ICBA: Pushing ahead on BSA reform

Sen. Mark R. Warner (D-Va.) is part of a bipartisan group of Senate Banking Committee members that is behind the ILLICIT CASH Act. Photo by Caroline Brehman/CQ Roll Call/Getty Images

Several potential Bank Secrecy Act-related bills may make their way through Congress this session, bringing much-needed reform for community banks.

By Chip Bartlett and Lilly Thomas, ICBA


Several potential Bank Secrecy Act-related bills may make their way through Congress this session, bringing much-needed reform for community banks.

With summer over and Congress back in session, Bank Secrecy Act (BSA) reform may see movement this fall, and ICBA is continuing its efforts to ensure community banks’ concerns are addressed.

Remaining in frequent contact with members of Congress and financial regulators, ICBA’s government relations team has been working diligently to make a case for much-needed reforms to ease the burden on community banks that have been essentially deputized to identify and combat financial crime.

These efforts are gaining ground. Here’s a rundown of activity in the House, where two bills have been introduced, and the Senate, where one seems likely to be introduced this fall.

Senate BSA reform

In the Senate, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings, or ILLICIT CASH, Act is likely to be introduced over the coming months by a bipartisan group of Senate Banking Committee members, including Sens. Mark R. Warner (D-Va.), Tom Cotton (R-Ark.), Doug Jones (D-Ala.) and Mike Rounds (R-S.D.).

A draft of the bill, which was released in June, suggests it would help relieve the burden of current customer due diligence rules by establishing federal reporting requirements that all “beneficial ownership” information is to be maintained in a federal database accessible by law enforcement. Shell companies would have to disclose their true owners to the U.S. Treasury.

ICBA believes this is a step in the right direction, as it noted in comments on the draft legislation, and supports legislation that would require companies to disclose their beneficial owners to the appropriate federal or state government agency, both when they are formed and on a periodic basis. ICBA believes this solution must be implemented in a way that safeguards the privacy of business owners and ensures the integrity of data held at the Financial Crimes Enforcement Network (FinCEN).

“FinCEN collection of beneficial owner information, as opposed to its collection by banks, would provide uniformity and consistency across the United States,” ICBA wrote Congress. “Making the formation of an entity contingent on receiving beneficial owner information more directly would create a strong incentive for equity owners and investors to provide such information.”

Another ICBA-supported provision in the potential Senate bill is the requirement that the Department of Justice provide the Treasury with data on the usefulness of BSA/AML data and the directive that law enforcement work with financial regulators to provide financial intuitions with periodic feedback on their suspicious activity reports (SAR). As noted in ICBA’s white paper Modernizing Anti-Money Laundering and Terrorist Financing Laws and Regulations, published in 2018, ICBA strongly believes community banks can provide better, more tailored information to law enforcement if FinCEN and law enforcement provided community banks with insights into data and patterns that are most likely to indicate criminal activity. It would also help banks direct their resources to the most critical areas of BSA/AML data collection. Any effort to increase the amount of information that FinCEN shares with financial institutions is a significant improvement since banks currently get no direct feedback on the quality or usefulness of their BSA/AML efforts. This lack of insight is particularly frustrating since financial institutions dedicate huge amounts of resources and significant expense to analyzing this data.

ICBA thanks this bipartisan group of senators for addressing these critical BSA issues while encouraging the Senate to consider further reforms as noted in ICBA’s white paper. Of key importance is increasing currency transaction reports (CTRs) and SAR thresholds. ICBA has made the case for increasing the CTR threshold to $30,000, up from the $10,000 threshold in place since 1970, and increasing the SAR threshold to $10,000, up from $5,000.

House BSA reform

ICBA welcomed the introduction of two BSA reform bills in the House in May and is hopeful they will be voted on by the full House before year-end. The Corporate Transparency Act of 2019 (H.R. 2513), introduced by Rep. Carolyn Maloney (D-N.Y.), would require corporations and limited liability companies to disclose their beneficial owners to FinCEN at the time the company is formed. It would further require FinCEN to modify its Customer Due Diligence Rule to remove any redundancies with the new requirement.

The Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act (H.R. 2514), sponsored by Rep. Emanuel Cleaver (D-Mo.), would also make key changes to the BSA. It would create a much-needed feedback loop between law enforcement and the banks that invest significant resources in BSA compliance, identifying “typologies” that would better help banks direct their resources and collect information more efficiently.

It would also provide a welcome first step to updating the outdated CTR thresholds by indexing the threshold to inflation with adjustments made in five-year increments. ICBA will continue to advocate for increasing the CTR threshold to $30,000 and the SAR threshold to $10,000. Both of these bills have moved out of the Financial Services Committee with bipartisan support.

A third bill is currently with the House Financial Services Committee. The Financial Reporting Modernization Act (H.R. 388), sponsored by Rep. Barry Loudermilk (R-Ga.), would raise the CTR and SAR thresholds to $30,000 and $10,000, respectively. ICBA is working with the committee to advance the bill this Congress.

How you can help advance BSA regulatory reform

With two House bills advanced from committee and the Senate bill likely not far behind, this fall offers the potential for a great first step toward BSA regulatory reform. While ICBA continues to advocate for key reforms, community banks can support ICBA’s legislative and regulatory advocacy by reaching out to congressional offices, especially in the Senate, to share BSA-related anecdotes. ICBA is highly effective in explaining the needs of community banks, but nobody makes a bigger impact than a constituent sharing the real-world details of how a problem directly affects a representative’s district.

Let legislators know how the current Treasury Customer Due Diligence (CDD) Rule affects your bottom line and your ability to serve your community. Demonstrate how labor-intensive the SAR process is and why defensively filed SARs don’t help your bank or aid law enforcement. Explain how your bank is essentially responsible for identifying, investigating, policing and reporting potential criminal activity, devoting significant resources to a process with no feedback into whether it’s making a difference. Make a case why collecting and verifying the identity of all natural-person owners of each entity is a task better suited to the IRS or a federal or state agency.

Meanwhile, ICBA is working with the Treasury and FinCEN to find regulatory fixes. Federal regulators are identifying areas where burdens can be reduced without affecting the ability to combat financial crime and are interested in making changes where possible.

Community bankers are committed to supporting balanced, effective measures that will prevent terrorists from using the financial system to fund their operations and prevent money launderers from hiding the proceeds of criminal activities. Introducing reforms that limit the growing share of resources community banks must dedicate to BSA/AML activities will help keep community banks healthy and strong. They’re also an opportunity to make financial crimes enforcement more efficient and effective.

Reaching out to your elected representatives today can help pave the way to a positive outcome.

5 ways to make an impact

As legislators return to work after the August recess, here’s how you can do your part for the community banking cause.

  1. Sign up for action alerts. Visit ICBA’s Be Heard grassroots advocacy toolkit (icba.org/beheard) and select “Action Center” to receive alerts about critical legislation and how you can help. You can also search specific pieces of legislation, identify your representatives and even see how they voted on key issues.
  2. Attend an advocacy training session. ICBA regularly holds free advocacy training sessions around the country. If one isn’t scheduled for your local area, you can email advocacy@icba.org to suggest a location.
  3. Attend next year’s ICBA Capital Summit. Meet with ICBA government relations staff and fellow community bankers in Washington, D.C., for policy briefings and a packed schedule of meetings with policymakers.
  4. Go to icba.org/advocacy to browse ICBA’s advocacy resources. You can read letters ICBA has sent to Congress and the regulatory agencies advocating for community banks. You can also find explanations of ICBA’s policy priorities, from the regulatory burden and cybersecurity to leveling the playing field with credit unions and the Farm Credit System.
  5. Read next month’s Independent Banker. The ICBA team will be outlining key legislative and regulatory issues as part of our October cover feature. It’ll give you the talking points you need when you meet with policymakers.

Lilly Thomas is ICBA’s senior vice president and senior regulatory counsel.

Chip Bartlett is ICBA’s vice president of congressional relations.

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