It seemed as though the BSA/AML community had run out of legislative time for regulatory relief concerning the Currency Transaction Reports (CTR) and Suspicious Activity Report (SAR) filing requirements. However, on Thursday, May 9, the House Financial Services Committee passed to the House floor H.R. 2514, the Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act of 2019 (COUNTER Act), with a late amendment to include long-overdue regulatory relief.
The BSA regulatory burden, coupled with the high cost of compliance faced by financial institutions, is real. The dollar amount thresholds for filing CTRs and SARs has not changed since 1986 with the Money Laundering Control Act, which set the reporting requirements for CTRs over $10,000 and SAR thresholds at $5,000 (or $25,000 if no suspect is known). There is no argument that the dollar is not what it was in 1986, and proponents of regulatory reform have been requesting relief for years. This new amendment has bipartisan support and renews hope that change may finally be on the way.
The proposed bill includes the following changes to CTR and SAR reporting requirements, in addition to addressing examiner training and encouraging technological innovation:
- FinCEN would be required to adjust the CTR threshold every 5 years in line with inflation. Certain high-risk areas could have exceptions.
- SAR thresholds would not be increased under this bill but would mandate a study within one year of the date of passed legislation around using a shorter SAR form for certain filings and increased thresholds.
The SAR proposal does not yet provide the relief that financial institutions have been asking for and a lot of that is because law enforcement has voiced concern about raising the BSA reporting thresholds for some time due to possible loss of data that has been used to stop illicit activity. FinCEN Director Kenneth A. Blanco testified in 2018 that BSA reporting, particularly CTRs and SARs, is critical in ensuring the protection of the U.S. financial system and in keeping our country strong and prosperous, and our families and communities safe from harm. For years, financial institutions have argued that the value of the dollar is not what it was 50 years ago and that current CTR and SAR thresholds are small amounts in today’s terms.
Mandating a study for the SAR threshold increase is a compromise for financial institutions and law enforcement in taking the prudent approach to ensuring there is no loss of valuable suspicious activity data. As the industry is aware, funds for terror financing and human trafficking can be quite low; and those are two of the areas that should be detected regardless of regulatory burden.
Although H.R. 2514 includes several other BSA elements, history tells us that this bill will most likely not pass in its current form. Keep in mind that this is proposed legislation and will have more hurdles to cross before becoming law. However, passing the house committee unanimously gives the AML community hope.