FRK_20190515_omb

Supporting Statement for the
Recordkeeping Requirements of Regulation H and Regulation K Associated with the
Procedures for Monitoring Bank Secrecy Act Compliance
(FR K1; OMB No. 7100-0310)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), is extending for three years, without
revision, the Recordkeeping Requirements of Regulation H and Regulation K Associated with
the Procedures for Monitoring Bank Secrecy Act Compliance (FR K; OMB No. 7100-0310).
Section 208.63 of the Board’s Regulation H – Membership of State Banking Institutions in the
Federal Reserve System (12 CFR Part 208) requires state member banks to establish and
maintain in writing procedures reasonably designed to ensure and monitor compliance with the
provisions of the Bank Secrecy Act (BSA)2 and the implementing regulations. Sections
211.5(m)(1) and 211.24(j)(1) of the Board’s Regulation K – International Banking Operations
(12 CFR Part 211) impose those same requirements on Edge and agreement corporations and,
except for a federal branch or a federal agency or a state branch that is insured by the Federal
Deposit Insurance Corporation, the U.S. branches, agencies, and representative offices of foreign
banks supervised by the Board. The estimated total annual burden for the FR K is 3,844 hours.
Background and Justification
The BSA and its implementing regulations require financial institutions to keep records
and make reports “where they have a high degree of usefulness in criminal, tax, or regulatory
investigations or proceedings, or in the conduct of intelligence or counterintelligence activities,
including analysis, to protect against international terrorism.”3 In 1986, the Anti-Drug Abuse
Act amended the Federal Deposit Insurance Act4 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 that
the insured depository institutions they regulate establish and maintain procedures to assure and
monitor compliance with the requirements of the BSA and the implementing regulations
promulgated thereunder by the Secretary of the Treasury.5 These amendments incorporated the
minimum components of a BSA compliance program, as determined by the federal banking
agencies, and as generally set forth in the BSA.6

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The internal Agency Tracking Number previously assigned by the Board to this information collection was
“Reg K.” The Board is changing the internal Agency Tracking Number to “FR K” for the purpose of consistency.
2
See 31 U.S.C. 5311 et seq.
3
See 31 U.S.C. 5311.
4
See 12 U.S.C. 1818(s).
5
The 1987 notice was issued by the Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency, Federal Home Loan Bank Board, and National Credit Union Administration.
6
See 31 U.S.C. 5318(h).

The Board’s 1987 amendments, codified at section 208.63 of Regulation H, apply to state
member banks. In 2006, Regulation K was revised to add corresponding provisions for Edge
and agreement corporations, and, except for a federal branch or a federal agency or a state branch
that is insured by the Federal Deposit Insurance Corporation, the U.S. branches, agencies, and
representative offices of foreign banks supervised by the Board.7
This information is not available from other sources.
Description of Information Collection
The BSA compliance program requirements of Regulation K and Regulation H require
respondent institutions 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 responsible for coordinating and monitoring
day-to-day compliance, and (4) training for appropriate personnel.8 The compliance program
must be approved by the board of directors of the state member bank, Edge corporation, or
agreement corporation and must be noted in the institution’s 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 and noted in the minutes or approved by a delegee acting
under the express authority of the foreign bank’s board of directors.
Time Schedule for Information Collection
This information collection consists of recordkeeping requirements, 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 FR K is authorized pursuant to the Federal Deposit Insurance Act
(12 U.S.C. 1818(s)), which requires the federal banking agencies, including the Board, 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.9 The FR K is mandatory.
Because the Federal Reserve will not collect this information, confidentiality issues
would normally not arise. Because the records will be retained at banking organizations, the
Freedom of Information Act (FOIA) will only be implicated if the Board’s examiners retain a
copy of the record as part of an examination or supervision of a banking institution. In that case,
7

See 71 FR 13934 (March 20, 2006).
See 12 CFR 208.63(c); these specific requirements are incorporated by reference in 12 CFR 211.5(m)(1) and
211.24(j)(1).
9
The Board’s authority in 12 U.S.C. 1818(s) to prescribe regulations includes the entities required to comply with
section 208.63 of the Board’s Regulation H (12 CFR 208.63) and sections 211.5(m)(1) and 211.24(j)(1) of the
Board’s Regulation K (12 CFR 211.5(m)(1) and 12 CFR 211.24(j)(1)).
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the records would be exempt from disclosure under exemption 8 to FOIA, which protects
examination materials from disclosure (5 U.S.C. 552(b)(8)). Exemption 4 to FOIA, which
protects confidential financial information, may also be applicable (5 U.S.C. 552(b)(4)).
Consultation Outside the Agency
There has been no consultation outside the agency.
Public Comments
On February 5, 2019, the Board published an initial notice in the Federal Register
(84 FR 1731) requesting public comment for 60 days on the extension, without revision, of the
FR K. The comment period for this notice expired on April 8, 2019. The Board did receive any
comments. On May 15, 2019, the Board published a final notice in the Federal Register
(84 FR 21779).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR K is 3,844
hours. The Board estimates that it takes each respondent 16 hours to create its BSA compliance
program and 4 hours to maintain procedures to assure and monitor compliance with the BSA.
Since the measures taken to comply with Regulations H and K are consistent with sound risk
management and banking practices, the Board believes that little additional burden is associated
with the requirements for establishing and maintaining a compliance program. These
recordkeeping requirements represent less than 1 percent of the Board’s total paperwork burden.
Estimated
number of
respondents10

FR K

Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

Establish compliance
program

111

1

16

16

Maintenance of
compliance program

95712

1

4

3,828
3,844

Total

10

Of these respondents, 548 are considered small entities as defined by the Small Business Administration (i.e.,
entities with less than $550 million in total assets), www.sba.gov/document/support--table-size-standards.
11
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 from 2015 through 2017.
12
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 December 31, 2017.

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The estimated total annual cost to the public for this information collection is $221,414.13
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 in connection with the FR K,
the cost to the Federal Reserve System is negligible.

13

Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $19, 45% Financial Managers at
$71, 15% Lawyers at $69, and 10% Chief Executives at $96). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2018, published March 29, 2019, www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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