A proposal to lower the reporting threshold of cross border wire transfers from $3000 to $250 has been put forward jointly by the U.S. regulators FINCEN and Federal Reserve. As per the U.S. Bank secrecy Act, for domestic and international transfers involving $3000 or more banks and nonbank financial institutions collect, store and transfer the KYC information of the sender and receiver like account details, identity information to other financial institutions as part of the payment process typically known as “Travel Rule”. These information, enable the regulators to carry on investigations at a later stage.
The regulators have reported that small value cross border transactions (below $3000) were being conducted to fund illicit activities like drug trafficking, terrorist financing etc. Based on the analysis of 2000 SAR s (Suspicious Activity Reports) filed from 2016 to 2019, FINCEN is able to identify that those transactions have potential terrorist financing purposes, and the mean and median values of such SAR s were $509 and $255 respectively.
FINCEN and the Federal Reserve have asked the common public to provide their suggestions and opinions on the new proposal till nov-27 while Bankers perceive this as an extra burden in terms of record & data management. While industry experts feel that the proposed change would not have huge impact either on the compliance cost or the efficiency of the payment and settlement systems of the financial institutions.
The law enforcement agencies objective for a new proposal is that such amendments would enhance their investigations further. The threshold for domestic transaction has not been changed on the other hand the proposed rule is applicable to transactions involving virtual assets or digital currencies meeting the set threshold limit.
Author: Rajashree, MBA, CAMI
(PonSun AML Academy)