Articles Anti-Money Laundering Update: FinCEN Seeks Comments on Potential No-Action Letter Process By Kenneth C. Rudd | June 14, 2022 Introduction On June 3, 2022, the Financial Crimes Enforcement Network (“FinCEN”) announced that it was issuing an Advanced Notice of Proposed Rulemaking (“ANPRM”) regarding a No Action Letter Process, which ANPRM was published in the Federal Register on June 6, 2022. This rulemaking is under the Anti-Money Laundering Act of 2020 (the “AML Act”). A no-action letter process, if ultimately promulgated, could provide an important avenue for financial institutions to seek prospective relief from FinCEN. That could have a substantive impact on their Anti-Money Laundering (“AML”) and Bank Secrecy Act (“BSA”) compliance efforts. Any comments on the APRM must be received by FinCEN by August 5, 2022. Background to the ANPRM Section 6305(a) of the AML Act requires the Director of FinCEN, in consultation with the Attorney General and other regulators and agencies, to “establish a process for the issuance of no-action letters by FinCEN in response to inquiries from persons concerning the application of” the BSA, the USA PATRIOT Act and other AML and countering the financing of terror laws and regulations to “specific conduct, including a request for a statement as to whether FinCEN or any relevant Federal functional regulator intends to take an enforcement against the person with respect to such conduct.” In turn, Section 6035(b) requires proposed rulemaking, if appropriate. On June 28, 2021, FinCEN submitted a report to Congress (the “Report”), which concluded that FinCEN should engage in rulemaking concerning no-action letters. FinCEN has overall authority for evaluating compliance with the BSA, but has generally delegated examination authority to Federal functional regulators and, in connection with Money Services Businesses, to the IRS. Certain other authority has not been delegated. In addition, each of FinCEN and the Federal banking agencies can bring civil money penalty actions for violations of the BSA. Under Chapter X of the Code of Federal Regulations (the existing regulatory scheme), FinCEN may provide certain administrative rulings and exceptive or exemptive relief. An administrative ruling binds FinCEN if it describes a specifically identified actual situation. In addition, such ruling can have precedential value only if FinCEN makes it available to the public through publication on FinCEN's website or otherwise. Exceptive or exemptive relief are only applicable as expressly stated in the order of authorization, and may be revoked by the Secretary of the Treasury. The Proposed No Action Letter Process No action letters are different. As used by other agencies, no-action letters typically are an exercise of enforcement discretion where the agency issues a letter indicating its intention to take or recommend taking, or not to take, enforcement action against the submitting party for the specific conduct in the submitting party’s request. They are generally only prospective. In its Report, FinCEN concluded that it should undertake rulemaking with regard to no action letters. The primary benefits of such process include promoting a robust and productive dialogue with the public, spurring innovation among financial institutions, and enhancing the culture of compliance and transparency in the application and enforcement of the BSA. As part of the ANPRM, FinCEN stated that it is seeking public input “on whether to establish a no-action letter process, what the scope of and limits of no-action letters should be, and how best to implement the process. It is also seeking comment on how such a process should interact with its existing forms of regulatory guidance and relief. FinCEN stated that it is seeking comment on all aspects of a no-action letter process, including how it may interact with other guidance and relief. It posed 48 specific categories of questions. Some highlights of the areas of inquiry about which FinCEN is seeking comment include: The viability of a cross-regulator no-action letter process;The value of a no-action letter from FinCEN if other agencies, including the Department of Justice, are not bound;Potential regulatory limits on no-action letters;Whether the no-action letter process should be available during a BSA examination;Specific elements that should be required, if any, in a no-action letter request;The application of no-action letters to affiliates of the submitter;Whether requests concerning the jurisdiction of FinCEN are more appropriate for the no-action letter or administrative ruling processes;Standards for revocation of no-action letters;Whether there should be an appeals process for denials and if so, how it should function;Whether denials should be published on FinCEN’s website;The confidentiality of the process;Procedures for consultation with other regulators or enforcement agencies;Burdens imposed on requesting institutions; andDistinguishing the no-action letter process from administrative rulings and exceptive or exemptive relief. We welcome any questions you may have regarding the ANPRM, the AML Act, AML compliance in general, or submitting comments to FinCEN. Kenneth C. Rudd is an accomplished AML attorney and commercial litigator. He routinely represents large and small financial institutions with regard to AML compliance and in connection with responding to criminal and civil process, particularly in the AML space. He frequently collaborates with other outside counsel in various matters to ensure that clients’ AML issues are well handled commensurate with risk. For questions about this article, please contact krudd@zeklaw.com.
Anti-Money Laundering Update: FinCEN Seeks Comments on Potential No-Action Letter Process By Kenneth C. Rudd | June 14, 2022 Introduction On June 3, 2022, the Financial Crimes Enforcement Network (“FinCEN”) announced that it was issuing an Advanced Notice of Proposed Rulemaking (“ANPRM”) regarding a No Action Letter Process, which ANPRM was published in the Federal Register on June 6, 2022. This rulemaking is under the Anti-Money Laundering Act of 2020 (the “AML Act”). A no-action letter process, if ultimately promulgated, could provide an important avenue for financial institutions to seek prospective relief from FinCEN. That could have a substantive impact on their Anti-Money Laundering (“AML”) and Bank Secrecy Act (“BSA”) compliance efforts. Any comments on the APRM must be received by FinCEN by August 5, 2022. Background to the ANPRM Section 6305(a) of the AML Act requires the Director of FinCEN, in consultation with the Attorney General and other regulators and agencies, to “establish a process for the issuance of no-action letters by FinCEN in response to inquiries from persons concerning the application of” the BSA, the USA PATRIOT Act and other AML and countering the financing of terror laws and regulations to “specific conduct, including a request for a statement as to whether FinCEN or any relevant Federal functional regulator intends to take an enforcement against the person with respect to such conduct.” In turn, Section 6035(b) requires proposed rulemaking, if appropriate. On June 28, 2021, FinCEN submitted a report to Congress (the “Report”), which concluded that FinCEN should engage in rulemaking concerning no-action letters. FinCEN has overall authority for evaluating compliance with the BSA, but has generally delegated examination authority to Federal functional regulators and, in connection with Money Services Businesses, to the IRS. Certain other authority has not been delegated. In addition, each of FinCEN and the Federal banking agencies can bring civil money penalty actions for violations of the BSA. Under Chapter X of the Code of Federal Regulations (the existing regulatory scheme), FinCEN may provide certain administrative rulings and exceptive or exemptive relief. An administrative ruling binds FinCEN if it describes a specifically identified actual situation. In addition, such ruling can have precedential value only if FinCEN makes it available to the public through publication on FinCEN's website or otherwise. Exceptive or exemptive relief are only applicable as expressly stated in the order of authorization, and may be revoked by the Secretary of the Treasury. The Proposed No Action Letter Process No action letters are different. As used by other agencies, no-action letters typically are an exercise of enforcement discretion where the agency issues a letter indicating its intention to take or recommend taking, or not to take, enforcement action against the submitting party for the specific conduct in the submitting party’s request. They are generally only prospective. In its Report, FinCEN concluded that it should undertake rulemaking with regard to no action letters. The primary benefits of such process include promoting a robust and productive dialogue with the public, spurring innovation among financial institutions, and enhancing the culture of compliance and transparency in the application and enforcement of the BSA. As part of the ANPRM, FinCEN stated that it is seeking public input “on whether to establish a no-action letter process, what the scope of and limits of no-action letters should be, and how best to implement the process. It is also seeking comment on how such a process should interact with its existing forms of regulatory guidance and relief. FinCEN stated that it is seeking comment on all aspects of a no-action letter process, including how it may interact with other guidance and relief. It posed 48 specific categories of questions. Some highlights of the areas of inquiry about which FinCEN is seeking comment include: The viability of a cross-regulator no-action letter process;The value of a no-action letter from FinCEN if other agencies, including the Department of Justice, are not bound;Potential regulatory limits on no-action letters;Whether the no-action letter process should be available during a BSA examination;Specific elements that should be required, if any, in a no-action letter request;The application of no-action letters to affiliates of the submitter;Whether requests concerning the jurisdiction of FinCEN are more appropriate for the no-action letter or administrative ruling processes;Standards for revocation of no-action letters;Whether there should be an appeals process for denials and if so, how it should function;Whether denials should be published on FinCEN’s website;The confidentiality of the process;Procedures for consultation with other regulators or enforcement agencies;Burdens imposed on requesting institutions; andDistinguishing the no-action letter process from administrative rulings and exceptive or exemptive relief. We welcome any questions you may have regarding the ANPRM, the AML Act, AML compliance in general, or submitting comments to FinCEN. Kenneth C. Rudd is an accomplished AML attorney and commercial litigator. He routinely represents large and small financial institutions with regard to AML compliance and in connection with responding to criminal and civil process, particularly in the AML space. He frequently collaborates with other outside counsel in various matters to ensure that clients’ AML issues are well handled commensurate with risk. For questions about this article, please contact krudd@zeklaw.com.