RegK_20160318_omb

Supporting Statement for the
Recordkeeping Requirements of Regulation H and Regulation K Associated with
Bank Secrecy Act Compliance Programs
(Reg K; OMB No. 7100-0310)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the mandatory Recordkeeping Requirements of Regulation H and Regulation K
Associated with Bank Secrecy Act Compliance Programs (Reg K; OMB No. 7100-0310). The
Federal Reserve is required to renew these requirements every three years pursuant to the
Paperwork Reduction Act of 1995,1 which classifies recordkeeping in regulations such as
Regulation H and Regulation K as “required information collections.”
Section 208.63 of Regulation H requires state member banks to establish and maintain
procedures reasonably designed to ensure and monitor compliance with the Bank Secrecy Act
(BSA)2 and related regulations. Sections 211.5(m)(1) and 211.24(j)(1) of Regulation K require
Edge and agreement corporations and U.S. branches, agencies, and representative offices of
foreign banks supervised by the Board to establish and maintain the same procedures. There are
no required reporting forms associated with this information collection. The Federal Reserve’s
total current annual burden is estimated to be 5,032 hours.
Background and Justification
The BSA requires financial institutions to keep records and make reports that have a high
degree of usefulness in criminal, tax, or regulatory proceedings. In 1986, the Anti-Drug Abuse
Act amended the Federal Deposit Insurance Act3 to require the federal banking agencies to
(1) prescribe regulations requiring the institutions they regulate to establish and maintain
procedures reasonably designed to assure and monitor compliance with the BSA and (2) to
review such procedures during the course of their examinations.
In 1987, the federal banking agencies amended their respective regulations to require the
banks, savings associations, and credit unions they regulated to establish and maintain
procedures to assure and monitor compliance with the requirements of the BSA and regulations
promulgated thereunder by the Secretary of the Treasury.4 These amendments incorporated the
minimum components of a BSA compliance program as determined by the federal banking
agencies as generally set forth in the BSA.5
1

See 44 U.S.C. § 3501 et seq.

2

See 31 U.S.C. § 5311 et seq.

3

See 12 U.S.C. § 1818(s).

4

The 1987 notice was issued by the Board, the Federal Deposit Insurance Corporation, the Office of the
Comptroller of the Currency, the Federal Home Loan Bank Board, and the National Credit Union Administration.
5

See 31 U.S.C. § 5318(h).

The Board’s 1987 amendments, codified at section 208.63 of Regulation H, applied to
state member banks. In 2006, Regulation K was revised to add corresponding provisions for
Edge and agreement corporations, and U.S. branches, agencies, and representative offices of
foreign banks supervised by the Board.6
Description of Information Collection
The BSA compliance program requirements of Regulation K and Regulation H require
respondents to establish a written BSA compliance program that includes the following
components (1) a system of internal controls to assure ongoing compliance, (2) independent
testing of compliance by the institution’s personnel or by an outside party, (3) the designation of
an individual or individuals for coordinating and monitoring day-to-day compliance, and (4)
training for appropriate personnel.7 The compliance program must be approved by the Edge or
agreement corporation’s board of directors and noted in the minutes. In the case of a branch,
agency, or representative office of a foreign bank, the compliance program may be approved by
the foreign bank’s board of directors or a delegee acting under the express authority of the
foreign bank’s board of directors.
Time Schedule for Information Collection
This information collection contains a recordkeeping requirement, as mentioned above.
The creation of a BSA compliance program is a mandatory one-time requirement. Subsequent
changes to the program would be on-occasion.
Legal Status
The Board’s Legal Division has determined that the standards for BSA compliance
programs associated with section 208.63 of Regulation H and with sections 211.5(m)(1) and
211.24(j)(1) of Regulation K are generally authorized pursuant to the BSA. In addition, sections
11, 21, and 25 of the Federal Reserve Act (12 U.S.C. §§ 248(a), 483, 602) authorize the Board to
require the information collection and recordkeeping requirements set forth in Regulations H.
Section 25A of the Federal Reserve Act (12 U.S.C. § 611a), section 5 of the Bank Holding
Company Act (12 U.S.C. § 1844), and section 13(a) of the International Banking Act (12 U.S.C.
§ 3108(a)) provide further authority for sections 211.5(m)(l) and 211.24(j)(1) of Regulation K.
The information collection and recordkeeping requirements for BSA compliance programs are
mandatory. Since the Federal Reserve does not collect any information, no issue of
confidentiality normally arises. However, if a BSA compliance program becomes a Board
record during an examination, the information may be protected from disclosure under
exemptions (b)(4) and (b)(8) of the Freedom of Information Act (5 U.S.C. §§ 552(b)(4) and
(b)(8)).

6

International Banking Operations, 71 Fed. Reg. 13934-37 (March 20, 2006) (codified at 12 C.F.R. §§ 211.5(m)(1)
and 211.24(j)(1)).
7

See 12 C.F.R. § 208.63(c); these specific requirements are incorporated by reference in 12 C.F.R. §§ 211.5(m)(1)
and 211.24(j)(1).

2

Consultation Outside the Agency
On September 15, 2015, the Federal Reserve published a notice in the Federal Register
(80 FR 55360) requesting public comment for 60 days on the extension, without revision, of the
Recordkeeping Requirements of Regulation H and Regulation K Associated with Bank Secrecy
Act Compliance Programs. The comment period for this notice expired on November 16, 2015.
The Federal Reserve did not receive any comments. On December 8, 2015, the Federal Reserve
published a final notice in the Federal Register (80 FR 76286).
Estimate of Respondent Burden
As shown in the table below, the current total annual burden for the recordkeeping
requirements of section 208.63 of Regulation H and sections 211.5(m)(1) and 211.24(j)(1) of
Regulation K is estimated to be 5,032 hours. The Board estimates that it takes each respondent
16 hours (or 2 business days) to create its BSA compliance program and 4 hours to maintain
procedures to assure and monitor compliance with the BSA. The Board believes that little
burden is associated with the requirements for establishing a compliance program for the BSA
because the measures involved in the program are consistent with existing requirements under
the BSA and with usual and customary business practices. This recordkeeping requirement
represents less than 1 percent of the total Federal Reserve System paperwork burden.
Number of
respondents

Reg K

Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

Establish compliance
program

108

1

16

160

Maintenance of
compliance program

1,2189

1

4

4,872

Total

5,032

The total cost to the public is estimated to be $260,406.10

8

This number represents the average number of state member banks, Edge and agreement corporations, and U.S.
branches, agencies, and representative offices of foreign banks supervised by the Board that were established each
year in 2012 through 2014.
9

This number represents the actual number of state member banks, Edge and agreement corporations, U.S.
branches, agencies, and representative offices of foreign banks supervised by the Board that are open and active as
of July 7, 2015.
10

Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rate (30% Office & Administrative Support at $17, 45 % Financial Managers at
$63, 15 % Lawyers at $64, and 10 % Chief Executives at $87). Hourly rate for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2014, published March 25, 2015, at www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

3

Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
Since the Federal Reserve does not collect any information, the cost to the Federal
Reserve System is negligible.

4