March 2021 Foodman website and JD Supra
bank secrecy act

The “Travel Rule” is a Bank Secrecy Act (BSA) rule [31 CFR 103.33(g)] that requires financial institutions to pass certain information on to the next financial institution, in certain funds transmittals involving more than one financial institution.  “Financial institutions” include banks; securities brokers or dealers; casinos subject to the BSA; money transmitters, check cashers, currency exchangers, and money order issuers and sellers subject to the BSA.  The purpose of the Travel Rule is to help law enforcement agencies detect, investigate, and prosecute money laundering and other financial crimes through preserving an information trail regarding persons sending and receiving funds through funds transfer systems.

The Travel Rule Requirements (Record Keeping Rules) are:

All transmitter financial institutions must include and send the following in the transmittal order:

  • the name of the transmitter
  • the account number of the transmitter, if used
  • the address of the transmitter
  • the identity of the transmitter’s financial institution
  • the amount of the transmittal order
  • the execution date of the transmittal order
  • the identity of the recipient’s financial institution

 And, if received:

  • the name of the recipient
  • the address of the recipient
  • the account number of the recipient, and
  • any other specific identifier of the recipient

On 10/27/20, FinCEN and the Board of Governors (the Agencies) issued a Joint Notice of Proposed Rulemaking

Currently, existing requirements of the Travel Rule of collecting, retaining, and transmitting information concerning funds transfers and transmittals of funds apply only to funds transfers and transmittals of funds in amounts of $3,000 or more.   Under the Agencies’ Notice of Proposed Rulemaking, the Agencies are proposing to:

  • Lower the threshold under the Recordkeeping Rule, and lower the threshold under the Travel Rule, to $250 for funds transfers and transmittals of funds that begin or end outside the United States.
  • Clarify the meaning of “money” as used in these same rules to ensure that the rules apply to domestic and cross-border transactions involving convertible virtual currency (cryptocurrency) that either has an equivalent value as currency, or acts as a substitute for currency, but lacks legal tender status.
  • Clarify that these rules apply to domestic and cross-border transactions involving digital assets that have legal tender status.

Will all Financial Institutions under the Definition be ready for the Agencies’ Proposed Travel Rule Rulemaking?

Financial Institutions will face higher compliance costs via the higher burden of reporting, recordkeeping, information technology implementation and maintenance costs.  Financial institutions will need to decide if:

  • increased staffing and additional or upgraded information technology systems will be necessary for compliance with the proposed rules.
  • they have the processes and procedures to capture funds transfers and transmittals of funds at $250 or more that begin or end outside the United States.
  • when the employees that are responsible with capturing and retaining the information required under the Rules will receive the training on the proposed rules.
  • there is sufficient funding for the compliance department.
  • they have the internal controls and quality review processes in line with the new regulatory guidance.

Will your Financial Institution be ready for the changes proposed in the Travel Rule?  Who is your Corporate Governance expert?  ©