Credit Union Groups: FinCEN Reporting Requirements Are Outdated

Reporting threshold is too low, regulatory burden too high

The Financial Crimes Enforcement Network’s requirements that credit unions and banks file Suspicious Activity Reports (SARs) for transactions exceeding $5,000 are burdensome and out of date, credit union trade groups told the network earlier this month.

“While larger banks and non-bank mortgage lenders can afford to absorb the significant regulatory and compliance costs from the [anti-money laundering and terrorist financing] framework, these rules have made it significantly more difficult for credit unions to provide the affordable financial services credit union members depend on and deserve,” Luke Martone, senior director of advocacy and counsel, at America’s Credit Unions wrote, in a comment submitted to FinCEN.

Martone and officials from the Virginia Credit Union League urged FinCEN officials to increase the threshold for transactions that trigger a SAR from $5,000 to $10,000, saying the threshold was established many years ago.

Under the federal Paperwork Reduction Act, agencies periodically request public comment on information collection requirements. As part of a Paperwork Reduction Act filing earlier this year, FinCEN said that it planned no changes to the current SAR filing process. The network also estimated that the filing of a SAR should take a financial institution two hours.

That estimate is far too low, according to Amy Kleinschmit, bank secrecy officer at the Dakotaland Federal Credit Union in Huron, S.D. “Depending on the facts and circumstances surrounding the triggering event, there can be significant time allocated to research and analysis of the transactions, review of account history, review for connected parties and other associated tasks that must be done prior to even filling out the SAR form,” she wrote. Martone said four hours would be a more accurate estimate of the time needed.

Martone also noted that credit unions have repeatedly expressed the desire to know how much of their reporting is actually reviewed by law enforcement officials, contributes to investigations and assists in prosecutions. “However, credit unions rarely receive any information from law enforcement that would allow them to review, test, or confirm the credit unions’ success in assisting law enforcement,” he wrote.

He added, “Generally, credit unions are under the impression that the filings are of little use to law enforcement.” If that is the case, the regulatory burden placed on credit unions is unjustified.

Officials from the Ohio Credit Union League wrote that FinCEN still requires reports to be filed for transactions involving marijuana-related businesses, even in states where cannabis is legal.

“Upon the legalization at the state level, these marijuana SARs are of little or no practical use to law enforcement,” Paul Mercer, the league’s president, and Sean Brown, the league’s director of regulatory affairs, wrote, in a letter to FinCEN. “The risk of money laundering or financing of terrorism associated with these transactions is not sufficient to justify the filings.”