The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

FinCen Proposes New Electronic Format and Data Field Amendments for Unified Currency Transaction Reports in the US

In keeping with its work to move from paper-based to electronic reporting formats, the Financial Crimes Enforcement Network (FinCen) has published a list of proposed new data fields to be added to firms’ currency transaction reports, as required under the US Bank Secrecy Act (BSA). Industry participants have until 28 March to provide feedback on the list of proposed data fields to be added to the reports, which are aimed at allowing the regulator to more easily monitor customer data for anti-money laundering (AML) purposes.

The proposals do not constitute a change in regulatory requirements, merely a change in the submission formats for currency transaction reporting. FinCen is therefore seeking input from the 82,255 market participants that will be impacted by the changes on the technical details of report submission, as it transitions from a system originally designed for collecting paper forms to a modernised IT environment for electronic reporting. Those affected include depository institutions, broker-dealers, future commission merchants, introducing brokers in commodities, money services businesses and mutual funds.

The impact on these financial institutions of moving to an electronic reporting format is twofold: there is the immediate cost of putting in place systems to be able to produce these reports electronically; and there is the longer term impact of facing greater scrutiny of individual data items, as the regulator uses the BSA database to improve its oversight capabilities. The initial investment in an electronic reporting system, or the alteration of a current system to meet these requirements, must also take into account possible future data related requirements and therefore must be fairly flexible to adapt to these requirements.

In terms of technical requirements as proposed by FinCen: “The database will accept XML-based dynamic, state of the art, reports. Batch and computer to computer filing processes will remain unchanged although the file format will change to match the database. Discrete filings will be based on Adobe LiveCycle Designer ES dynamic forms.”

FinCen estimates that the reporting burden will be an average of 20 minutes per report and 20 minutes recordkeeping per filing. In an average year, the regulator estimates that 14,111,600 responses will be filed and this will work out as 9,407,733 hours of form filling per year.

To illustrate the regulator’s current process of oversight, FinCen, along with the Securities and Exchange Commission (SEC), fined Pinnacle Capital Markets back in September last year for failing to comply with the Bank Secrecy Act. The investigation found that, from October 2003 to August 2006, Pinnacle failed to verify the identities of 34 out of a sample of 55 of its corporate accounts and from October 2003 through November 2009 it did not collect or verify identifying information for “the vast majority” of its sub-accounts.

The move to an electronic reporting format should help the regulator to more closely monitor this data; therefore one can expect an increase in the number actions taken against financial institutions found to be non-compliant.

Related content

WEBINAR

Recorded Webinar: Getting ready for Sustainable Finance Disclosure Regulation (SFDR) and ESG – what action should asset managers be taking now?

Interest in Environmental, Social and Governance (ESG) investment has exploded in recent years, bringing with it regulation and a requirement for buy-side firms to develop ESG strategies and meet disclosure obligations. The sell-side can help here by integrating ESG data with traditional financial information, although the compliance burden remains with asset managers. The EU Sustainable...

BLOG

Privacy Enhancing Technologies – A Game Changer?

Privacy Enhancing Technologies (PETs) hold promise for financial institutions as a means of collaborating on customer data while ensuring its privacy and security. Use cases include measuring the quality of KYC data in a peer group, sharing suspicious activity reports, and bringing together transaction data for Anti-Money Laundering (AML) purposes. As well as supporting these...

EVENT

Virtual Data Management Summit London (Redirected)

Now in its 8th year, the Data Management Summit (DMS) in London explores the shift to the new world where data is redefining the operating model and firms are seeking to unlock value via data transformation projects for enterprise gain and competitive edge.

GUIDE

Regulatory Data Handbook 2021/2022 – Ninth Edition

Welcome to the ninth edition of A-Team Group’s Regulatory Data Handbook, a publication dedicated to helping you gain a full understanding of regulations related to your organisation from the details of requirements to best practice implementation. This edition of the handbook includes a focus on regulations being rolled out to bring order and standardisation to...