2020 Journal of Community Bank Studies

THIRD PLACE: Mansfield University of Pennsylvania

best advice and guidance on how to make the process as efficient as possible. Communication with individual banks is important since each is unique and has its own specific situations. FinCEN and other regulators should try to be understanding when institutions have questions regarding policies and compliance expectations. Many banks believe the customer due diligence rule in 2018 was too ambiguous and left too many questions unanswered (Leutkeyemer and Pearce). Because this was a new rule, many banks, including C&N, found this process to be an enormous burden. It can take hours for a bank to complete customer due diligence, especially when dealing with wealth management. FinCEN should be as thorough as possible and address as many questions as it can when announcing any new additions to policy, predicting what banks will ask in response and being ready to answer frequently asked questions. There are always unique situations that may need more of an explanation. For example, many institutions offer non-traditional banking services that will not fall under a regular account. It is in FinCEN’s best interest to always be as thorough as possible when laying out new policies and future plans that will affect the country’s banks. Policy Measures There have been different measures enacted to modernize BSA provisions, but there are also many pieces of legislation that community banks would like to see passed to progress even more. One solution is FinCEN’s Bank Secrecy

Act Information Technology (IT) Modernization Program. It added this program to help modernize the way information is collected, stored, shared, and analyzed. The regulations must be modernized because they will help the government detect crime, strengthen security, and improve data quality (“FinCEN’s IT”). The program also mandated the electronic filing of FinCEN reports, rather than using paper reports. The fundamental problem that banks see with BSA/AML regulations is that they are simply outdated. Jim Reuter, CEO of FirstBank Holding Co. in Colorado, states, “The problem is that we are still operating as if it was 25 to 30 years ago” (Finkle). One new bill introduced to modernize the system is the Counter-Terrorism and Illicit Finance Act, introduced in June 2018, which would increase the CTR threshold from $10,000 to $30,000. It would also provide more detailed feedback to banks (regarding their reports) and modernize the AML system. The $30,000 figure still does not come close to the correct amount adjusted for inflation, but the House of Representatives tabled the bill, and it has yet to be voted on. In 2017, financial institutions filed 1.5 million SARs and 15.8 million CTRs (Leutkeyemer and Pearce). As mentioned previously, C&N files anywhere from 1,000 to 1,200 CTRs per year. If the threshold were to increase to $30,000, C&N predicted it would file closer to 100 to 200 per year, as many of the CTRs filed relate to ordinary business transactions. On a national scale, many filed reports go unseen, and only a small percentage result in criminal charges. An

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