FinCEN Seeks Public Comments on a “No-Action” Letter Process

That report was submitted to Congress on June 28, 2021 (the Report).² In it, FinCEN found that a no-action letter process would promote a robust and productive dialogue with the public, spur innovation among financial institutions, and enhance the culture of compliance and transparency in the application and enforcement of the BSA. As a result, the Report concluded that FinCEN should undertake a rulemaking to establish a no-action letter process.

The following addresses some of the key issues raised by the ANPRM.

I. Additional Considerations Related to the Report

The ANPRM solicits comments on the sufficiency of the issues considered in the Report as well as FinCEN’s ultimate conclusion that a no-action process would be beneficial.

• Additional Considerations: In the Report, FinCEN analyzed a number of issues, including the viability of a cross-regulator no-action letter process, a timeline for considering and issuing no-action letters, and the extent to which no-action letters would mitigate or accentuate illicit finance risks. The ANPRM asks for comments on whether there are additional considerations that FinCEN did not consider in the Report.
• Usefulness of a No-Action Process: The ANPRM seeks comments on FinCEN’s ultimate conclusion that a no-action process would in fact be useful to the public. In particular, the ANPRM asks the public to comment on the extent to which a no-action process would be beneficial if any no-action letter issued by FinCEN would not be binding on other U.S. regulatory agencies and on points to consider in assessing the viability of a cross-regulator system and also whether existing laws or regulations allow for the issuance of no-action letters by FinCEN already.

II. No-Action Letter Process

The ANPRM seeks comment on various points related to the scope and mechanics of filing a no-action letter, including the following components:

• Limitations on Content and Timing: The ANPRM asks the public to comment on whether the use of a no-action process should be limited to certain kinds of anticipated conduct or activity and whether FinCEN should incorporate the informational, procedural, and filing requirements in its regulation covering administrative rulings in its no-action letter process. As to timing, the ANPRM asks, in particular, for comment on whether the no-action letter requests should be prohibited during a BSA or BSA-related examination.
• FinCEN Evaluation Process: The ANPRM seeks comment on certain aspects of FinCEN’s evaluation of a no-action letter request. Specifically, the ANPRM asks whether FinCEN’s consideration of no-action letter requests should be limited to written materials only (as opposed to allowing for oral communications as well) and whether FinCEN should be permitted to share the facts included in a no-action letter request with agencies with delegated examination authority under 31 CFR 1010.810 for the purpose of evaluating specific conduct addressed in the request.
• Scope of No-Action Letters: Understanding that many requests may relate to corporate entities that have a number of subsidiaries, the ANPRM seeks comment on when, or if, a no-action letter issued to a parent should apply to its subsidiaries and vice versa.

III. FinCEN Jurisdiction Determination

If a no-action letter process is implemented, it is foreseeable that FinCEN could receive no-action letter requests from nonfinancial institutions not subject to FinCEN’s regulatory authority. In the ANPRM, FinCEN acknowledges that it may not be able to immediately or definitively establish whether it has regulatory authority over a requester and asks for comment on questions related to that issue.

Specifically, the ANPRM asks for comment on whether FinCEN should confirm that it has regulatory authority over a requester before issuing a no-action letter and whether it should also issue letters on requests for a determination as to whether FinCEN does indeed have regulatory authority over the requester. Relatedly, the ANPRM also asks for comment on how, if at all, a no-action letter should apply to individuals or entities over which it does not have regulatory authority, such as agents, third parties, domestic affiliates, and foreign affiliates.

IV. Change in Circumstances

The ANPRM solicits comments on what effect a change in circumstances, whether through a change in corporate structure or a change in relevant law or regulation, should have on FinCEN’s no-action letters. Additionally, the ANPRM asks for comment on the extent to which FinCEN should be able to deviate from its position in prior no-action letters.

V. Revocation

The ANPRM solicits comments on if, and how, a FinCEN no-action letter should be revoked or terminated.

• Revocation: The ANPRM asks the public to provide comment on potential standards for the revocation of a no-action letter, including whether there are any circumstances under which a no-action letter should be automatically revoked and whether standards for revocation should be published or whether revocation should simply be determined on a case-by-case basis. The ANPRM also asks how a recission should impact FinCEN’s nonenforcement determination and whether conduct that occurred while a revoked letter was active should be subject to FinCEN enforcement action.
• Expiration: The ANPRM seeks comment on whether no-action letter should be issued with expiration dates.

VI. No-Action Letter Denials and Withdrawals

The ANPRM also seeks comment on how no-action request denials and withdrawals should be handled, including whether there should be an appeals process, whether denials should be published publicly, and whether requesters should be able to withdraw their request.

VII. Confidentiality

The ANPRM also solicits comment on a number of questions related to the confidentiality of no-action requests.

In many cases, the anticipated conduct that is the subject of a no-action letter request will be confidential. For example, many no-action letter requests are likely to contain information regarding a requestor’s AML controls that will need to be kept confidential to avoid abuse of those controls by potential money launderers. The ANPRM seeks comment on whether the no-action-letter process should be confidential, including from Federal, State, local, or Tribal regulators, and, if so, for how long. Additionally, the ANPRM also asks whether no-action letters should be published as precedents after being granted and, if no-action letters and their underlying requests are made public, what FinCEN should do to ensure certain confidential or sensitive information in those materials is not disseminated to the public.

VIII. Consultation

The ANPRM solicits comment on how FinCEN can or should liaise with other regulators or law enforcement regarding a no-action letter request, including the following:

• Consultation: The ANPRM asks for comments on the procedures and processes that should be put in place to allow FinCEN to consult with relevant regulators and law enforcement on a no-action letter request.
• Disclosure: The ANPRM also asks for comment on the circumstances under which, other than for consultation, FinCEN should share information learned during the no-action letter request process with other Federal, State, local, and Tribal agencies, including the U.S. Department of Justice.

IX. Other Questions

The ANPRM solicits comment on several miscellaneous questions that appear to be directed at guiding FinCEN’s evaluation.

• Expected Burdens: The ANPRM asks commenters to identify the burdens requesting institutions are expected to face in connection with the implementation of a no-action letter process, including expected time and costs associated with those burdens. FinCEN also asks what it can do to address those burdens on regulated parties. 
• Expected Requests: The ANPRM seeks comment on what topics, issues, transaction types, customer types, geographies, products, services, or other matters would be expected to be the subject of no-action letter requests to FinCEN.

X.No-Action Letter Interaction With Existing Processes

Finally, the ANPRM solicits comment on how the potential no-action letter process may complement existing processes. FinCEN currently provides the two forms of regulatory guidance or relief: (1) administrative rulings and (2) exceptive or exemptive relief. The ANPRM seeks comment on the potential interplay between these forms of relief and a no-action letter process.

• Distinction From Existing Processes: The ANPRM seeks comment on what criteria should distinguish a no-action letter request from an administrative ruling or exemptive relief and what value or benefit a no-action letter would bring that is distinct from those forms of relief.
• Enhancements to Existing Processes: The ANPRM also seeks comment on potential improvements to the existing processes for issuing administrative rulings or exceptive or exemptive relief and potentially helpful guidance from FinCEN concerning administrative rulings or exceptive or exemptive relief.

The ANPRM’s comment period closes on August 5, 2022. A no-action letter process has the potential to be a valuable tool to financial institutions and other entities wading through the often murky waters of the BSA’s regulatory requirements. This is especially true in light of the clear indication in AMLA that AML enforcement will be a FinCEN priority moving forward and the emergence of new complex technologies and products, such as blockchain and cryptocurrency.

However, unsurprisingly, its utility will be determined by the boundaries FinCEN places on the process. This is especially so with regard to the applicability of a FinCEN no-action letter to other regulatory authorities and the Department of Justice. For many financial institutions, a no-action letter issued by FinCEN will provide some but not total comfort if, in addition to alerting the Department of Justice or other regulators to the conduct in question, those entities can disagree with FinCEN’s determination and initiate their own independent enforcement action. Alternatively, if a FinCEN no-action letter is binding on other regulatory authorities as well as the Department of Justice, that determination could be extremely valuable to those subject to the BSA. Indeed, the ANPRM suggests that if FinCEN determines that a cross-regulator program is required for a valuable no-action letter process but that such a program is not viable, the implementation of the no-action process may be abandoned altogether.

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¹ 87 Fed. Reg. 34224 (June 3, 2022), available at https://www.federalregister.gov/documents/2022/06/06/2022-12048/no-action-letter-process#citation-5-p34224.

² See FinCEN, A Report to Congress: Assessment of No-Action Letters in Accordance with Section 6305 of the Anti-Money Laundering Act of 2020 (June 28, 2021), available at https://www.fincen.gov/sites/default/files/shared/No-Action%20Letter%20Report%20to%20Congress%20per%20AMLA%20for%20ExecSec%20Clearance%20508.pdf.