On Sept. 30, 2010 the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) published proposed regulations that would require banks to report all electronic cross border financial transfers, dramatically expanding the current rule that requires reporting transfers over $10,000. International grants, purchasing, program operation costs of charities that involve international electronic transfers will be covered by this rule. Comments are due Dec. 29. On Sept. 28 the House Financial Services Subcommittee on Oversight and Investigations held a hearing on the effectiveness and burdens in current reporting requirements.

If approved, the proposed FinCEN regulation would apply to all electronic international transfers by banks and money transmitter transfers over $1000.   Typical information collected will include the name, address and account numbers of both senders and recipients. Each year banks would have to report the tax identification numbers (TINs) of all senders and receivers, and money transmitters would have to report TINs on transfers over $3000.
The Washington Post reports that currently there are about 14 million reports filed each year, and that with this change it will increase to about 750 million a year. Banks are already required to file Suspicious Activity Reports (SARs).

In a press release FinCEN’s Director James Freis, Jr. said, “By establishing a centralized database, this regulatory plan will greatly assist law enforcement in detecting and ferreting out transnational organized crime, multinational drug cartels, terrorist financing and international tax evasion.” But questions about the need for government to collect the information and its ability to use it effectively have been raised. Former FinCEN executive assistant director for regulatory policy Peter Djinis told the Washington Post, “This regulation is outrageous. Consider me old-fashioned, but I believe you need to show some evidence of criminality before you are granted unfettered access to the private financial affairs of every individual and company that dares to conduct financial transactions overseas.”

The House oversight hearing “A Review of Current and Evolving Trends in Terrorism Financing,” did not address the proposed regulation directly, but focused on how better enforcement and streamlined reporting can improve the system. David Caruso of the Dominion Advisory Group said, “The burden of detecting, investigating and reporting cash structuring using today’s version of the SAR, hampers a financial institution’s ability to identify transactions associated with more serious crimes, and makes our financial system more vulnerable to terrorist financing and money laundering.”

Stephen Landman of the Investigative Project on Terrorism urged the committee to expand information collection. He devoted a section of his testimony to charities, making broad brush allegations about the role of charities in terrorist financing, while citing few examples and providing no overall data. He urged the committee members to oppose any expansion of the humanitarian exemption to the ban on material support saying humanitarian assistance can be just as dangerous as weapons.

Additional Resources:

Fact Sheet: FinCEN NPRM; Cross-Border Electronic Transmittal of Funds

A copy of the proposed rules can be read at FinCEN Proposes Rule On Reporting Requirements For Cross-Border Transactions