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Department's Response to FinCEN's Proposal to Reduce Direct State Access to Bank Secrecy Act Data through the Currency and Banking Reporting System (CBRS) 

The Honorable Timothy F. Geithner
Secretary of the Treasury
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220  

Re:  Importance of Preserving State Access to BSA Data in FinCEN’s FY 2012 Budget

Dear Secretary Geithner,

The New York Banking Department would like to express concern with the proposal to reduce direct state access to Bank Secrecy Act data through the Currency and Banking Reporting System (CBRS).

FinCEN’s FY 2012 budget proposal would replace the current BSA direct access agreements between FinCEN and state and local regulators and law enforcement agencies with procedures for funneling all BSA data queries through designated state coordinators. The reason given for this proposal is that it would allow FinCEN to reduce costs currently associated with the direct access program, including training, investigative and administrative costs. These cost savings are estimated at approximately $1.3 million, which represents approximately 1% of FinCEN’s current budget.

The Banking Department believes that the proposal would be detrimental to the enforcement efforts of state and local regulators and law enforcement in safeguarding the U.S. financial system and financial institutions from the abuses of financial crime, and that these negative effects are not justified by the anticipated minimal cost savings.

The Banking Department has enjoyed the privilege of direct access to CBRS data since February 1995, when it signed a Project Gateway access agreement with the U.S. Treasury. In order to use the system, the Banking Department implemented stringent procedures and controls for data management and record retention.  FinCEN audits have confirmed our adherence to these procedures and controls.

The Banking Department supervises, either independently or jointly with other regulatory agencies, nearly 2,000 depository and non-depository institutions.  The latter category includes over 200 money service businesses: approximately 70 licensed money transmitters (with over 20,000 agents operating in the State of New York) and 180 check cashers. During 2010, money transmission totaled $24 billion; while total 2009 volume of checks cashed was $14 billion.  During 2010, the Banking Department conducted approximately 160 BSA/AML compliance examinations of depository institutions and 48 such examinations of non-depository institutions and access to the CBRS was a critical component of these examinations.

The Department uses the Gateway System both to fulfill our own regulatory and criminal investigation mandates and to cooperate with other regulators and law enforcement at federal, state and local levels to help ensure the integrity of the U.S. financial system. Moreover, we, like other states, have been delegated responsibility from FinCEN/IRS for non-depository BSA/AML exams.  With the aid of the Gateway System, we have participated in numerous enforcement actions, many of which were high profile and included fines and forfeitures, relating to violations of U.S. anti-money laundering laws and other applicable laws and regulations.

We respectfully submit that the small savings to FinCEN under the budget proposal would be achieved at the greater expense of the ability of state regulators such as the Banking Department to conduct effective and timely BSA/AML compliance examinations and to investigate criminal activity. Timely access to CBRS is integral to our BSA/AML examinations both for depositories and non-depositories.  Due to the fast, free-flowing ability of the financial system to execute transactions, timeliness is crucial, particularly in the area of detecting money laundering, where criminals intent on money laundering through the U.S. Financial system are constantly “pinging away” at financial portals to gain access.

We believe it is likely that reliance on a handful of CBRS coordinators will dramatically increase the volume of SAR data inquiries (and delay their timely processing) since state and local regulators and investigators who are the end users will lack the ability to properly refocus and refine online CBRS searches as needed. Therefore, there will be further delays in users quickly accessing and downloading relevant information due to the additional time it takes for CBRS coordinators and end users to clarify requests and questions. 

To compensate for lack of timely access to the CBRS, we may need to place an additional reporting burden on regulated institutions.  For example, in 2006, the Banking Department and the New York State legislature considered modifying the State's banking laws to require that financial entities supervised by the Banking Department and subject to the suspicious activity reporting requirements file copies of their Suspicious Activity Reports with the Banking Department. Because of the Department's ability to directly access SAR data via the Gateway system, it was decided not to introduce this additional regulatory reporting burden on the financial services industry. 

For these reasons, we believe that the proposal does not pass a basic cost/benefit analysis.  We look forward to a mutually satisfactory resolution of this matter and hope to continue our cooperative relationship in addressing this vital area of the national interest.  Please do not hesitate to contact me at (212) 709-3501 if I can be of any assistance.

Sincerely,

 

Richard H. Neiman
Superintendent of Banks
New York Banking Department

                                                                                
cc.        James H. Freis, Jr;  Director, Financial Crimes Enforcement Network
            John Ryan;  Executive Vice President, Conference of State Bank Supervisors

 

 

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