FinCEN launches rulemaking on no-action letter process

“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,” said FinCEN Acting Director Himamauli Das in a press release Friday. No-action letters are a type of enforcement discretion in which the agency will not take an action against a submitting party for the specific conduct presented to the agency.

FinCEN was ordered to assess and report on the viability of creating a no-action letter process by the Anti-Money Laundering Act of 2020, which was approved as part of the 2021 defense spending bill. The agency had indicated in July 2021 it would launch a rulemaking process on no-action letters.

Currently, the agency offers two ways for financial institutions to request interpretation of conduct as it relates to enforcement of the Bank Secrecy Act (BSA): administrative rulings and exceptive or exemptive relief.

Administrative rulings are the most formal process and are binding to FinCEN and the party involved. If made public, they can be used to set precedent for other covered entities. FinCEN can also grant exceptive or exemptive relief to BSA requirements, which applies only to a specific set of circumstances. The relief can be revoked by FinCEN’s director if other information about the circumstances comes to light at a later date.

The agency is seeking comment from the public on whether the no-action letter process should be implemented, “and if so, how a no-action letter process should interact with these other tools.” The agency will accept public comments on the rulemaking through Aug. 5.

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

Several federal regulators, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Consumer Financial Protection Bureau, have no-action letter processes. Both the SEC and CFTC said they issue a handful of no-action letters a year and the response time can range from a few months to more than a year.

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