Regulatory Efficiency and Effectiveness

Taking a Fresh Look at Regulatory Efficiency and Effectiveness

In March 2007, Director Freis announced he would "take a fresh look" at the way FinCEN carries out its mission. This included a review of the regulatory framework with a renewed focus on ensuring that requirements on covered financial industries are efficient in their application, yet remain extremely effective in their service to law enforcement investigators, FinCEN analysts, and regulatory examiners, to safeguard the financial system from the abuses of terrorist financing, money laundering, and other financial crime.

Director Freis made the commitment in June 2007 to conduct analyses and provide public written feedback within 18 months of the effective date of a new regulation or significant change to an existing regulation. While FinCEN had previously taken similar steps (for example, in 1998 publishing a review of the first 18 months of Suspicious Activity Report [SAR] filings), the bureau has since operationalized the review process as a component of its regulatory process, to test whether a regulatory change once implemented is achieving its intended purpose.

President Obama has underscored the importance of retrospective analysis of existing rules among other obligations to ensure that the benefits of regulations outweigh the costs, even in those cases where they are difficult to quantify. The theme of cooperation between government and regulated industry will continue to be an essential part of the good government process, as future plans for regulatory review are developed and implemented. FinCEN consistently emphasizes the importance of partnership with financial institutions in achieving its shared goals of rooting out financial crime. Below is a summary of analyses conducted 18 months after the effective date of a new regulation or significant change to an existing regulation.

FinCEN's Initial Regulatory Efficiency and Effectiveness Initiative

On June 22, 2007, FinCEN launched its initial regulatory efficiency and effectiveness initiative. Prior to the launch, then-Secretary Paulson was briefed on certain aspects of FinCEN's analytical capabilities, including its recent Mortgage Fraud, and Domestic Shell Company reports. He also received a detailed briefing from FBI counterterrorism officials concerning their use of the BSA information and the wealth of investigatory value that they find in CTR and SAR filings. 

Representatives from trade groups representing thousands of financial services providers also received similar briefings from FinCEN and the FBI. Senior executives from the American Bankers Association, America's Community Bankers, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers of America, Institute of International Bankers, National Association of Federal Credit Unions, National Money Transmitters Association, and The Clearing House Association attended. After those briefings, the Secretary joined the trade group representatives for a discussion of the initiatives. 

Other Federal regulatory agencies including the Office of Thrift Supervision, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration and the Internal Revenue Service sent representatives to attend the announcement and provided their support to FinCEN's initiatives. 

Under the initiative announced that day, FinCEN commenced a joint effort with the Federal bank regulators to ensure that financial institutions and regulators treat compliance obligations in a manner that helps to avoid expenditures that are not commensurate with actual risk. In an effort to address many of the issues dealing with the oversight of and access to banking by Money Services Businesses (MSBs), FinCEN worked with the IRS, State regulators, and Federal functional regulators to develop MSB examination materials, and completed the BSA/AML Examination Manual for Money Services Businesses in December 2008. In addition, FinCEN crafted a more narrow definition of MSBs. FinCEN also completed its own new chapter of the Code of Federal Regulations to ensure that a financial institution will only need to look in two places to identify its regulatory responsibilities. FinCEN also committed to providing affected industries with written feedback within 18 months from the effective date of new regulations or changes to existing regulations. As part of its efforts to provide more value in the feedback products that it produces for the financial industry, FinCEN continues to release The SAR Activity Review - Trends, Tips & Issues and The SAR Activity Review - By the Numbers twice a year. 

Director Freis reiterated his commitment to efficiency and effectiveness during remarks made in February 2011 before the American Bankers Association's National Conference for Community Bankers. FinCEN's focus on efficiency and effectiveness continues, as evidenced in the actions below.

FinCEN's Steps toward Efficiency and Effectiveness

• 2011
• 2010
• 2009
• 2008
• 2007