Major Changes Are On the Way for Bank Secrecy Act Filings

The Financial Crimes Enforcement Network has announced some significant changes to the filing requirements for Bank Secrecy Act forms like Suspicious Activity Reports and Currency Transaction Reports.

First, by July 1, CTRs and SARs will have to be filed electronically using FinCEN’s e-filing capability. Electronic filing has been available since October 2002, but previously the option has always been available for filings to be done using paper forms. Since 2002, electronic filing has become the most common means of filing, with more than 86 percent of BSA reports already being filed electronically by the end of 2011.

FinCEN says that BSA e-filing offers features not available to paper filers, including:

• Electronic notification of submissions, receipt of submission, and errors, warnings and alerts.
• Batch validation.
• Acknowledgement that batch-filed reports are received.
• Feedback reports to filers.

For those financial institutions that cannot meet the electronic filing deadline of July 1, FinCEN will consider specific requests for exceptions, in limited hardship circumstances. Receiving such an exception would allow an institution to file the most current paper forms for as long as one year but not later than July 1, 2013.

The other major development is that FinCEN is making significant changes to the data items that appear on CTRs and SARs. The electronic file specifications for the changed data items were provided to filers on Sept. 8, 2011. Originally, the plan was to use July 1 as the date for implementing these new data items but that date was delayed until March 31, 2013, due to the fact that the changes would require major changes to data collection systems.

Several of the new data items for CTRs will require institutions to document information about the parties that was not on the old forms. For example, there are specific data items for whether the party is an entity, the North American Industry Classification System Code number for the type of business conducted by the entity, the gender of an individual party and whether the transactions involve a private courier service or a person conducting transactions for someone else. In addition, far more detailed information must be reported on the transaction, including whether separate transactions are being aggregated, and an itemized breakdown of both the cash going in and the cash going out.

On the SAR, there are similar changes to the information collected about the parties, such as whether a party is an entity, the NAICS Code for businesses and the gender of an individual. There will also be a far more detailed collection of data involving the type of suspicious activity. For example, information will be collected on whether various types of cash structuring, terrorist financing, fraud money laundering or other suspicious activity are involved, whether there are problems with the identification or documentation of the suspect, and what types of products or financial instruments might be involved.

Because paper forms will be eliminated, this new information will all be reported in an electronic format on the FinCEN e-filing system. The changes to the types and amounts of information that institutions will have to collect will require considerable changes to internal processes and training, so adapting your BSA program to meet these new requirements is a process that should start as soon as possible.

Ted Dreyer is a senior attorney at Wolters Kluwer Financial Services, www.wolterskluwerfs.com. He can be reached at ted.dreyer(at)wolterskluwer.com.

Copyright (c) May 2012 by BankNews Media