In these times of financial volatility, it is as important as ever to focus on ensuring there are no holes in the net designed to prevent criminal actors from abusing the financial system.
Fincen's success in efforts to promote the integrity of financial institutions and markets depends on our collective ability to maintain focus. We are committed to working with financial institutions, which have a common interest in protecting themselves and their customers from becoming victims of financial crime.
Affiliated financial institutions under common ownership should be able to leverage insights and information for the detection of crime, but this is not necessarily occurring today. Corporate structures, which have developed for a variety of business reasons (but not likely for efficiency in detecting crime), may inadvertently have created barriers when it comes to detecting and providing law enforcement officials with information regarding criminal activity crossing various business lines.
For example, if a criminal conducted suspicious transactions at a bank branch on Monday and suspicious transactions with an affiliated broker-dealer on Tuesday, these two affiliates may be limited in their ability to share that information, even though they are within the same corporate structure. This dynamic has created a situation that could expose the overall corporate structure to risk of criminal abuse, while missing the opportunity to provide law enforcement officials valuable information about potentially complex money laundering cases.
Fincen recently took two steps to affirm and clarify the confidentiality of suspicious activity reports while permitting common sense sharing of the reports within a corporate structure.
First, Fincen issued a notice of proposed rulemaking to update regulations on SAR confidentiality. When finalized, these rules will clarify the scope of the statutory prohibition against the disclosure by a financial institution or by a government agency of a SAR or any information that would reveal the existence of a report. The changes will underscore the importance of confidentiality in the SAR filing system.
Second, Fincen proposed guidance to accompany the new rule, which would clarify that sharing a SAR within a corporate structure is permitted and consistent with the Bank Secrecy Act. This would remove some of the inefficiencies encountered today.
Our proposed guidance would help depository institutions facilitate compliance with the BSA and more effectively execute enterprisewide diligence. SAR sharing also would help affiliates assess risks by receiving information about suspicious transactions taking place through other affiliates or lines of business within the corporate structure.
Further, enabling a filing institution to share the report under these circumstances would eliminate the need for an institution that wants to provide underlying information to an affiliate to create a separate summary document, which has to be crafted carefully to avoid revealing the existence of the SAR itself.
The proposed guidance would only permit sharing with those affiliates that also have SAR filing obligations and would apply only to the sharing of a report by the financial institution that has filed it. The proposed guidance also clarifies that it is not permissible for an affiliate that has received such a SAR to share it with another affiliate. These safeguards seek to ensure that the filing depository institution will be sharing only with those affiliates it expressly selects.
The Global Community
Many financial institutions operating in multiple jurisdictions seek to implement an enterprisewide anti-laundering policy, which is consistent with the way many institutions manage other risks. An enterprisewide policy helps a financial institution avoid duplication, lower costs, allocate resources to the greatest risks and promote market integrity.
To discharge their oversight responsibilities for enterprisewide risk management, financial institutions required to file SARs may need to share them, or information about them, within their corporate structure. Fincen and its U.S. regulatory colleagues have long recognized this. For example, head offices, controlling entities or parties and parent entities may have a valid need to review an internal unit's compliance with legal requirements to identify and report suspicious activity.
The same rationale applies to U.S.-based institutions seeking to manage risks with respect to overseas operations. Efforts to share information must cross national boundaries to enable global institutions to promote true market integrity, and Fincen is actively promoting this goal. We do this through our work with the Egmont Group of 100-plus financial intelligence units, as well as through an initiative to identify laws, perceptions or other factors that may limit the sharing of information.
A growing number of countries apply the same anti-laundering principles, but implementation remains subject to the laws of each individual jurisdiction. We are taking the first steps to identify the various legal frameworks relevant to SAR sharing among Egmont member jurisdictions, and we are looking to utilize this information to promote incentives for internationally active institutions to manage risks in an efficient way.
As we work to clarify the framework for SAR confidentiality and sharing in the United States, Fincen is also promoting global efforts to provide a better framework for detecting globally active criminals and promoting enterprisewide risk management and information sharing. I encourage you to review our proposals at www.fincen.gov. The comment period ends June 8.