Executive Summary

The Department of the Treasury (Treasury) recently announced a delay in the effective date for certain amendments to the Bank Secrecy Act (BSA) that were scheduled for January 1, 1996. The amendments, which require broker/dealers to comply with additional recordkeeping requirements for funds transfers and transmittals, now are effective April 1, 1996. The changes are delayed while Treasury seeks comment on proposed amendments that clarify definitions regarding the parties to an international funds transfer.

Background

The BSA authorizes Treasury to require financial institutions, including broker/dealers, to keep records and file reports about the source, volume, and movement of funds into and out of the country and through domestic financial institutions. In 1992, the Annunzio-Wylie Anti-Money Laundering Act (the 1992 Amendment) amended the BSA to give Treasury and the Board of Governors of the Federal Reserve System (the Fed.) joint authority to prescribe regulations for maintaining records of domestic and international transfers of funds.

In April 1993, Treasury and the Fed. published a joint proposal with amendments to the BSA for wire transfers, which was adopted in final form in early 1995 (the Joint Rule). The Joint Rule requires additional recordkeeping related to certain funds transfers and transmittals by broker/dealers and other financial institutions. At the same time, Treasury adopted a companion rate (the Travel Rule) that requires financial institutions to include in transmittal orders certain information that must be retained under the new record-keeping requirements. Members may refer to Notice to Members 95-69 (August 1995) for a more detailed discussion of these rates.

Originally scheduled to become effective on January 1, 1996, these changes prompted industry concerns because the parties to an international funds transfer were defined differently in the BSA than they are in the Uniform Commercial Code Article 4A (UCC 4A). In response, Treasury and the Fed. determined to delay the effective date of these changes until April 1, 1996, and proposed amendments that clarify the roles of the parties to an international funds transfer.

Proposed Amendments

To clarify the requirements, Treasury and the Fed. are proposing changes to the definitions in the Joint Rule that make the roles of the parties to an international funds transfer or transmittal of funds consistent under the BSA and under the UCC 4A. Specifically, the amendments expand the definitions of beneficiary's bank, originator's bank, payment order, receiving bank, receiving financial institution, recipient's financial institution, transmittal order, transmitter, and transmitter's financial institution to include both domestic and foreign institutions. The changes also clarify that only financial institution offices located within the United States are subject to the Joint Rule's requirements. In addition, Treasury and the Fed. are revising Sections 103.33(e)(6) and (f)(6) of the BSA to delete the word "domestic" in certain places. These changes do not effect the scope of the exceptions in these sections.

Finally, Treasury is proposing changes to the Travel Rule that reflect the amended definitions in the Joint Rule. The proposed amendments to the Travel Rule also incorporate the exceptions contained in the Joint Rule.

Members may refer to the August 24, 1995, Federal Register to review the proposed amendments in their entirety.

Questions concerning this Notice may be directed to Susan Lang, NASD Compliance Department, at (202) 728–6969.