In its notice, FinCEN outlines six stages to the suspicious activity monitoring process: (1) maintaining a monitoring system; (2) reviewing alerts; (3) transforming alerts into cases; (4) case review; (5) documentation of determination; and (6) SAR filing process. FinCEN’s existing PRA burden and cost estimates only consider the sixth stage of the process — i.e., the “traditional annual PRA burden,” — and provides a uniform estimate for all SARs.
However, in the current notice, FinCEN intends to modify the PRA burden and cost methodology to instead categorize SARs based on their complexity and allocate different PRA burden and cost estimates to each category of SAR complexity. The proposed categories of complexity will be: (1) continuing SARs; (2) proposed SARs with standard content at depository institutions; (3) proposed SARs with standard content at nondepository institutions; (4) proposed SARs with extended content at depository institutions; and (5) proposed SARs with extended content at nondepository institutions.
In addition, FinCEN communicated its intention to expand the scope of assessment to also include a “supplemental annual PRA burden” estimate that reflects the annual costs involved in the fourth stage (i.e., case review and evaluating cases for potential SAR filing) and the fifth stage (i.e., determination and recordkeeping of cases not converted into SARs).
For both the modified traditional and supplemental PRA burden calculations, FinCEN assumed that 42% of cases become SARs based on information published by the Bank Policy Institute’s 2018 study of 13 financial institutions of varying sizes.FinCEN also assumed that four roles are involved in the various stages of the process and that each receive a fully loaded hourly wage consistent with the following:
Supplemental Annual PRA Burden Calculation
Fourth Stage Case Review PRA Burden
Using these figures, FinCEN estimates that the average hourly cost of evaluating cases for potential SAR filing in the case review stage is $49.00/hour. This calculation assumes that case evaluation for an original SAR can occur in 20 minutes, case evaluation for a continuing SAR can occur in three minutes, and that no Clerical Work (Recordkeeping) roles will be involved.
Fifth Stage Determination and Documentation
FinCEN estimates that the hourly average cost for documenting cases not converted to SARs in the documentation stage is $29.00/hour. The calculation assumes that documentation of such decisions consumes 25 minutes and that no Clerical Work (Case Review) roles will be involved.
Modified Traditional Annual PRA Burden Calculation — Sixth Stage SAR Filing Process
In its reconsideration of the PRA burdens and costs associated with the SAR filing stage, FinCEN estimated the PRA burdens and costs for storing filed reports and documentation, as well as the drafting, writing, and submitting of SARs.
FinCEN’s estimate for the cost for storing filed reports and supporting documentation is $24.00/hour across all SAR categories, institution types, and filers. FinCEN assumes that the storing component of the SAR filing stage will require no involvement by Indirect Supervision or Clerical Work (Case Review) roles and that PRA burdens will be five and 15 minutes for batch filers and discrete filers, respectively.
Regarding the cost of drafting, writing, and submitting original SARs in the SAR filing process stage, the table below summarizes FinCEN’s PRA burden and cost estimates for the modified stages of the suspicious activity monitoring process:
The primary assumption underlying the difference in estimated PRA cost for standard and extended content SARs is the shift in labor from the Clerical Work (Case Review) role to the Indirect and Direct Supervision roles.
While FinCEN acknowledges the potential for differential SAR complexity for depository and nondepository institutions, the PRA cost estimates apply regardless of whether the filer is a depository or nondepository institution. The estimates also do not vary depending on the filing method despite acknowledgment that PRA burdens can differ for batch filers that tend to leverage automation more than discrete filers that tend to rely more heavily on manual processes.
FinCEN’s notice acknowledges its assessment does not contemplate PRA burdens and costs for SARs required by the rules of more than one agency. FinCEN also states its intent to also review the first three stages of the suspicious activity monitoring process for possible modifications of the PRA burden estimates at a future time.
The notice of rulemaking also invites specific commentary on the inputs used for its calculations; its characterization of the three final stages of the suspicious activity monitoring process; the types, cost, and involvement of different roles within the process; the proposed SAR complexity categories; and other assumptions underlying its estimates.
Comments must be submitted online at the Federal E-rulemaking Portal at http://www.regulations.gov or via mail to the Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183, with reference to Docket Number FINCEN-2020-0004 and OMB control numbers 1506-0001, 1506-0006, 1506-0015, 1506-0019, 1506-0029, 1506-0061, and 1506-0065. All comments must be submitted on or before July 27, 2020.