The Financial Crimes Enforcement Network ("FinCEN") published a notice of proposed rulemaking (the “Proposed Rules”) that would broaden the reporting obligations of banks and money transmitters for cross-border electronic transmittals of funds (“CBETFs”). The Proposed Rules would require certain banks to furnish FinCEN with (1) copies of transmittal orders or advices (or equivalent information in a format to be developed by FinCEN) for CBETFs sent to or received from foreign financial institutions and (2) an annual report that provides the account numbers for accounts that transmitted or received a CBETF and the U.S. taxpayer identification numbers (“TINs”) for the corresponding accountholders. The Proposed Rules would also require certain money transmitters to submit reports regarding CBETFs of $1,000 or more sent to or received from foreign financial institutions.
Financial Institutions Subject to the Proposed Rules
The reporting requirements under the Proposed Rules would apply to a bank or money transmitter which is either a “first-in” or “last-out” financial institution” for a CBETF. A “first-in” financial institution would be defined as the recipient of a transmittal order or advice for a CBETF from a foreign financial institution, while a “last-out financial institution” would be the sender of a transmittal order or advice for a CBETF to a foreign financial institution.
A separate, but related, annual TIN reporting requirement would apply to banks (even those which are not “first in” or “last-out” financial institutions) that maintain accounts through which CBETFs were originated or received.
CBETF Transactions Subject to the Proposed Rules
The Proposed Rules would define a CBETF as “[a] transmittal of funds where either the transmittal order or advice is: (i) communicated through electronic means; and (ii) sent or received by either a first-in or a last-out financial institution.” For banks, the Proposed Rules would apply to all CBETFs regardless of the amount, but the Proposed Rules would only apply to such CBETFs of $1,000 or more in the case of money transmitters. The Proposed Rules would also apply in cases where the funds transfer is not effected.
The Proposed Rules would provide exemptions under which reporting would not be required for CBETFs that do not involve third parties (e.g., bank-to-bank transactions) or transmittal orders or advices that are communicated solely through a bank’s proprietary systems.
CBETF Reporting Requirement
FinCEN recognizes that there is a large degree of standardization in the formats of transmittal orders currently used by banks. Accordingly, the Proposed Rule would permit banks to satisfy the CBETF reporting requirement by submitting a full copy of any transmittal order or advice which is in a standardized form that has been approved for direct submission by FinCEN. A bank would also be able to comply with this filing obligation by directing a third-party carrier, such as SWIFT, to submit the transmittal order to FinCEN on behalf of the bank.
If a bank is not able to submit (or cause to be submitted) copies of transmittal orders for CBETFs in a standardized format, FinCEN would accept submission of the required information in an alternative format to be prescribed by FinCEN. Banks using such an alternative reporting format would be required to submit the following information, if available, about a CBETF: (i) unique transaction identifier number; (ii) either the name and address or the unique identifier of the transmittor’s financial institution; (iii) name and address of the transmittor: (iv) the account number of the transmittor (if applicable); (v) the amount and currency of the funds transfer; (vi) the execution date of the funds transfer; (vii) the identity of the recipient’s financial institution; (viii) the name and address of the recipient; (ix) the account number of the recipient; and (x) any other specific identifiers of the recipient or transaction. These data points coincide with the combined recordkeeping requirements currently imposed under the so-called “Recordkeeping Rule” and “Travel Rule” for funds transfers, with the addition of the unique transaction identifier number.
Money transmitters would be required to provide such information in the alternative format prescribed by FinCEN for all CBETFs of $1,000 or more. Additionally, for CBETFs of $3,000 or more, the money transmitter would need to report the U.S. TIN of the transmittor or recipient (as applicable), or if none, the alien identification number of passport number and country of issuance. Money transmitters would not be permitted to submit copies of transmittal orders.
FinCEN acknowledges that some of the reportable fields of CBETFs collected through either method (submitting copies of the actual transmittal orders or using an alternative format prescribed by FinCEN) might be empty or contain incomplete data.
All reporting would need to be completed electronically unless an institution can demonstrate that this would be unnecessarily onerous. The CBETF reports would need to be filed no more than five business days after the financial institution issues or receives the transmittal order.
Annual TIN Reporting Requirement
The Proposed Rules would also require banks to file an annual report with FinCEN by April 15 of each year that contains the account number and TIN for all accountholders whose accounts were used to originate or receive a CBETF. Money transmitters would not be subject to the annual reporting requirement, but would be required to provide FinCEN with the TIN of the transmittor or recipient of a transmittal order or advice as part of its CBETF reporting requirement for each CBETF of $3,000 or more.
Public Comments; Effective Date
Comments on the Proposed Rules are due by December 29, 2010. FinCEN does not anticipate issuing final rules prior to January 1, 2012 to give it adequate time to put the necessary technology in place to accept required reports. In addition, FinCEN anticipates that this delay in issuing final rules will give financial institutions time to obtain or adjust the relevant compliance systems.