FinCEN Proposes Pilot for Expanded Suspicious Activity Sharing
The Treasury Department's Financial Crimes Enforcement Network is seeking public comments on a potential pilot program that would give financial institutions more freedom to share suspicious activity reports, according to a Jan. 24 notice. The program would allow institutions to share SARs with their foreign branches, subsidiaries and affiliates to better combat illicit finance and transactions that may violate U.S. sanctions or anti-money laundering regulations. Institutions are currently only allowed to share with their head offices or controlling companies. Comments on the proposed program are due March 28.
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The pilot, required by the Anti-Money Laundering Act of 2020, would still block banks from sharing their SARs with subsidiaries in certain jurisdictions, including in China and Russia. Banks would also be prohibited from sharing their reports with branches in regions subject to U.S. sanctions, countries that have been designated as state sponsors of terrorism by the State Department and countries subject to certain export and import restrictions. But FinCEN said Treasury can make exceptions on a case-by-case basis for foreign branches in China or Russia if the Treasury secretary certifies to Congress that the exception “is in the national security interest” of the U.S.
Under the pilot, banks would be required to submit a “written application” to FinCEN before sharing their SARs with foreign branches, the agency said. The applications would have to identify the foreign branches receiving the reports, their purpose for sharing the SARs and a description of the “internal controls in place to prevent unauthorized disclosures” of the SARs.
FinCEN said it’s proposing a “formal application” process “given the sensitive nature of the information contained in or relating to a SAR, including personally identifiable information of U.S. persons, and the jurisdictional limitations set out in the statute.” The agency hopes to issue responses within 90 days of receiving an application. “FinCEN will make every effort to expeditiously review applications and provide responses to potential participant financial institutions in a timely manner,” the agency said.
If the pilot program is implemented, FinCEN may require applicants to create “additional internal controls” to make sure their SARs are sufficiently protected. As the pilot program matures, FinCEN said it may make those internal controls a “condition” for participation in the program. Banks and other pilot program applicants would also be able to request “modifications” to those conditions to “address operational contingencies, resourcing challenges, or other circumstances,” the notice said. The agency would be able to “terminate” a bank’s participation in the pilot program “at any time.”
Program participants also would be required to submit quarterly reports to FinCEN on the total number of SARs shared, the name and jurisdiction of each entity that received a SAR, any “legal and compliance issues encountered” and more. The agency said it’s seeking comments on the “costs” and “burdens” associated with this reporting requirement and the other pilot program conditions.
FinCEN is also looking for feedback on the technological challenges of complying with the requirements, any expected benefits to a financial institution from being permitted to more freely share SARs, the potential challenges in protecting the confidentiality of SARs, and whether FinCEN should consider a broader, longer-term program. The agency said it expects about 100 financial institutions to participate in the program. The pilot, if implemented, would terminate by Jan. 1, 2024, unless Treasury extends it for up to two years.