Fed, FinCEN want to make banks report international transfers of as little as $250

Dive Brief:

The Federal Reserve and the Financial Crimes Enforcement Network (FinCEN) are seeking feedback on a proposed change to the Bank Secrecy Act that would lower the threshold for reporting international transactions from $3,000 to $250, the agencies said in a notice Friday.
The agencies said the proposed rule change "would lead to the preservation of information that would benefit law enforcement and national security investigations." The rule only applies to international money transfers, and the threshold for domestic transactions remains unchanged at $3,000.
"Information available to the Agencies indicates that malign actors are using smaller-value cross-border wire transfers to facilitate or commit terrorist financing, narcotics trafficking, and other illicit activity, and that increased recordkeeping and reporting concerning these transactions would be valuable to law enforcement and national security authorities," the agencies said.

Dive Insight:

The Fed and FinCEN's "record-keeping rule" dates back to 1995, and requires banks and nonbank financial institutions to collect and retain information related to transfers and transmittals of funds in amounts of $3,000 or more.

The agencies say the rule is intended to help law enforcement and regulators detect, investigate and prosecute financial crimes by maintaining a paper trail about persons sending and receiving funds through the funds transfer system.

FinCEN said it analyzed data from approximately 2,000 suspicious activity reports (SARs) filed by money transmitters between 2016 and 2019 — 99% of which began or ended outside the U.S.

The mean and median dollar value of transmittals of funds mentioned in those SARs were around $509 and $255, respectively, the agency found. About 71% of the transmittals — totaling more than $179 million — were at or below $500.

"[T]errorist financiers and facilitators are creative and will seek to exploit vulnerabilities in the financial system to further their unlawful aims, including, as the above analysis indicates, through the use of low-dollar transactions," the agencies said.

The agencies said they believe the effect on the cost and efficiency of the payments system by lowering the international transaction threshold from $3,000 to $250 "is likely to be low."

"[S]ome financial institutions are already collecting information on at least a portion of transactions taking place under the current threshold for purposes of reporting suspicious transactions to FinCEN," the agencies said. "FinCEN is also aware that some financial institutions already collect information on the originator and beneficiary for transmittals below the $3,000 threshold for reasons separate from reporting suspicious transactions to FinCEN, for instance because it is cost-effective to maintain a single set of processes for all transactions."

In Friday's notice of proposed rulemaking, the agencies also proposed to clarify that the rules also apply to virtual currency and digital assets that have legal tender status.