Insights

A new chapter is being added to the Code of Federal Regulations – Chapter X of Title 31. It is part of FinCEN’s effort to increase the efficiency and effectiveness of its regulatory oversight. FinCEN hopes the reorganization will make compliance with the Bank Secrecy Act (BSA) less difficult, with its regulations more user-friendly to navigate, research and, ultimately, understand. Its regulations will be grouped by particular regulated industries to make clearer and more accessible regulatory obligations. The reorganization does not result in substantive changes to the regulations.

FinCEN published its Final Rule on reorganizing its BSA regulations on October 26, 2010. Chapter X will replace 31 C.F.R. Part 103 and begins with Part 1010, which is devoted to provisions that are generally applicable to any person subject to the BSA. Each subsequent Part is devoted to a particular type of financial institution subject to the BSA. The structure and numbering in each Part is consistent. For example, the requirement for an anti-money laundering program appears at .210, with the general requirement at § 1010.210, the rule for banks appearing at § 1020.210 and for money services businesses at § 1022.210. This makes it easier to determine whether a particular obligation applies to a particular type of financial institution. The only drawback is that a person will have to refer to the General Part for the generally applicable provisions and other Parts for institution-specific provisions. The overall layout of Chapter 10 should more clearly outline BSA requirements, and what requirements apply to which regulated person.

FinCEN elected not to include in Chapter X the Appendices currently located in 31 C.F.R. Part 103. The information contained in these materials, if still required, will be available on FinCEN’s website (www.fincen.gov). This approach tracks their decision to post administrative rulings with precedential value on their website, rather than in the Federal Register. It was part of FinCEN’s Administrative Ruling Final Rule that was published on November 17, 2009. The idea is that the rulings and information from the Appendices will be easier to find.

The transfer of FinCEN’s regulations in Part 103 to Chapter X becomes effective March 1, 2011, after which 31 C.F.R. Chapter X should be cited. Until that time, FinCEN’s regulations remain under 31 C.F.R. Part 103 and that Part should be cited. To aid with the transition, FinCEN has published a cross-reference guide as part of the Final Rule, and it is also available online at http://www.fincen.gov/statutes_regs/ChapterX/pdf/ChapterX.pdf. FinCEN also plans to release an automated citation translator that converts a regulatory citation from Part 103 to Chapter X and vice versa. During the transition, FinCEN suggests providing the citation that is not in effect in parentheses. For example, prior to March 1, 2011, 31 C.F.R. Part 103 should be cited with the future 31 C.F.R. Chapter X in parentheses. Beginning March 1, 2011, 31 C.F.R. Chapter X should be cited noting the former 31 C.F.R. Part 103 in parentheses.

FinCEN will not be updating the citations in previously published materials, viewing it unnecessary because it refers to the regulations as structured at the time of the materials’ publication. FinCEN will be updating the citations in its forms, which will be available for use as of March 1, 2011. After the updated forms become available, FinCEN will nevertheless continue to accept and process all currently acceptable forms that cite to Part 103.

While there are no substantive changes, financial institutions will have some work ahead of them due to the reorganization. They will need to change all references in their BSA compliance programs, to include policies, procedures, controls and training materials. It is also an opportunity to revisit compliance programs to ensure they are up to date and have accounted for changes in the business and operations.

Patricia E.M. Covington is a partner in the Maryland office of Hudson Cook, LLP. Patty can be reached at 410-865-5409 or by email at pcovington@hudco.com.