CUNA Regulatory Comment Call
April 27, 2009
Proposed Interpretive Guidance on Sharing Suspicious Activity Report by Depository Institutions with Certain U.S. Affiliates
EXECUTIVE SUMMARY
- The Financial Crimes Enforcement Network (FinCEN), as well as NCUA and the other federal bank and thrift regulators issued and is seeking comments on the proposed interpretive guidance on depository institutions sharing Suspicious Activity Reports (SARs) with Certain U.S. Affiliates.
- The proposed guidance interprets a provision in the SAR confidentiality proposed rule that permits financial institutions to share SARs or information that would reveal the existence of a SAR with affiliates that are also subject to the SAR rules. The SAR confidentiality proposed rule was issued concurrent with this proposed guidance.
- Please submit your comments to CUNA by May 22, 2009. Comments are due to FinCEN by June 8, 2009.
Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.commdunn@cuna.com and to Federal Compliance Counsel Nichole Seabron at nseabron@cuna.com; or mail them to Mary and Nichole in c/o CUNA’s Regulatory Affairs Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004. You may also contact us at 800-356-9655 ext 6739, if you would like a copy of the proposed rule, or you may access it here.
BACKGROUND
FinCEN, under authority granted by the Secretary of Treasury, administers the Bank Secrecy Act (BSA) and may require financial institutions to keep records and file reports that FinCEN determines to have a high degree of usefulness in criminal, tax or regulatory investigations or proceedings or for intelligence or counterintelligence activities to protect against international terrorism. FinCEN has issued rules that may require certain financial institutions to file Suspicious Activity Reports (SARs) and the SAR rules currently contain a provision implementing the statutory prohibition on SAR disclosure by a financial institution.
DISCUSSION OF PROPOSED GUIDANCE
Sharing within the Corporate Organizational Structure
FinCEN and the Federal Banking agencies, excluding NCUA, issued joint guidance in January 2006 that permitted a U.S. branch or agency of a foreign bank to share a SAR with its head office outside of the United States and allowed a U.S. bank or savings association to disclose a SAR to its controlling company, no matter where the entity or party was located. Nothing in the current proposed guidance for sharing with affiliates supersedes the January 2006 guidance.
The proposed guidance interprets a statement in the proposed SAR confidentiality proposed rules that a credit union may share a SAR or information revealing the existence of a SAR within its organizational structure for purposes consistent with Title II of the BSA (Reports of Currency and Foreign Transactions) provided the individual that is the subject of the SAR has not been of the filing.
According to FinCEN, the proposed regulations may be interpreted to permit a credit union to share a SAR or information revealing the existence of a SAR with an affiliate that is subject to SAR regulation issued by FinCEN or the Federal Banking agencies. For the purposes of the proposed guidance, “affiliate” has been defined as a company under common control with, or a subsidiary of, the depository institution. “Affiliate” does not include holding companies. Sharing with holding companies has already been addressed under the January 2006 guidance. Affiliates subject to the SAR rule are prohibited from disclosing a SAR or information revealing the existence of a SAR, including SARs that the affiliate has filed and SARs the affiliate has received that have been filed by others. The guidance clarifies that it is not permissible for an affiliate has received a SAR or information revealing the existence of a SAR from a depository institution to share that SAR or SAR-related information with another affiliate.
FinCEN has declined to permit sharing with affiliates that are not subject to SAR rules, whether domestic or foreign. Footnote 14 in the proposed guidance clarifies that the foreign branches of U.S. banks/credit unions are generally regarded as foreign banks for BSA purposes and would be considered affiliates that are not subject to SAR regulation. Accordingly, a U.S. bank/credit union that has filed a SAR may not share the SAR or information revealing the existence of a SAR with its foreign branches. FinCEN has not yet concluded that sharing a SAR or SAR-related information with affiliates that are not subject to SAR regulation would be consistent with the purposes of the BSA which are to promote efforts to detect and report money laundering and terrorist financing and ensure SAR confidentiality.
Depository institutions, as part of their internal controls, should have written confidentiality agreements in place to ensure affiliates protect the confidentiality of SARs or SAR information.
The proposed guidance is intended to remove unnecessary obstacles to detecting and reporting suspicious activity. The guidance should not be read to impose any new BSA requirements or to suggest that sharing with affiliates is mandatory.
QUESTIONS REGARDING THE GUIDANCE
FinCEN invites comments on all aspects of the guidance. However, they are soliciting comments on the following questions:
- Whether the proposed guidance would achieve the intended effect of promoting compliance with
the BSA?
- Whether the guidance raises any ambiguities or results in any negative consequences?
- Whether the definition of “affiliate” is appropriate?
- Whether the scope of the guidance should be expanded to permit sharing with other affiliates within
the United States? If so, please address how additional sharing would be consistent with the purposes
of Title II of BSA.
- Whether the scope of the guidance should be expanded to permit shring with other affiliates
outside of the United States, including with foreign branches of U.S. banks? If so, please
address how additional sharing would be consistent with the purposes of Title II of the BSA.
In particular, comments should detail how a foreign affiliate might protect a SAR or SAR information
in light of a possible request for disclosure abroad that may be subject to foreign law.
- Whether similar provisions to allow sharing with certain affiliates should be permitted
among all financial institutions subject to SAR rules?
- Whether financial institutions (other than depository institutions, securities
broker-dealers, mutual funds, futures commission merchants, or introducing brokers in
commodities) subject to SAR rules, should be permitted to share a SAR or SAR information
with parent entities and/or affiliates?
- Whether and how a depository institution can store and provide access to SARs in an
electronic system in a way that prevents the SARs from being subject to disclosure laws
or obligations of foreign jurisdictions?
- Any other questions or concerns?
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Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com Luke Martone • Senior Regulatory Counsel • (202) 508-6743 • lmartone@cuna.com |
