule contains voluntary reporting 
requirements, or exemption requests, in 12 CFR 353.3(d)(3).
    Title of Proposed Information Collection: Exemptions to Suspicious 
Activity Report Requirements.
    OMB Control Number: 3064--[NEW].
    Frequency of Response: On Occasion.
    Affected Public: Businesses or other for-profit.
    Respondents: Any FDIC-supervised institution wishing to obtain an 
exemption from the Suspicious Activity Report requirements.
    Estimated Number of Annual Respondents: 3.
    Estimated Burden per Response: 8 hours.
    Total estimated annual burden: 24 hours.
    To derive these estimates, the FDIC assumed that the FDIC-
supervised institutions that file the most SARs will be the most likely 
to request exemptions from SAR filing requirements. There are ten FDIC-
supervised institutions that filed 1,000 or more SARs in the second 
quarter of 2020. The FDIC expects roughly one-third of those 
institutions to request an exemption per year, so the FDIC expects 3 
annual respondents to this information collection. The FDIC estimates 
the hourly burden of an exemption request to be 8 hours.
    Comments are invited on: (a) Whether the collection of information 
is necessary for the proper performance of the FDIC's functions, 
including whether the information has practical utility; (b) the 
accuracy of the estimates of the burden of the information collection, 
including the validity of the methodology and assumptions used; (c) 
ways to enhance the quality, utility, and clarity of the information to 
be collected; (d) ways to minimize the burden of the information 
collection on respondents, including through the use of automated 
collection techniques or other forms of information technology; and (e) 
estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments will become a matter of public record. Comments on 
aspects of this notice that may affect reporting or recordkeeping 
requirements and burden estimates should be sent to the addresses 
listed in the ADDRESSES section of this preamble. A copy of the 
comments may also be submitted to the FDIC OMB desk officer by mail to 
U.S. Office of Management and Budget, 725 17th Street NW, #10235, 
Washington, DC 20503 or by facsimile to 202-395-5806, Attention, 
Federal Banking Agency Desk Officer.

B. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), requires that, in connection 
with a notice of proposed rulemaking, an agency prepare and make 
available for public comment an initial regulatory flexibility analysis 
that describes the impact of the proposed rule on small entities.\16\ 
However, a regulatory flexibility analysis is not required if the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities, and publishes its 
certification and a short explanatory statement in the Federal Register 
together with the rule. The Small Business Administration (SBA) has 
defined ``small entities'' to include banking organizations with total 
assets of less than or equal to $600 million.\17\ Generally, the FDIC 
considers a significant effect to be a quantified effect in excess of 5 
percent of total annual salaries and benefits per institution, or 2.5 
percent of total noninterest expenses. The FDIC believes that effects 
in excess of these thresholds typically represent significant effects 
for FDIC-supervised institutions. For the reasons provided below, the 
FDIC certifies that the proposed rule would not have a significant 
economic impact on a substantial number of small banking organizations. 
Accordingly, a regulatory flexibility analysis is not required.
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    \16\ 5 U.S.C. 601, et seq.
    \17\ The SBA defines a small banking organization as having $600 
million or less in assets, where ``a financial institution's assets 
are determined by averaging the assets reported on its four 
quarterly financial statements for the preceding year.'' See 13 CFR 
121.201 (as amended by 84 FR 34261, effective August 19, 2019). 
``SBA counts the receipts, employees, or other measure of size of 
the concern whose size is at issue and all of its domestic and 
foreign affiliates.'' See 13 CFR 121.103. Following these 
regulations, the FDIC uses a covered entity's affiliated and 
acquired assets, averaged over the preceding four quarters, to 
determine whether the FDIC-supervised institution is ``small'' for 
the purposes of RFA.
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    As of June 30, 2020, the FDIC supervised 3,270 institutions,\18\ of 
which 2,492 are considered small entities for the purposes of RFA.\19\ 
Using the methodology for calculating the cost associated with filing 
SARs that FinCEN published in May 2020,\20\ the FDIC estimates that 
small FDIC-supervised institutions incurred $460,565.08 \21\ in

[[Page 6585]]

costs in the second quarter of 2020 related to reviewing alerts, 
documenting the reasons why certain alerts do not merit a SAR filing, 
and drafting, writing, submitting, and storing SAR filings and 
documentation, which amounts to annual estimated costs of $1,842,260.32 
for small FDIC-supervised institutions in aggregate.
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    \18\ FDIC-supervised institutions are set forth in 12 U.S.C. 
1813(q)(2).
    \19\ Call Report data, March 2020.
    \20\ See 85 FR 31598.
    \21\ This estimate uses the May 2019 75th percentile hourly wage 
rate for Financial Managers ($73.48), Compliance Officers ($43.70), 
Financial Clerks ($18.20), and Tellers ($17.49) reported by the 
Bureau of Labor Statistics, National Industry-Specific Occupational 
Employment, and Wage Estimates. These wage rates have been adjusted 
for changes in the Consumer Price Index for all Urban Consumers 
between May 2019 and June 2020 (0.67 percent) and grossed up by 51 
percent to account for non-monetary compensation as reported by the 
June 2020 Employer Costs for Employee Compensation Data. The mix of 
professions varies depending on the task associated with filing SARs 
including reviewing alerts, documenting reasons why some alerts do 
not merit a SAR filing, drafting, writing, and submitting SARs, and 
storing SARs and supporting documentation. For this calculation the 
FDIC assumed that the mix of professions involved in each task, the 
percentage of SAR alerts that result in a SAR filing, and the 
percentage of SARs that are batch filed or filed discretely, and the 
percentage of SARs that contain extended content matches what FinCEN 
reported in its recent estimates of the costs associated with SAR 
filing requirements (85 FR 31598).
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    The FDIC estimated costs of filing SARs for each FDIC-supervised 
institution in the second quarter of 2020 using data on SAR filings for 
each institution in combination with FinCEN's methodology for 
estimating costs associated with SAR filings.\22\ The annualized 
estimated recordkeeping, reporting, and disclosure costs of filing SARs 
in the second quarter of 2020 do not represent more than 1.9 percent of 
annual non-interest expense for any small FDIC-supervised institution. 
Additionally, only one small FDIC-supervised institution incurred 
estimated annualized costs associated with SAR filing that amounted to 
more than 5 percent of annual wage and salary expense with the costs 
equaling 5.2 percent.\23\ While the total estimated costs of filing 
SARs represent a significant expense for one FDIC-supervised small 
entity, the costs do not represent a significant amount for all other 
FDIC-supervised small entities. Thus, the cost savings from this 
proposal for all other FDIC-supervised small entities will likely not 
be significant. In addition, the cost savings from receiving a SAR 
exemption would be at least partially offset by the costs associated 
with requesting an exemption and the costs associated with developing a 
method for meeting SAR requirements. Further, this proposed rule would 
only allow the FDIC to grant exemptions in instances where safety and 
soundness and BSA regulatory requirements would not be compromised, so 
the proposed rule is also not expected to have any broader negative 
economic impacts.
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    \22\ FDIC analysts queried data on SAR filings by institution 
from a SAR database that FinCEN makes available to regulators and 
law enforcement agencies.
    \23\ This estimate uses FinCEN data on the SAR filings of each 
FDIC-supervised institution, in combination with FinCEN's 
methodology for estimating costs associated with SAR filings, to 
estimate the SAR-related costs that each FDIC-supervised institution 
incurred in the second quarter of 2020. That estimate is then 
multiplied by four, and compared to each institution's previous four 
quarters of merger-adjusted noninterest expense and wages and salary 
expense reported in Call Report filings from June 2019 to March 
2020.
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    Based on the information above, the FDIC certifies that the rule 
would not have a significant economic impact on a substantial number of 
small entities.
    The FDIC invites comments on all aspects of the supporting 
information provided in this section, and in particular, whether the 
proposed rule would have any significant effects on small entities that 
the FDIC has not identified.

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \24\ requires the federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The FDIC has sought to present the 
proposed rule in a simple and straightforward manner. The FDIC invites 
comments on whether the proposal is clearly stated and effectively 
organized, and how the FDIC might make the proposal easier to 
understand.
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    \24\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999).
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D. The Economic Growth and Regulatory Paperwork Reduction Act

    Under section 2222 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (EGRPRA), the FDIC is required to review all of 
its regulations, at least once every 10 years, in order to identify any 
outdated or otherwise unnecessary regulations imposed on insured 
institutions.\25\ The FDIC, along with the other federal banking 
agencies, submitted a Joint Report to Congress on March 21, 2017 
(EGRPRA Report) discussing how the review was conducted, what has been 
done to date to address regulatory burden, and further measures the 
FDIC will take to address issues that were identified.\26\ By providing 
the ability to issue exemptions and reduce burdens on FDIC-supervised 
institutions, this rule complements other actions that the FDIC has 
taken, separately and with the other federal banking agencies, to 
further the EGRPRA mandate.
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    \25\ Public Law 104-208, 110 Stat. 3009 (1996).
    \26\ 82 FR 15900 (March 31, 2017).
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E. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\27\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
insured depository institutions (IDIs), each federal banking agency 
must consider, consistent with principles of safety and soundness and 
the public interest, any administrative burdens that the regulations 
would place on depository institutions, including small depository 
institutions, and customers of depository institutions, as well as the 
benefits of the regulations. In addition, section 302(b) of RCDRIA 
requires new regulations and amendments to regulations that impose 
additional reporting, disclosures, or other new requirements on IDIs 
generally to take effect on the first day of a calendar quarter that 
begins on or after the date on which the regulations are published in 
final form.\28\ The FDIC invites comments that further will inform its 
consideration of RCDRIA.
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    \27\ 12 U.S.C. 4802(a).
    \28\ Id.
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List of Subjects in 12 CFR Part 353

    Banks, banking, Crime, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the preamble, the Federal Deposit 
Insurance Corporation proposes to amend 12 CFR part 353 as follows:

PART 353--SUSPICIOUS ACTIVITY REPORTS

0
1. The authority citation for part 353 continues to read as follows:

    Authority: 12 U.S.C. 1818, 1819; 31 U.S.C. 5318.


0
2. Revise Sec.  353.3 paragraph (d) to read as follows:


Sec.  353.3  Reports and records.

* * * * *
    (d) Exemptions. (1) An FDIC-supervised institution need not file a 
suspicious activity report for a robbery or burglary committed or 
attempted, that is reported to appropriate law enforcement authorities.
    (2) An FDIC-supervised institution need not file a suspicious 
activity report for lost, missing, counterfeit, or stolen securities if 
it files a report pursuant to the reporting requirements of 17 CFR 
240.17f-1.
    (3) The FDIC may exempt any FDIC-supervised institution from the 
requirements of this section. Upon receiving a written request from an 
FDIC-supervised institution, the FDIC will determine whether the 
exemption is consistent with safe and sound banking and may consider 
other appropriate factors. The FDIC will also

[[Page 6586]]

seek FinCEN's determination whether the exemption is consistent with 
the purposes of the BSA, if applicable. The exemption shall be 
applicable only as expressly stated in the exemption, may be 
conditional or unconditional, may apply to particular persons or to 
classes of persons, and may apply to transactions or classes of 
transactions.
    The FDIC will seek FinCEN's concurrence with regard to any 
exemption request that also requires an exemption from FinCEN's SAR 
regulation, and may consult with FinCEN regarding other exemption 
requests. The FDIC also may consult with the other state and federal 
banking agencies before granting any exemption.
    (4) The FDIC will provide a written response to the FDIC-supervised 
institution that submitted the exemption request after considering 
whether the exemption is consistent with safe and sound banking, 
consulting with the appropriate agencies, and seeking concurrence when 
appropriate. An FDIC-supervised institution that has received an 
exemption under paragraph (d)(3) of this section may rely on the 
exemption for a period of time to be communicated by the FDIC in its 
granting of the exemption, which may be indefinite.
    (5) The FDIC may extend the period of time or may revoke an 
exemption granted under paragraph (d)(3) of this section. Exemptions 
may be revoked at the sole discretion of the FDIC. The FDIC will 
provide written notice to the FDIC-supervised institution of the FDIC's 
intention to revoke an exemption. The notice will include the basis for 
the revocation and will provide an opportunity for the FDIC-supervised 
institution to submit a response to the FDIC. The FDIC will consider 
the response prior to deciding whether or not to revoke an exemption, 
and will notify the FDIC-supervised institution of the FDIC's final 
decision to revoke an exemption in writing.
* * * * *

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on December 15, 2020.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2021-00037 Filed 1-21-21; 8:45 am]
BILLING CODE 6714-01-P