New Wire Transfer Regs A Reality

by Professor Sarah Welling

The final regulations on wire transfers are out. The regulations were published on January 3 in the Federal Register. They will become effective in about one year, on January 1, 1996.

Two "Rules"
The regulations are composed of two "rules." One is the Joint Federal Reserve Board and Department of Treasury Recordkeeping Rule. This rule requires that certain information on wire transfers must be collected and retained by financial institutions.

The second rule is the Department of Treasury Travel Rule. This rule requires that the information collected under the recordkeeping rule travel with the wire transfer. The purpose of this rule is to make the information available to law enforcement from one source. (This is sometimes coloquially referred to as "one-stop-shopping" for law enforcement.)

Recordkeeping Rule
The recordkeeping rule basically requires that financial institutions collect and retain certain information about wire transfers. The amount and type of information depends on four variables: (1) the type of financial institution (bank or non-bank); (2) the institution's role in the wire transfer (originator/transmittor or beneficiary/recipient); the amount of the wire transfer (below $3,000 or not) and (4) the relationship between the customer and the institution (established customer or not).

Travel Rule
The travel rule requires that financial institutions which send wire transfer orders must send:
(i) the name and, if payment is ordered from an account, the account number of the transmittor;
(ii) the address of the transmittor;
(iii) the amount of the transmittal;
(iv) the execution date of the transmittal;
(v) the identity of the recipient's financial institution
(vi) as many of the following items as are received: the name and address of the recipient; the account number of the recipient; any other specific identifier of the recipient; and
(vii) either the name and address or numerical identifier of the transmittor's financial institution.

Differences From Proposals
Several points in these final rules differ from proposed versions and deserve comment.

First, the final rules adopt a threshold amount of $3,000 to exclude small transactions, which, Treasury says, will significantly relieve the burden on small institutions.

Second, financial institutions do not have to verify the identity of established customers. Again, Treasury concluded this was a good way to reduce compliance burden.

Third, the travel rule makes allowances for the current Fedwire format being inadequate for all the information required by the rule.

Fourth, for closed systems (services where a recipient can pick up transmitted funds at any location within the system with no reliance on outside financial institutions), the final rule requires that the transmittor's financial institution be identified only by the system name and not by a particular office involved.

Number Of Debited Account Travels
One point in the proposed rules that drew critical comments, but Treasury decided to keep in the final rules, is the requirement that if a wire transfer is funded by debiting an account, the transmittor's account number must travel with the transmittal. Treasury rejected various objections to this requirement and did not modify it in the final rules.

The recordkeeping rule is codified primarily in new paragraphs (e) and (f) and travel rule in new paragraph (g) of 32 CFR ~ 103.33.

Sarah N. Welling is a professor of law at the University of Kentucky. She writes widely on money laundering and serves on the Department of the Treasury's BSA Advisory Committee.

Copyright © 1995 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 6, 2/95