Sharing Information Under the Patriot Act

On September 18, 2002 the Treasury Department issued three final and two proposed rules under the provisions of the USA Patriot Act. The final rules concern sections 313, 319 and 314 in addition to the reporting requirements for casinos under the BSA. The proposes rules cover section 352 of the Act.

Of most interest to financial institutions is the final rule implementing Section 314 which contains the procedures that are intended to encourage a financial institution to share information not only with governmental agencies but also other financial institutions.

Summary

Final Rule v. Proposed Rule FinCEN requested comments regarding the proposed rule in March 2002 and received 180 comment letters from individuals, financial institutions and other interested parties.

The final rule is for the most part consistent with the proposed rule with the following major exceptions:

Unless otherwise included in the request from FinCEN:

• A search need only be conducted for current accounts of the named suspect
• Accounts maintained by the named suspect during the preceding 12 months
• Transactions conducted by, and funds transferred involving a named suspect during the preceding 6 months.
• Reports of future customer activity of the named suspect is not required
• Information may be shared with all financial institutions that are required to establish and maintain an anti-money laundering program, unless FinCEN says otherwise
• The certification requirement has been replaced with a notice to FinCEN of an intent to share
• Prior to sharing information, an institution must take steps to verify that the receiving institution has also given the notice to FinCEN

Searches Under the Final Rule

• Only FinCEN is authorized under the final rule to make a search request of a financial institution and all responses from the institution must be made only to FinCEN.
• A financial institution is not required to search processed checks to determine if a named suspect was the payee of a check unless the check was made out to the account holder.
• However, a search is required to determine if the named suspect was a transmitter or recipient of a funds transfer in excess of $3,000 that was conducted within the preceding 6 months.
• The final rule requires a financial institution to expeditiously search its records, but the term "expeditiously" is not defined.
• In order to expedite the searches, a financial institution is authorized to directly contact the federal agency that requested FinCEN to issue a search request.

A report must be made to FinCEN if any account or transaction matches the information request. The information to be reported is limited, however, to the following:

• The name or account number of each individual, entity or organization matched
• The Social Security number
• Date of birth
• Other similar identifying information that was provided when the account was opened or the transaction conducted

Sharing Information

FinCEN will provide a list of institutions that have submitted notice of intent to share information. The form for submitting notice to FinCEN is attached to the final rule as Appendix A. The list will be updated quarterly and the notice can be submitted to FinCen electronically or by mail.

Note, a financial institution MAY NOT disclose the fact that FinCEN has requested or obtained any information as the result of a search. However, the closing of an existing account or the refusal to conduct business for any individual, entity or organization listed on an information request is not prohibited. Even if information regarding a named suspect is shared with another financial institution, it can not be disclosed that such sharing is the result of an information request.

Designation of Contact Person

• A financial institution must designate one person to be the point of contact for FinCEN regarding requests for information. The party's name, title, mailing address, e-mail address, telephone number and fax number must be provided.

Safeguarding Information

• Financial institutions are also required to safeguard the confidentiality of the information requested. This requirement is deemed satisfied if the institution follows the procedures that it has established to comply with the provisions of GLB.

An information request from FinCEN does not stop a federal government agency from using other methods to request information from the financial institution including direct requests from federal law enforcement agencies.

Remember, a financial must give notice to FinCEN prior to sharing any information even if the receiving institution has given its own notice. BOTH financial institutions must give notice to FinCEN for the safe harbor provision to apply.

Even if a financial institution complies with a FinCEN information request, it is not relieved of any obligation to file a SAR or otherwise directly contact a federal agency concerning suspicious terrorist or money laundering.

First published on BankersOnline.com 9/19/02