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The Financial Crimes Enforcement (FinCEN) has begun rulemaking on the no-action letter process

FinCEN has begun rulemaking for a no-action letter process, which the agency claims will help spur innovation in financial services for anti-money laundering/counter-terrorist financing (AML/CFT) and compliance functions.

In a press release issued Friday, FinCEN's acting director, Himamauli Das, said, "A no-action letter process has the potential to spur innovation and enhance overall effectiveness of the AML/CFT framework and the implementation of financial institutions' compliance programs." No-action letters are a type of enforcement discretion in which the agency decides not to take action against a submitting party for the specific conduct that has been brought to the agency's attention.

The Anti-Money Laundering Act of 2020, which was approved as part of the 2021 defense spending bill, directed FinCEN to assess and report on the viability of creating a no-action letter process. In July 2021, the agency announced that it would begin a rulemaking process on no-action letters.

Administrative rulings and exceptive or exemptive relief are the two options available to financial institutions seeking interpretation of conduct in relation to the Bank Secrecy Act (BSA) enforcement.

Administrative rulings are the most formal process, and they bind FinCEN and the other party. They can be used to set precedent for other covered entities if they are made public. FinCEN can also grant exceptions or exemptions to BSA requirements, but only for a limited set of circumstances. FinCEN's director has the authority to revoke the relief if new information about the circumstances becomes available.

The agency is seeking public input on whether the no-action letter process should be implemented, as well as "how a no-action letter process should interact with these other tools," according to the agency. The rulemaking will be open to public comment until August 5th.

FinCEN said it would most commonly use no-action letters in situations where a covered entity is considering a new product or service that could potentially violate the BSA but has not yet engaged in the activity, according to a June 2021 report to Congress.

The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Consumer Financial Protection Bureau all have no-action letter procedures in place. The SEC and the CFTC both stated that they only issue a few no-action letters per year, with response times ranging from a few months to more than a year.

The main benefits of establishing a no-action letter process, according to FinCEN's report to Congress, would be to open a dialogue between the regulator and regulated entities, encourage innovation among financial institutions, and improve the culture of compliance and transparency in BSA enforcement.



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