Ready for the New Wire Transfer Rules?
Byrne, John J., ABA Banking Journal
After six years of debate, several comment periods, and congressional intervention, banks face an April 1, 1996, deadline for implementation of the wire-transfer regulations put out by the Treasury Department and the Federal Reserve Board (60 Federal Register 220, Jan. 3, 1995).
These rules require enhanced recordkeeping of certain wire transfers by domestic financial institutions as defined under the regulation. In addition, a companion rule published by the Treasury Department on the same day (the "travel rule") requires that institutions include certain information in transmittal and payment orders that will "travel" through the transmittal process. The 1996 deadline is the same for this rule.
How did we arrive at this new requirement that Treasury's Financial Crimes Enforcement Network (FinCEN) argues "will assist law enforcement efforts by preserving significantly more information than is currently available to investigators"?
How we got here
During the 1980s, Congress frequently considered ways to address the drug and money-laundering problem. After passing legislation that made money laundering a crime, creating recordkeeping requirements for cash purchases of cashiers, checks, and making many other changes, Congress went after the wire-transfer system. Then-Chairman of the House Banking Committee Henry B. Gonzalez (D-Texas) argued that "[w]hether the funds are to pay for cocaine provided by foreign suppliers or these monies are sent overseas to simply avoid detection, the use of electronic transfer systems moves tremendous amounts of money at the speed of light." Rep. Gonzalez proposed legislation in 1990, which was eventually passed in 1992, that required the Treasury and Federal Reserve Board to promulgate recordkeeping procedures for international funds transfers before Jan. 1, 1994. The final law (the Annunzio-Wylie Anti-Money Laundering Act of 1992) also required both agencies to jointly promulgate rules with respect to domestic funds transfers.
After Congress became convinced that the way to close the money laundering spigot was to cover funds transfers, the Treasury Department began a rulemaking process.
The first proposal was developed in 1989 and drew the wrath of the banking industry. ABA was unalterably opposed to the change because of its reliance on creating a new reporting system that we argued would have dramatically hindered the payment system.
Fortunately, the banking industry worked hard to familiarize the government with the complexities of the wire-transfer system. As we approached the possibility of new regulations, government employees were asked to tour wire facilities, discuss the payment system with operations officials, and seek more information on this area of potential reporting. Banking agency officials accepted the invitations and changes to the initial proposal soon followed.
The concern over these potentially burdensome requirements and the view that the Treasury Department needed the expertise of the Federal Reserve Board led the banking industry to seek--with success--congressional support for a joint rulemaking process that would enable the Federal Reserve Board, together with the Treasury Department, to cover international funds transfer. The rules cover not only banks, but also check cashers and money-transmitters.
What must be emphasized is Congressional concern about the scope of these new requirements. The Annunzio-Wylie law directed the joint rulemaking agencies to consider both the usefulness of regulations and their cost and burden on the payment system.
A look back at the 1993 proposal
The Treasury Department and the Federal Reserve closed the comment period on the second wire transfer proposal on Oct. 4, 1993. As the Jan. 1, 1994, effective date was fast approaching the industry strenuously argued--again successfully--for more time. In response to comments from many affected groups, the Under Secretary for Enforcement at the Treasury, Ronald Noble, announced that due to the formation of the Bank Secrecy Act Advisory Group and the agency's review of its anti-money laundering programs, the Treasury was delaying the wire-transfer rules until sometime in 1994. …