9 March 2009. Three notices.
See also:
occ030909.htm Confidentiality of Suspicious Activity Reports 1 March 9, 2009
ots030909.htm Confidentiality of Suspicious Activity Reports 2 March 9, 2009
[Federal Register: March 9, 2009 (Volume 74, Number 44)]
[Proposed Rules]
[Page 10148-10158]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr09-22]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AA99
[Docket Number: TREAS-FinCEN-2008-0022]
Financial Crimes Enforcement Network; Confidentiality of
Suspicious Activity Reports
AGENCY: The Financial Crimes Enforcement Network (FinCEN), Department
of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN''), a
bureau of the Department of the Treasury (``Treasury''), is proposing
to revise the regulations implementing the Bank Secrecy Act (``BSA'')
regarding the confidentiality of a report of suspicious activity
(``SAR'') to: Clarify the scope of the statutory prohibition against
the disclosure by a financial institution of a SAR; address the
statutory prohibition against the disclosure by the government of a
SAR; clarify that the exclusive standard applicable to the disclosure
of a SAR by the government is to fulfill official duties consistent
with the purposes of the BSA; modify the safe harbor provision to
include changes made by the Uniting and Strengthening America by
Providing the Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (``USA PATRIOT Act''); and make minor technical
revisions for consistency and harmonization among the different rules.
These amendments are consistent with similar proposals to be issued by
some of the Federal bank regulatory agencies.\1\
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\1\ The Federal bank regulatory agencies have parallel SAR
requirements for their supervised entities: See 12 CFR 208.62 (the
Board of Governors of the Federal Reserve System (``Fed'')); 12 CFR
353.3 (the Federal Deposit Insurance Corporation (``FDIC'')); 12 CFR
748.1 (the National Credit Union Administration (``NCUA'')); 12 CFR
21.11 (the Office of the Comptroller of Currency (``OCC'')) and 12
CFR 563.180 (the Office of Thrift Supervision (``OTS'')). Of these
agencies the OCC and OTS are proposing corollary regulation changes
contemporaneously.
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DATES: Comments must be received by June 8, 2009.
ADDRESSES: You may submit comments, identified by RIN 1506-AA99 or
docket number TREAS-FinCen-2008-0022,\2\ by any of the following
methods:
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\2\ This single docket number is shared by three related
documents (this notice of proposed rulemaking, and two related
pieces of proposed guidance) published simultaneously by FinCEN in
today's Federal Register. Accordingly, commenters may submit
comments related to any of the proposals, or any combination of
proposals, in a single comment letter.
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[[Page 10149]]
Federal e-rulemaking portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include RIN
1506-AA99 or docket number TREAS-FinCen-2008-0022 in the body of the
text.
Inspection of comments: Comments may be inspected, between 10 a.m.
and 4 p.m., in the FinCEN reading room in Vienna, VA. Persons wishing
to inspect the comments submitted must request an appointment with the
Disclosure Officer by telephoning (703) 905-5034 (Not a toll free
call).
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division, FinCEN (800) 949-2732 and select option 1.
SUPPLEMENTARY INFORMATION:
I. Background
The BSA requires financial institutions to keep certain records and
make certain reports that have been determined to be useful in
criminal, tax, or regulatory investigations or proceedings, and for
intelligence or counter intelligence activities to protect against
international terrorism. In particular, the BSA and its implementing
regulations require financial institutions to file a SAR when they
detect a known or suspected violation of Federal law or regulation, or
a suspicious activity related to money laundering, terrorist financing,
or other criminal activity.\3\
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\3\ The Annunzio-Wylie Anti-Money Laundering Act of 1992 (the
Annunzio-Wylie Act), amended the BSA and authorized the Secretary of
the Treasury to require financial institutions to report suspicious
transactions relevant to a possible violation of law or regulation.
See Public Law 102-550, Title XV, Sec. 1517(b), 106 Stat. 4055,
4058-9 (1992); 31 U.S.C. 5318(g)(1).
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SARs generally are unproven reports of possible violations of law
or regulation, or of suspicious activities, that are used for law
enforcement or regulatory purposes. The BSA provides that a financial
institution and its officers, directors, employees, and agents are
prohibited from notifying any person involved in a suspicious
transaction that the transaction was reported.\4\ FinCEN implemented
this provision in its SAR regulations for each industry through an
explicit prohibition that closely mirrored the statutory language.
Specifically, we clarified that disclosure could not be made to the
person involved in the transaction, but that the SAR could be provided
to FinCEN, law enforcement, and the institution's supervisor or
examining authority. In certain SAR rules, we have expressly provided
for the possibility of institutions jointly filing a SAR regarding
suspicious activity that occurred at multiple institutions.\5\
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\4\ See 31 U.S.C. 5318(g)(2).
\5\ Bank Secrecy Act regulations expressly permitting the filing
of a joint SAR when multiple financial transactions are involved in
a common transaction or series of transactions involving suspicious
activity can be found at 31 CFR 103.15(a)(3) (for mutual funds); 31
CFR 103.16(b)(3)(ii) (for insurance companies); 31 CFR 103.17(a)(3)
(for futures commission merchants and introducing brokers in
commodities); 31 CFR 103.19(a)(3) (for broker-dealers in
securities); and 31 CFR 103.20(a)(4) (for money services
businesses).
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The USA PATRIOT Act strengthened the confidentiality of SARs by
adding to the BSA a new provision that prohibits officers or employees
of the Federal government or any State, local, tribal, or territorial
government within the United States with knowledge of a SAR from
disclosing to any person involved in a suspicious transaction that the
transaction was reported, other than as necessary to fulfill the
official duties of such officer or employee.\6\
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\6\ See USA PATRIOT Act, section 351(b). Public Law 107-56,
Title III, Sec. 351, 115 Stat. 272, 321 (2001); 31 U.S.C.
5318(g)(2).
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To encourage the reporting of possible violations of law or
regulation, and the filing of SARs, the BSA contains a safe harbor
provision that shields financial institutions making such reports from
civil liability. In 2001, the USA PATRIOT Act clarified that the safe
harbor covers voluntary disclosure of possible violations of law and
regulations to a government agency and expanded the scope of the limit
on liability to cover any civil liability which may exist ``under any
contract or other legally enforceable agreement (including any
arbitration agreement).'' \7\
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\7\ See USA PATRIOT Act, section 351(a). Public Law 107-56,
Title III, Sec. 351, 115 Stat. 272, 321 (2001); 31 U.S.C.
5318(g)(3).
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II. Overview of Proposal
The proposed amendments to FinCEN's SAR rules include key changes
that would (1) clarify the scope of the statutory prohibition against
the disclosure by a financial institution of a SAR; (2) address the
statutory prohibition against the disclosure by the government of a
SAR; (3) clarify that the exclusive standard applicable to the
disclosure of a SAR, or any information that would reveal the existence
of a SAR by the government is ``to fulfill official duties consistent
with Title II of the BSA,'' in order to ensure that SAR information is
protected from inappropriate disclosures unrelated to the BSA purposes
for which SARs are filed; (4) modify the safe harbor provision to
include changes made by the USA PATRIOT Act; and (5) where possible,
harmonize minor technical differences that exist between the
confidentiality, safe harbor, and compliance provisions of our
rulemakings for different industries.
In separate but contemporaneous rulemakings, some of the Federal
bank regulatory agencies are proposing to amend their SAR rules to
incorporate comparable provisions, and to amend their information
disclosure regulations \8\ to clarify that the exclusive standard
governing the release of a SAR, or any information that would reveal
the existence of a SAR is set forth in the confidentiality provisions
of their respective SAR rules.
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\8\ Generally, these regulations are known as ``Touhy
regulations,'' after the Supreme Court's decision in United States
ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). In that case, the
Supreme Court held that an agency employee could not be held in
contempt for refusing to disclose agency records or information when
following the instructions of his or her supervisor regarding the
disclosure. As such, an agency's Touhy regulations are the
instructions agency employees must follow when those employees
receive requests or demands to testify or otherwise disclose agency
records or information.
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Additionally, elsewhere in this part, FinCEN is simultaneously
issuing for notice and comment proposed guidance regarding the sharing
of SARs with affiliates. This proposed guidance interprets one of the
provisions of this notice of proposed rulemaking and, accordingly,
should be read in conjunction with this notice.
III. Section-by-Section Analysis
A. Confidentiality of SARs
Out of recognition that ``reports with a high degree of
usefulness'' were unlikely to be filed unless afforded strict
confidentiality, Congress established what is often referred to as the
``non-disclosure provision'' \9\ in the BSA. This provision prohibits
financial institutions and officers or employees of the government with
knowledge that a SAR was filed from notifying the person involved in
the transaction that the transaction has been reported. Accordingly,
under the section heading ``confidentiality of reports,'' FinCEN's
rules currently prohibit financial institutions from disclosing that a
SAR was filed to any person involved in the transaction. The SAR rules
also provide that no institution may disclose a SAR in response to a
subpoena or other request, except when that request comes from FinCEN
or an appropriate supervisory or law enforcement agency. Over the
years, FinCEN has received numerous questions regarding the scope of
the prohibition against the disclosure of a SAR in its current rules.
Accordingly, in this rulemaking, we are
[[Page 10150]]
proposing to clarify the scope of SAR confidentiality.
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\9\ See 31 U.S.C. 5318(g)(2).
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FinCEN believes it is important to clarify that the statutory
prohibition on notifying the person involved in the transaction that
the transaction has been reported must be interpreted more broadly to
prohibit disclosures to any person. SAR rules issued by the Federal
bank regulatory agencies already provide that ``SARs are
confidential.'' As described further in the Section-by-Section Analysis
below, this view of SAR confidentiality also has been repeatedly upheld
in relevant case law.
FinCEN also recognizes that in order to protect the confidentiality
of a SAR, any information that would reveal the existence of a SAR must
be afforded the same protection as the SAR itself. The confidentiality
of SARs must be maintained for a number of compelling reasons. For
example, the disclosure of a SAR could result in notification to
persons involved in the transaction that is being reported and
compromise any investigations being conducted in connection with the
SAR. In addition, FinCEN recognizes that any disclosure of a SAR could
reduce the willingness of all financial institutions to file SARs. If
institutions believe that a SAR can be used for purposes unrelated to
the law enforcement and regulatory purposes of the BSA, the disclosure
of such information could adversely affect the timely, appropriate, and
candid reporting of suspicious transactions. Institutions also may be
reluctant to report suspicious transactions for fear that the
disclosure of a SAR will interfere with the institution's relationship
with its customer. Further, a SAR may provide insight into how an
institution uncovers potential criminal conduct that can be used by
others to circumvent detection. The disclosure of a SAR also could
compromise personally identifiable information or commercially
sensitive information, or damage the reputational interests of
companies that may be named. Finally, the disclosure of a SAR increases
the risk that an institution's employees or others involved in the
preparation and filing of SARs could become targets for retaliation by
persons whose criminal conduct has been reported.
FinCEN believes that all of the reasons for maintaining the
confidentiality of SARs are equally applicable to any information that
would reveal the existence of a SAR. Therefore, FinCEN is proposing to
modify the general introduction in our rules to state that ``[a] SAR,
and any information that would reveal the existence of a SAR, are
confidential.'' The introduction also indicates that neither a SAR, nor
any information that would reveal the existence of a SAR, may be
disclosed, except as authorized in the limited circumstances that
follow.
FinCEN is also proposing to modify this introductory section by
clarifying that ``for purposes of [the confidentiality provision] only,
a SAR shall include any suspicious activity report filed with FinCEN
pursuant to any regulation in this part.'' By using the term ``SAR'' in
each of the proposed confidentiality provisions, FinCEN is purposefully
using a term broader than the existing references in those provisions
to specific types of SARs. We note that our rules require institutions
to comply with our filing requirements through the use of particular
versions of the SAR form, e.g., a SAR-SF for those in the securities
and futures sector, or a SAR-MSB for money services businesses.
Nevertheless, it is critical that the confidentiality provisions of our
SAR rules apply with respect to any type of SAR in the filing
institution's possession, which since it may result from the joint
filing or sharing of a SAR with another type of financial institution
in accordance with the provisions of these proposed rules, could
include a type of SAR form not used by the institution.
B. Disclosure by Financial Institutions
FinCEN's current rules provide that any institution subpoenaed or
otherwise requested to disclose a SAR or the information contained in a
SAR must decline to produce the SAR or to provide any information that
would disclose that a SAR has been prepared or filed, and must notify
FinCEN of the request and its response to the request.
The proposed rules more specifically address the prohibition on the
disclosure of a SAR by a financial institution. The rules provide that
the prohibition includes ``any information that would reveal the
existence of a SAR'' instead of using the phrase ``any information that
would disclose that a SAR has been prepared or filed.'' FinCEN believes
that this phrase more clearly describes the type of information that is
covered by the prohibition against the disclosure of a SAR. In
addition, the proposed rules incorporate the specific reference in 31
U.S.C. 5318(g)(2)(A)(i) to ``directors, officers, employees and
agents,'' and clarify that the prohibition against disclosure extends
to those individuals in a financial institution who may have access to
a SAR or information that would reveal the existence of a SAR.
Although 31 U.S.C. 5318(g)(2)(A)(i) states that a person involved
in the transaction may not be notified that the transaction has been
reported, the proposed rules continue to reflect case law that has
consistently concluded, in accordance with applicable regulations, that
financial institutions are broadly prohibited from disclosing a SAR, or
information that would reveal the existence of a SAR, to any person.
Accordingly, these cases have held that, in the context of discovery in
connection with civil lawsuits, financial institutions are prohibited
from disclosing a SAR or information that would reveal the existence of
a SAR because section 5318(g) and its implementing regulations have
created an unqualified discovery and evidentiary privilege for such
information that cannot be waived by financial institutions.\10\
Consistent with case law and current regulation, the texts of the
proposed rules do not limit the prohibition on disclosure only to the
person involved in the transaction. Permitting disclosure to any
outside party may make it likely that SAR information would be
disclosed to a person involved in the transaction, which is prohibited
by the statute.
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\10\ See, e.g., Whitney Nat'l Bank v. Karam, 306 F. Supp. 2d
678, 682 (S.D. Tex. 2004); Cotton v. Private Bank and Trust Co., 235
F. Supp. 2d 809, 815 (N.D. Ill. 2002).
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The proposed rules continue to provide that any financial
institution, or any director, officer, employee, or agent of a
financial institution, that is subpoenaed or otherwise requested to
disclose a SAR or information that would reveal the existence of a SAR
must decline to provide the information, citing this section of the
rules and 31 U.S.C. 5318(g)(2)(A)(i), and must provide notification of
the request and its response thereto to FinCEN and its primary Federal
regulator if that regulator has a parallel SAR requirement.
C. Rules of Construction
FinCEN is proposing rules of construction to address issues that
have arisen over the years about the scope of the SAR disclosure
prohibition and to implement statutory modifications to the BSA made by
the USA PATRIOT Act. The proposed rules of construction primarily
describe situations that are not covered by the prohibition against the
disclosure of SAR information. The introduction to these rules makes
clear that the rules of construction are each qualified by the
statutory mandate that no person involved in any reported suspicious
transaction can be notified that the transaction has been reported.
The first proposed rule of construction builds upon the existing
[[Page 10151]]
provision to clarify that a financial institution, or any director,
officer, employee, or agent of a financial institution, may disclose a
SAR or information that would reveal the existence of a SAR to FinCEN
or any Federal, state, or local law enforcement agency or any Federal
or state regulatory agency that examines the financial institution for
compliance with the BSA. For the rules governing broker-dealers,
futures commission merchants, and introducing brokers in commodities,
such disclosure is also permissible at the request of an appropriate
self-regulatory organization that is examining the institution for
compliance with the SAR reporting requirement. Although the
permissibility of such disclosures may be readily apparent, the
proposal contains this statement to clarify that the prohibition
against disclosure cannot be used to withhold this information from
governmental authorities or other examining authorities that are
otherwise entitled by law to receive SARs and to examine for and
investigate suspicious activity.
The second proposed rule of construction provides that the phrase
``a SAR or information that would reveal the existence of a SAR'' does
not include the underlying facts, transactions, and documents upon
which a SAR is based. This statement reflects case law which has
recognized that, while a financial institution is prohibited from
producing documents in discovery that evidence the existence of a SAR,
factual documents created in the ordinary course of business (for
example, business records and account information upon which a SAR is
based), may be discoverable in civil litigation under the Federal Rules
of Civil Procedure.\11\
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\11\ See Cotton, 235 F. Supp. 2d at 815.
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This proposed rule of construction includes illustrative examples
of situations where the underlying facts, transactions, and documents
upon which a SAR is based may be disclosed. The first example clarifies
that this information \12\ may be disclosed to another financial
institution, or any director, officer, employee, or agent of the
financial institution, for the preparation of a joint SAR. Although
FinCEN had not previously prohibited any institution from jointly
filing with any other institution that was subject to the suspicious
activity reporting requirement, this rule of construction clarifies the
authority for all institutions with a SAR requirement to jointly file
SARs with any other institution with a SAR requirement.\13\
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\12\ Although the underlying facts, transactions, and documents
upon which a SAR is based may include previously filed SARs or other
information that would reveal the existence of a SAR, these
materials would not be disclosable as underlying documents.
\13\ On December 21, 2006, FinCEN and the Federal bank
regulatory agencies announced that the format for the SAR form for
depository institutions had been revised to support a new joint
filing initiative to reduce the number of duplicate SARs filed for a
single suspicious transaction. ``Suspicious Activity Report (SAR)
Revised to Support Joint Filings and Reduce Duplicate SARs,'' Joint
Release issued by FinCEN, the FRB, the OCC, the OTS, the FDIC, and
NCUA (Dec. 21, 2006). On February 17, 2006, FinCEN and the Federal
bank regulatory agencies published a joint Federal Register notice
seeking comment on proposed revisions to the SAR form. See 71 FR
8640. On April 26, 2007, FinCEN announced a delay in implementation
of the revised SAR form until further notice. See 72 FR 23891. Until
such time as a new SAR form is available that facilitates joint
filing, institutions authorized to jointly file should follow
FinCEN's guidance to use the words ``joint filing'' in the narrative
of the SAR and ensure that both institutions maintain a copy of the
SAR and any supporting documentation (See, e.g., http://
www.fincen.gov/statutes_regs/guidance/html/guidance_faqs_sar_
10042006.html).
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The second example, applicable only to depository institutions,
broker-dealers, futures commission merchants, and introducing brokers
in commodities, codifies a rule of construction added to the BSA by
section 351 of the USA PATRIOT Act which provides that such underlying
information may be disclosed in certain written employment references
and termination notices.\14\ These two examples are not intended to be
an exhaustive list of all possible scenarios in which the disclosure of
underlying information is permissible.
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\14\ 31 U.S.C. 5318(g)(2)(B).
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The third proposed rule of construction, applicable at this time
only to depository institutions, broker-dealers, mutual funds, futures
commission merchants, and introducing brokers in commodities, makes
clear that the prohibition against the disclosure of a SAR or
information that would reveal the existence of a SAR does not include
the sharing by any of these financial institutions, or any director,
officer, employee, or agent of these institutions, of a SAR or
information that would reveal the existence of the SAR within the
institution's corporate organizational structure, for purposes that are
consistent with Title II of the BSA, as determined by regulation or in
guidance. This proposed rule of construction recognizes that these
financial institutions may find it necessary to share a SAR or
information that would reveal the existence of a SAR to fulfill
reporting obligations under the BSA, and to facilitate more effective
enterprise-wide BSA monitoring, reporting, and general risk-management.
The term ``share'' used in this rule of construction is an
acknowledgement that sharing within a corporate organization for
purposes consistent with Title II of the BSA is distinguishable from a
prohibited disclosure.
FinCEN and the Federal bank regulatory agencies have already issued
joint guidance making clear that the U.S. branch or agency of a foreign
bank may share a SAR with its head office, and that a U.S. bank or
savings association may share a SAR with its controlling company
(whether domestic or foreign). In consultation with the staffs of the
SEC and CFTC, FinCEN also issued comparable guidance for broker-
dealers, futures commission merchants, and introducing brokers in
commodities permitting them to share SARs with parent entities (whether
domestic or foreign). These guidance documents recognized that the
sharing of a SAR with a head office, controlling company, or parent
entity facilitates both the compliance with the applicable requirements
of the BSA and the discharge of oversight responsibilities with respect
to enterprise-wide risk management and compliance with applicable laws
and regulations.\15\
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\15\ See ``Interagency Guidance on Sharing Suspicious Activity
Reports with Head Offices and Controlling Companies'' (January 20,
2006). http://www.fincen.gov/statutes_regs/guidance/pdf/
sarsharingguidance01122006.pdf; and ``Guidance on Sharing of
Suspicious Activity Reports by Securities Broker-Dealers, Futures
Commission Merchants, and Introducing Brokers in Commodities''
(January 20, 2006). http://www.fincen.gov/statutes_regs/guidance/
pdf/sarsharingguidance01202006.pdf.
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In this same part of the Federal Register, FinCEN and certain
Federal bank regulatory agencies today are issuing for notice and
comment proposed guidance that further clarifies when a SAR can be
shared with an institution's affiliates for purposes consistent with
the BSA. FinCEN, in consultation with the SEC and CFTC, is also
proposing for notice and comment similar guidance for the broker-
dealer, mutual fund, futures commission merchant, and introducing
broker in commodities industries.
D. Disclosures by Government Authorities
As previously noted, section 351 of the USA PATRIOT Act, 31 U.S.C.
5318(g)(2)(A)(ii), amended the BSA, adding a new provision prohibiting
officers and employees of the government from disclosing a SAR except
``as necessary to fulfill [their] official duties.'' FinCEN is
proposing a new section in the regulations that
[[Page 10152]]
extends this prohibition against disclosure to all federal, state,
local, territorial, or tribal government authorities, and any director,
officer, employee, or agent of those authorities. The proposed rules
track the statutory language closely by clarifying that any officer or
employee of the government may not disclose a SAR or information that
would reveal the existence of the SAR, ``except as necessary to fulfill
official duties consistent with Title II of the Bank Secrecy Act.''
As stated in 5318(g)(2)(A)(i), which prohibits a financial
institution's disclosure of a SAR, section 5318(g)(2)(A)(ii) also
prohibits the government from disclosing a SAR to ``any person involved
in the transaction.'' FinCEN is proposing to address sections
5318(g)(2)(A)(i) and (A)(ii) in a consistent manner, because disclosure
to any outside party may make it likely that a SAR or any information
that would reveal the existence of a SAR, will be disclosed to a person
involved in the transaction. Accordingly, the section of the rules that
address the disclosure of a SAR or of such information by the
government and its officers, employees, and agents is broad and does
not prohibit disclosure only to ``any person involved in the
transaction.''
Section 5318(g)(2)(A)(ii) narrowly permits governmental disclosures
``as necessary to fulfill the official duties,'' a phrase that is not
defined in the BSA. FinCEN is proposing to construe this phrase in the
context of the BSA, in light of the purpose for which SARs are filed.
Accordingly, the proposed rules interpret ``official duties'' to mean
``official duties consistent with the purposes of Title II of the
BSA,'' namely, for ``criminal, tax, or regulatory investigations or
proceedings, or in the conduct of intelligence or counterintelligence
activities, including analysis, to protect against international
terrorism.'' \16\ This standard would permit, for example, official
disclosures responsive to a grand jury subpoena; a request from an
appropriate Federal or State law enforcement or regulatory agency; a
request from an appropriate Congressional committee or subcommittees;
and prosecutorial disclosures mandated by statute or the Constitution,
in connection with the statement of a government witness to be called
at trial, the impeachment of a government witness, or as material
exculpatory of a criminal defendant.\17\ This proposed interpretation
of section 5318(g)(2)(A)(ii) would ensure that a SAR or information
that would reveal the existence of a SAR will not be disclosed for a
reason that is unrelated to the purposes of the BSA. For example, this
standard would not permit the disclosure of a SAR or information that
would reveal the existence of a SAR to the media.
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\16\ 31 U.S.C. 5311.
\17\ See, e.g.,, Giglio v. United States, 405 U.S. 150, 153-54
(1972); Brady v. State of Maryland, 373 U.S. 83, 86-87 (1963);
Jencks v. United States, 353 U.S. 657, 668 (1957).
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The proposed rules also specifically provide that ``official duties
consistent with Title II of the BSA'' shall not include the disclosure
of a SAR or information that would reveal the existence of a SAR in
response to a request for disclosure of non-public information or in
response to a request for use in a private legal proceeding, including
a request under 31 CFR 1.11. The BSA exists, in part, to protect the
public's interest in an effective reporting system that benefits the
nation by helping to assure that the U.S. financial system will not be
used for criminal activity or to support terrorism. FinCEN believes
that this purpose would be undermined by the disclosure of a SAR or
information that would reveal the existence of a SAR to a private
litigant for use in a civil lawsuit for the reasons described earlier,
including the reason that such disclosures could negatively impact full
and candid reporting by financial institutions.
Finally, the proposed regulations would apply to any government
authority, in addition to its officers, employees, and agents. FinCEN
is proposing to include each government authority itself in the scope
of coverage because requests for SARs are typically directed to the
government authority, rather than to individuals within the government
with authority to respond to the request. In addition, agents are
included in the proposed paragraph because agents of a government
authority may have access to a SAR or information that would reveal the
existence of a SAR.
E. Disclosures by Self-Regulatory Organizations
Although not part of any federal, state, local, territorial, or
tribal government authority, self-regulatory organizations registered
with or designated by the SEC or CFTC are permitted to access SARs
through FinCEN's delegation of examination authority to the SEC or
CFTC, for the purpose of examining broker-dealers, futures commission
merchants, and introducing brokers in commodities for compliance with
their SAR requirements. Although the BSA does not explicitly address
the issue of disclosures of SARs by self-regulatory organizations,
FinCEN believes it was Congress's clear intent that self-regulatory
organizations with access to SARs should be subject to the same
confidentiality provisions as all other users of SAR data. Accordingly,
in the rules governing entities which may be examined for compliance
with their SAR requirements by a self-regulatory organization, FinCEN
is proposing a provision regarding disclosures by self-regulatory
organizations that closely follows the provision regarding government
disclosures. The language differs, however, to reflect the fact that
self-regulatory organizations are not governmental entities. As with
the provision for financial institutions and government authorities,
the provision for self-regulatory organizations would apply equally to
any director, officer, employee, or agent of the self-regulatory
organization.
F. Limitation on Liability
In 1992, the Annunzio-Wylie Act amended the BSA by providing a safe
harbor for financial institutions and their employees from civil
liability for the reporting of known or suspected criminal offenses or
suspicious activity through the filing of a SAR.\18\ FinCEN
incorporated the safe harbor provisions of the 1992 law into its SAR
rules.\19\ In Section 351 of the USA PATRIOT Act, Congress amended
section 5318(g)(3) to clarify that the scope of the safe harbor
provision includes the voluntary disclosure of possible violations of
law and regulations to a government agency, and to expand the scope of
the limit on liability to include any liability which may exist ``under
any contract or other legally enforceable agreement (including any
arbitration agreement).'' FinCEN has more closely tracked the statutory
language in the proposed rules, particularly by stating that the safe
harbor applies to ``disclosures'' (and not ``reports'' as in some
previous rulemakings) made by institutions.
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\18\ See supra footnote 2.
\19\ See, e.g., 31 CFR 103.18(e). The safe harbor regulations
are also applicable to oral reports of violations. (In situations
requiring immediate attention, a financial institution must
immediately notify its regulator and appropriate law enforcement by
telephone, in addition to filing a SAR.) See e.g., 12 CFR 21.11(d).
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Additionally, to comport with the authorization to jointly file
SARs in the second rule of construction, FinCEN is clarifying that the
safe harbor also applies to ``a disclosure made jointly with another
institution.'' This concept exists currently in those SAR rules
[[Page 10153]]
where joint filing had been explicitly referenced, but has been revised
to track more closely the statutory language. It has also been inserted
for the sake of consistency into those SAR rules where it had been
absent previously, clarifying that all parties to a joint filing, and
not simply the party that provides the form to FinCEN, fall within the
scope of the safe harbor.
For consistency, FinCEN also separated the provision for
confidentiality of reports and limitation of liability into two
separate provisions in those rules for industries which previously
contained both provisions under the single heading ``confidentiality of
reports; limitation of liability.''
G. Compliance
Each of FinCEN's existing SAR rules contains a provision that
clarifies that Treasury, through FinCEN or its delegatee,\20\ may audit
a financial institution for compliance with the requirement. Some of
the SAR rules list the appropriate delegatee(s) for the type of
financial institution, and for certain financial institutions clarify
that SARs must be provided to those delegatees within the context of an
examination of compliance with the SAR requirement. The newly proposed
rule of construction that authorizes the disclosure of a SAR to, among
other official entities, a federal regulatory authority examining the
institution for compliance with the BSA or any self-regulatory
organization that examines the institution for compliance with the SAR
requirement eliminates the need for what would be a duplicate provision
in the compliance section. Accordingly, we have streamlined the section
to provide only that (1) FinCEN or its delegatees may examine the
institution for compliance with the SAR requirement; (2) that a failure
to satisfy the requirements of the SAR rule may constitute a violation
of the BSA or BSA regulations; and (3) for depository institutions with
parallel Title 12 SAR requirements, that failure to comply with
FinCEN's SAR requirement may also constitute a violation of the
parallel Title 12 rules. Also, although some of FinCEN's current rules
use the heading ``Examination and Enforcement'' while others use
``Compliance'' for the same provision, for consistency we have used
only the heading ``Compliance'' for the same parallel provision in each
of the proposed rules.
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\20\ See 31 CFR 103.56.
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H. Technical Corrections and Harmonization
In addition to the changes described above in the Section-by-
Section analysis, FinCEN is proposing technical corrections to
harmonize each of the seven SAR rules with rules being issued by some
of the Federal bank regulatory agencies. FinCEN believes that such
efforts will simplify compliance with SAR reporting requirements.
IV. Proposed Location in 31 CFR Chapter X
As per the Federal Register Notice of November 7, 2008,\21\ FinCEN
is separately proposing to remove Part 103 of Chapter I of Title 31,
Code of Federal Regulations, and add Parts 1000 to 1099 under a new 31
CFR Chapter X. As such and if finalized, the proposed changes herein
would be reorganized according to the changes proposed in the Notice
for Proposed Rulemaking for Chapter X. The planned reorganization will
have no substantive effect on the proposed regulatory changes herein.
The proposed regulatory changes of this specific NPRM would be
renumbered according to the proposed Chapter X as follows:
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\21\ ``Transfer and Reorganization of Bank Secrecy Act
Regulations,'' 73 FR 66414. See, http//www.fincen.gov/statutes_
regs/frn/pdf/frnChapt_X_NPRM-Final.pdf.
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(a) 31 CFR 103.15, Reports by mutual funds of suspicious
transactions, would be moved to 31 CFR 1024.320.
(b) 31 CFR 103.16, Reports by insurance companies of suspicious
transactions, would be moved to 31 CFR 1025.320.
(c) 31 CFR 103.17, Reports by futures commission merchants and
introducing brokers in commodities of suspicious transactions, would be
moved to 31 CFR 1026.320.
(d) 31 CFR 103.18, Reports by banks of suspicious transactions,
would be moved to 31 CFR 1020.320.
(e) 31 CFR 103.19, Reports by brokers or dealers in securities,
would be moved to 31 CFR 1023.320.
(f) 31 CFR 103.20, Reports by money services businesses in
securities, would be moved to 31 CFR 1022.320.
(g) 31 CFR 103.21, Reports by casinos of suspicious transactions,
would be moved to 31 CFR 1021.320.
V. Request for Comments
FinCEN welcomes comments on any aspect of these proposed amendments
to the SAR rules. FinCEN has timed the release of the notice of
proposed rulemaking to coincide with the following related items: (1) A
notice of, and request for comment on, proposed guidance regarding the
sharing of SARs with affiliates; (2) parallel amendments proposed by
certain Federal bank regulatory agencies to their own respective SAR
confidentiality regulations; and (3) proposed rules by certain Federal
bank regulatory agencies to amend the information disclosure rules.
Commenters are encouraged to consider each proposal when commenting on
the others.
While FinCEN welcomes comment on any part of the proposed rules, we
specifically solicit comment on the following areas:
Should any of the proposed provisions which would apply
only to a limited segment of SAR filers be applicable to additional
types of financial institutions? For example, should sharing within an
institution's corporate organizational structure for purposes
consistent with Title II of the BSA be limited only to banks, broker-
dealers, futures commission merchants, and introducing brokers in
commodities?
Are any of the terms or provisions that were used for
consistency across financial institutions inappropriate for any one
type of financial institution based on its specific characteristics?
Have any important provisions from the existing
regulations been unintentionally or inappropriately eliminated or
confused by the proposed new regulations?
Are any of the provisions or terms used in the rules or
this preamble unclear in their meaning, application, or scope?
If finalized, how would these proposed rules impact
compliance costs and practices?
What additional or alternative methods could be used to
strengthen the confidentiality of SARs?
Should additional parts of the SAR rules be harmonized? If
so, please describe the benefit of such revisions.
VI. Regulatory Matters
A. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (RFA) ( 5 U.S.C. 601 et
seq.), FinCEN certifies that these proposed regulation revisions will
not have a significant economic impact on a substantial number of small
entities. The proposals in this notice of proposed rulemaking would
affect only the disclosure provisions of the current rules relating to
the reporting of suspicious activity by financial institutions, and
would not change any requirement to file or maintain a report. In the
context of disclosure, the proposals clarify, rather than add to,
[[Page 10154]]
existing regulatory provisions regarding the confidentiality of
suspicious activity reports. FinCEN therefore expects little or no
economic impact to result from these proposals. Accordingly, a
regulatory flexibility analysis is not required.
B. Paperwork Reduction Act Notices
We have reviewed the proposed rules in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320, Appendix
A.1) (PRA) and have determined that it does not contain any
``collections of information'' as defined by the PRA.
C. Executive Order 12866
It has been determined that this proposed rule is not a significant
regulatory action for purposes of Executive Order 12866. Accordingly, a
regulatory impact analysis is not required.
D. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in a Federal mandate that may result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year. The
current inflation-adjusted expenditure threshold is $133 million. If a
budgetary impact statement is required, Sec. 205 of the Unfunded
Mandates Act also requires an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a
rule.
FinCEN has determined that the proposed rules will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of $133 million or more in any one year. Accordingly, this
proposal is not subject to section 202 of the Unfunded Mandates Act.
List of Subjects in 31 CFR Part 103
Administrative practice and procedure, Authority delegations
(government agencies), Crime, Currency, Investigations, Law
enforcement, Reporting and recordkeeping requirements, Security
measures.
Authority and Issuance
For the reasons set forth in the preamble, 31 CFR Part 103 is
proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 continues to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314
and 5316-5332; title III, sec. 314 Public Law 107-56, 115 Stat. 307.
2. Section 103.15 is amended by:
a. Revising paragraphs (d) and (e);
b. Redesignating paragraphs (f) and (g) as paragraphs (g) and (h);
and
c. Adding new paragraph (f).
Sec. 103.15 Reports by mutual funds of suspicious transactions.
* * * * *
(d) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (d). For purposes of
this paragraph (d) only, a SAR shall include any suspicious activity
report filed with FinCEN pursuant to any regulation in this part.
(1) Prohibition on disclosures by mutual funds--(i) General rule.
No mutual fund, and no director, officer, employee, or agent of any
mutual fund, shall disclose a SAR or any information that would reveal
the existence of a SAR. Any mutual fund, and any director, officer,
employee, or agent of any mutual fund that is subpoenaed or otherwise
requested to disclose a SAR or any information that would reveal the
existence of a SAR, shall decline to produce the SAR or such
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and
shall notify FinCEN of any such request and the response thereto.
(ii) Rules of Construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (d)(1) shall not be construed as
prohibiting:
(A) The disclosure by a mutual fund, or any director, officer,
employee, or agent of a mutual fund of:
(1) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
or any Federal regulatory authority that examines the mutual fund for
compliance with its SAR reporting requirements; or
(2) The underlying facts, transactions, and documents upon which a
SAR is based, including disclosures to another financial institution,
or any director, officer, employee, or agent of a financial
institution, for the preparation of a joint SAR; or
(B) The sharing by a mutual fund, or any director, officer,
employee, or agent of the mutual fund, of a SAR, or any information
that would reveal the existence of a SAR, within the mutual fund's
corporate organizational structure for purposes consistent with Title
II of the Bank Secrecy Act as determined by regulation or in guidance.
(2) Prohibition on disclosures by government authorities. A
Federal, state, local, territorial, or tribal government authority, or
any director, officer, employee, or agent of any of the foregoing,
shall not disclose a SAR, or any information that would reveal the
existence of a SAR, except as necessary to fulfill official duties
consistent with Title II of the Bank Secrecy Act. For purposes of this
section, official duties shall not include the disclosure of a SAR, or
any information that would reveal the existence of a SAR, in response
to a request for disclosure of non-public information or in response to
a request for use in a private legal proceeding, including a request
under 31 CFR 1.11.
(e) Limitation on liability. A mutual fund, and any director,
officer, employee, or agent of any mutual fund, that makes a voluntary
disclosure of any possible violation of law or regulation to a
government agency or makes a disclosure pursuant to this section or any
other authority, including a disclosure made jointly with another
institution, shall be protected from liability for any such disclosure,
or for failure to provide notice of such disclosure to any person
identified in the disclosure, or both, to the full extent provided by
31 U.S.C. 5318(g)(3).
(f) Compliance. Mutual funds shall be examined by FinCEN or its
delegatees for compliance with this section. Failure to satisfy the
requirements of this section may be a violation of the Bank Secrecy Act
and of this part.
* * * * *
3. Section 103.16 is amended by:
a. Revising paragraph (f);
b. Redesignating paragraphs (g) through (i) as paragraphs (h)
through (j);
c. Adding new paragraph (g); and
d. Revising newly designated paragraph (h).
Sec. 103.16 Reports by insurance companies of suspicious
transactions.
* * * * *
(f) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (f). For purposes of
this paragraph (f) only, a SAR shall include any suspicious
[[Page 10155]]
activity report filed with FinCEN pursuant to any regulation in this
part.
(1) Prohibition on disclosures by insurance companies--(i) General
rule. No insurance company, and no director, officer, employee, or
agent of any insurance company, shall disclose a SAR or any information
that would reveal the existence of a SAR. Any insurance company, and
any director, officer, employee, or agent of any insurance company that
is subpoenaed or otherwise requested to disclose a SAR or any
information that would reveal the existence of a SAR, shall decline to
produce the SAR or such information, citing this section and 31 U.S.C.
5318(g)(2)(A)(i), and shall notify FinCEN of any such request and the
response thereto.
(ii) Rules of Construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (f)(1) shall not be construed as
prohibiting the disclosure by an insurance company, or any director,
officer, employee, or agent of an insurance company of:
(A) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
or any Federal or state regulatory authority that examines the
insurance company for compliance with the Bank Secrecy Act; or
(B) The underlying facts, transactions, and documents upon which a
SAR is based, including disclosures to another financial institution,
or any director, officer, employee, or agent of a financial
institution, for the preparation of a joint SAR.
(2) Prohibition on disclosures by government authorities. A
Federal, State, local, territorial, or tribal government authority, or
any director, officer, employee, or agent of any of the foregoing,
shall not disclose a SAR, or any information that would reveal the
existence of a SAR, except as necessary to fulfill official duties
consistent with Title II of the Bank Secrecy Act. For purposes of this
section, official duties shall not include the disclosure of a SAR, or
any information that would reveal the existence of a SAR, in response
to a request for disclosure of non-public information or in response to
a request for use in a private legal proceeding, including a request
under 31 CFR 1.11.
(g) Limitation on liability. An insurance company, and any
director, officer, employee, or agent of any insurance company, that
makes a voluntary disclosure of any possible violation of law or
regulation to a government agency or makes a disclosure pursuant to
this section or any other authority, including a disclosure made
jointly with another institution, shall be protected from liability for
any such disclosure, or for failure to provide notice of such
disclosure to any person identified in the disclosure, or both, to the
full extent provided by 31 U.S.C. 5318(g)(3).
(h) Compliance. Insurance companies shall be examined by FinCEN or
its delegatees for compliance with this section. Failure to satisfy the
requirements of this section may be a violation of the Bank Secrecy Act
and of this part.
* * * * *
4. Section 103.17 is amended by revising paragraphs (e), (f), and
(g) to read as follows:
Sec. 103.17 Reports by futures commission merchants and introducing
brokers in commodities of suspicious transactions.
* * * * *
(e) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (e). For purposes of
this paragraph (e) only, a SAR shall include any suspicious activity
report filed with FinCEN pursuant to any regulation in this part.
(1) Prohibition on disclosures by futures commission merchants and
introducing brokers in commodities--(i) General rule. No futures
commission merchant (``FCM'') or introducing broker in commodities
(``IB-C''), and no director, officer, employee, or agent of any FCM or
IB-C, shall disclose a SAR or any information that would reveal the
existence of a SAR. Any FCM or IB-C, and any director, officer,
employee, or agent of any FCM or IB-C that is subpoenaed or otherwise
requested to disclose a SAR or any information that would reveal the
existence of a SAR, shall decline to produce the SAR or such
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and
shall notify FinCEN of any such request and the response thereto.
(ii) Rules of Construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (e)(1) shall not be construed as
prohibiting:
(A) The disclosure by an FCM or IB-C, or any director, officer,
employee, or agent of an FCM or IB-C of:
(1) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
any Federal regulatory authority that examines the FCM or IB-C for
compliance with the BSA, or any self-regulatory organization examining
the FCM or IB-C for compliance with the requirements of this section;
or
(2) The underlying facts, transactions, and documents upon which a
SAR is based, including, disclosures:
(i) To another financial institution, or any director, officer,
employee, or agent of a financial institution, for the preparation of a
joint SAR; or
(ii) In connection with certain employment references or
termination notices, to the full extent authorized in 31 U.S.C.
5318(g)(2)(B); or
(B) The sharing by an FCM or IB-C, or any director, officer,
employee, or agent of the FCM or IB-C, of a SAR, or any information
that would reveal the existence of a SAR, within the FCM's or IB-C's
corporate organizational structure for purposes consistent with Title
II of the Bank Secrecy Act as determined by regulation or in guidance.
(2) Prohibition on disclosures by government authorities. A
Federal, state, local, territorial, or tribal government authority, or
any director, officer, employee, or agent of any of the foregoing,
shall not disclose a SAR, or any information that would reveal the
existence of a SAR, except as necessary to fulfill official duties
consistent with Title II of the Bank Secrecy Act. For purposes of this
section, official duties shall not include the disclosure of a SAR, or
any information that would reveal the existence of a SAR, in response
to a request for disclosure of non-public information or in response to
a request for use in a private legal proceeding, including a request
under 31 CFR 1.11.
(3) Prohibition on disclosures by Self-Regulatory Organizations.
Any self-regulatory organization registered with or designated by the
Commodity Futures Trading Commission, or any director, officer,
employee, or agent of any of the foregoing, shall not disclose a SAR,
or any information that would reveal the existence of a SAR except as
necessary to fulfill official duties consistent with Title II of the
Bank Secrecy Act. For purposes of this section, official duties shall
not include the disclosure of a SAR, or any information that would
reveal the existence of a SAR, in response to a request for disclosure
of non-public information or in response to a request for use in a
private legal proceeding.
(f) Limitation on liability. An FCM or IB-C, and any director,
officer, employee, or agent of any FCM or IB-C, that makes a voluntary
disclosure of any possible violation of law or
[[Page 10156]]
regulation to a government agency or makes a disclosure pursuant to
this section or any other authority, including a disclosure made
jointly with another institution, shall be protected from liability for
any such disclosure, or for failure to provide notice of such
disclosure to any person identified in the disclosure, or both, to the
full extent provided by 31 U.S.C. 5318(g)(3).
(g) Compliance. FCMs or IB-Cs shall be examined by FinCEN or its
delegatees for compliance with this section. Failure to satisfy the
requirements of this section may be a violation of the Bank Secrecy Act
and of this part.
* * * * *
5. Section 103.18 is amended by revising paragraphs (e) and (f),
and adding paragraph (g), to read as follows:
Sec. 103.18 Reports by banks of suspicious transactions.
* * * * *
(e) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (e). For purposes of
this paragraph (e) only, a SAR shall include any suspicious activity
report filed with FinCEN pursuant to any regulation in this part.
(1) Prohibition on disclosures by banks--(i) General rule. No bank,
and no director, officer, employee, or agent of any bank, shall
disclose a SAR or any information that would reveal the existence of a
SAR. Any bank, and any director, officer, employee, or agent of any
bank that is subpoenaed or otherwise requested to disclose a SAR or any
information that would reveal the existence of a SAR, shall decline to
produce the SAR or such information, citing this section and 31 U.S.C.
5318(g)(2)(A)(i), and shall notify FinCEN and its primary Federal
regulator of any such request and the response thereto.
(ii) Rules of Construction.
Provided that no person involved in any reported suspicious
transaction is notified that the transaction has been reported, this
paragraph (e)(1) shall not be construed as prohibiting:
(A) The disclosure by a bank, or any director, officer, employee,
or agent of a bank of:
(1) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
or any Federal or state regulatory authority that examines the bank for
compliance with the Bank Secrecy Act; or
(2) The underlying facts, transactions, and documents upon which a
SAR is based, including, disclosures:
(i) To another financial institution, or any director, officer,
employee, or agent of a financial institution, for the preparation of a
joint SAR; or
(ii) In connection with certain employment references or
termination notices, to the full extent authorized in 31 U.S.C.
5318(g)(2)(B); or
(B) The sharing by a bank, or any director, officer, employee, or
agent of the bank, of a SAR, or any information that would reveal the
existence of a SAR, within the bank's corporate organizational
structure for purposes consistent with Title II of the Bank Secrecy Act
as determined by regulation or in guidance.
(2) Prohibition on disclosures by government authorities. A
Federal, state, local, territorial, or tribal government authority, or
any director, officer, employee, or agent of any of the foregoing,
shall not disclose a SAR, or any information that would reveal the
existence of a SAR, except as necessary to fulfill official duties
consistent with Title II of the Bank Secrecy Act. For purposes of this
section, official duties shall not include the disclosure of a SAR, or
any information that would reveal the existence of a SAR, in response
to a request for disclosure of non-public information or in response to
a request for use in a private legal proceeding, including a request
under 31 CFR 1.11.
(f) Limitation on liability. A bank, and any director, officer,
employee, or agent of any bank, that makes a voluntary disclosure of
any possible violation of law or regulation to a government agency or
makes a disclosure pursuant to this section or any other authority,
including a disclosure made jointly with another institution, shall be
protected from liability for any such disclosure, or for failure to
provide notice of such disclosure to any person identified in the
disclosure, or both, to the full extent provided by 31 U.S.C.
5318(g)(3).
(g) Compliance. Banks shall be examined by FinCEN or its delegatees
for compliance with this section. Failure to satisfy the requirements
of this section may be a violation of the Bank Secrecy Act and of this
part. Such failure may also violate provisions of Title 12 of the Code
of Federal Regulations.
6. Section 103.19 is amended by revising paragraphs (e), (f), and
(g) to read as follows:
Sec. 103.19 Reports by brokers or dealers in securities of suspicious
transactions.
* * * * *
(e) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (e). For purposes of
this paragraph (e) only, a SAR shall include any suspicious activity
report filed with FinCEN pursuant to any regulation in this part.
(1) Prohibition on disclosures by brokers or dealers in
securities--(i) General rule. No broker-dealer, and no director,
officer, employee, or agent of any broker-dealer, shall disclose a SAR
or any information that would reveal the existence of a SAR. Any
broker-dealer, and any director, officer, employee, or agent of any
broker-dealer that is subpoenaed or otherwise requested to disclose a
SAR or any information that would reveal the existence of a SAR, shall
decline to produce the SAR or such information, citing this section and
31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any such request
and the response thereto.
(ii) Rules of Construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (e)(1) shall not be construed as
prohibiting:
(A) The disclosure by a broker-dealer, or any director, officer,
employee, or agent of a broker-dealer of:
(1) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
any Federal regulatory authority that examines the broker-dealer for
compliance with the BSA, or any self-regulatory organization examining
the broker-dealer for compliance with the requirements of this section;
or
(2) The underlying facts, transactions, and documents upon which a
SAR is based, including, disclosures:
(i) To another financial institution, or any director, officer,
employee, or agent of a financial institution, for the preparation of a
joint SAR; or
(ii) In connection with certain employment references or
termination notices, to the full extent authorized in 31 U.S.C.
5318(g)(2)(B); or
(B) The sharing by a broker-dealer, or any director, officer,
employee, or agent of the broker-dealer, of a SAR, or any information
that would reveal the existence of a SAR, within the broker-dealer's
corporate organizational structure for purposes consistent with Title
II of the Bank Secrecy Act as determined by regulation or in guidance.
(2) Prohibition on disclosures by government authorities. A
Federal, State, local, territorial, or tribal
[[Page 10157]]
government authority, or any director, officer, employee, or agent of
any of the foregoing, shall not disclose a SAR, or any information that
would reveal the existence of a SAR, except as necessary to fulfill
official duties consistent with Title II of the Bank Secrecy Act. For
purposes of this section, official duties shall not include the
disclosure of a SAR, or any information that would reveal the existence
of a SAR, in response to a request for disclosure of non-public
information or in response to a request for use in a private legal
proceeding, including a request under 31 CFR 1.11.
(3) Prohibition on disclosures by Self-Regulatory Organizations.
Any self-regulatory organization registered with the Securities and
Exchange Commission, or any director, officer, employee, or agent of
any of the foregoing, shall not disclose a SAR, or any information that
would reveal the existence of a SAR except as necessary to fulfill
official duties consistent with Title II of the Bank Secrecy Act. For
purposes of this section, official duties shall not include the
disclosure of a SAR, or any information that would reveal the existence
of a SAR, in response to a request for disclosure of non-public
information or in response to a request for use in a private legal
proceeding.
(f) Limitation on liability. A broker-dealer, and any director,
officer, employee, or agent of any broker-dealer, that makes a
voluntary disclosure of any possible violation of law or regulation to
a government agency or makes a disclosure pursuant to this section or
any other authority, including a disclosure made jointly with another
institution, shall be protected from liability for any such disclosure,
or for failure to provide notice of such disclosure to any person
identified in the disclosure, or both, to the full extent provided by
31 U.S.C. 5318(g)(3).
(g) Compliance. Broker-dealers shall be examined by FinCEN or its
delegatees for compliance with this section. Failure to satisfy the
requirements of this section may be a violation of the Bank Secrecy Act
and of this part.
* * * * *
7. Section 103.20 is amended by:
a. Revising paragraph (d);
b. Redesignating paragraphs (e) and (f) as paragraphs (f) and (g);
c. Adding new paragraph (e); and
d. Revising newly designated paragraph (f).
Sec. 103.20 Reports by money services businesses of suspicious
transactions.
* * * * *
(d) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (d). For purposes of
this paragraph (d) only, a SAR shall include any suspicious activity
report filed with FinCEN pursuant to any regulation in this part.
(1) Prohibition on disclosures by money services businesses--(i)
General rule. No money services business, and no director, officer,
employee, or agent of any money services business, shall disclose a SAR
or any information that would reveal the existence of a SAR. Any money
services business, and any director, officer, employee, or agent of any
money services business that is subpoenaed or otherwise requested to
disclose a SAR or any information that would reveal the existence of a
SAR, shall decline to produce the SAR or such information, citing this
section and 31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any
such request and the response thereto.
(ii) Rules of Construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (d)(1) shall not be construed as
prohibiting the disclosure by a money services business, or any
director, officer, employee, or agent of a money services business of:
(A) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
or any Federal or State regulatory authority that examines the money
services business for compliance with the BSA; or
(B) The underlying facts, transactions, and documents upon which a
SAR is based, including disclosures to another financial institution,
or any director, officer, employee, or agent of a financial
institution, for the preparation of a joint SAR.
(2) Prohibition on disclosures by government authorities. A
Federal, State, local, territorial, or tribal government authority, or
any director, officer, employee, or agent of any of the foregoing,
shall not disclose a SAR, or any information that would reveal the
existence of a SAR, except as necessary to fulfill official duties
consistent with Title II of the Bank Secrecy Act. For purposes of this
section, official duties shall not include the disclosure of a SAR, or
any information that would reveal the existence of a SAR, in response
to a request for disclosure of non-public information or in response to
a request for use in a private legal proceeding, including a request
under 31 CFR 1.11.
(e) Limitation on liability. A money services business, and any
director, officer, employee, or agent of any money services business,
that makes a voluntary disclosure of any possible violation of law or
regulation to a government agency or makes a disclosure pursuant to
this section or any other authority, including a disclosure made
jointly with another institution, shall be protected from liability for
any such disclosure, or for failure to provide notice of such
disclosure to any person identified in the disclosure, or both, to the
full extent provided by 31 U.S.C. 5318(g)(3).
(f) Compliance. Money services businesses shall be examined by
FinCEN or its delegatees for compliance with this section. Failure to
satisfy the requirements of this section may be a violation of the Bank
Secrecy Act and of this part.
* * * * *
8. Section 103.21 is amended by:
a. Revising paragraph (e);
b. Redesignating paragraphs (f) and (g) as paragraphs (g) and (h);
c. Adding new paragraph (f); and
d. Revising newly designated paragraph (g).
Sec. 103.21 Reports by casinos of suspicious transactions.
* * * * *
(e) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential and shall not be
disclosed except as authorized in this paragraph (e). For purposes of
this paragraph (e) only, a SAR shall include any suspicious activity
report filed with FinCEN pursuant to any regulation in this part.
(1) Prohibition on disclosures by casinos--(i) General rule. No
casino, and no director, officer, employee, or agent of any casino,
shall disclose a SAR or any information that would reveal the existence
of a SAR. Any casino, and any director, officer, employee, or agent of
any casino that is subpoenaed or otherwise requested to disclose a SAR
or any information that would reveal the existence of a SAR, shall
decline to produce the SAR or such information, citing this section and
31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any such request
and the response thereto.
(ii) Rules of Construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (e)(1) shall not be construed as
prohibiting the disclosure by a casino, or any director, officer,
employee, or agent of a casino of:
[[Page 10158]]
(A) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, state, or local law enforcement agency,
or any Federal or state regulatory authority that examines the casino
for compliance with the BSA; or
(B) The underlying facts, transactions, and documents upon which a
SAR is based, including disclosures to another financial institution,
or any director, officer, employee, or agent of a financial
institution, for the preparation of a joint SAR.
(2) Prohibition on disclosures by government authorities. A
Federal, State, local, territorial, or tribal government authority, or
any director, officer, employee, or agent of any of the foregoing,
shall not disclose a SAR, or any information that would reveal the
existence of a SAR, except as necessary to fulfill official duties
consistent with Title II of the Bank Secrecy Act (BSA). For purposes of
this section, official duties shall not include the disclosure of a
SAR, or any information that would reveal the existence of a SAR, in
response to a request for disclosure of non-public information or in
response to a request for use in a private legal proceeding, including
a request under 31 CFR 1.11.
(f) Limitation on liability. A casino, and any director, officer,
employee, or agent of any casino, that makes a voluntary disclosure of
any possible violation of law or regulation to a government agency or
makes a disclosure pursuant to this section or any other authority,
including a disclosure made jointly with another institution, shall be
protected from liability for any such disclosure, or for failure to
provide notice of such disclosure to any person identified in the
disclosure, or both, to the full extent provided by 31 U.S.C.
5318(g)(3).
(g) Compliance. Casinos shall be examined by FinCEN or its
delegatees for compliance with this section. Failure to satisfy the
requirements of this section may be a violation of the Bank Secrecy Act
and of this part.
* * * * *
Dated: February 27, 2009.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. E9-4697 Filed 3-6-09; 8:45 am]
BILLING CODE 4810-02-P
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