I. INTRODUCTION
The Bank Secrecy Act requires that financial institutions to report “any suspicious transaction relevant to a possible violation of law or regulation.” To implement the law, the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued regulations requiring banks, securities broker-dealers, introducing brokers, casinos, futures commission merchants and money services businesses, to report any suspicious activity that meets a particular dollar threshold (threshold for most financial institutions is $5,000, whereas transactions conducted at points of sale for money services businesses have a reporting threshold of $2,000). The regulations include instructions on the completion of a suspicious activity report (SAR) and procedures for filing with FinCEN (on Form TD F 90-22.47). Generally, the rules require a financial institution to file a SAR within 30 days from the date of the initial detection of suspicious activity, with an additional 30 days allowed if a financial institution is unable to identify a suspect. The Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC’s Reporting, Procedures and Penalties Regulations (31 C.F.R. Part 501) require financial institutions to block and file reports on accounts, payments or transfers in which an OFAC-designated country, entity or individual has any interest. These reports must be filed with OFAC within 10 business days of the blocking of the property.
II. GUIDANCE PERMITTING UNITARY REPORTING OF A SAR
In December, 2004, FinCEN issued an “Interpretive Guidance” entitled the Interpretation of Suspicious Activity Reporting Requirements to Permit the Unitary Filing of Suspicious Activity and Blocking Reports. The guidance clarifies that reports filed with OFAC of blocked transactions with Specially Designated Global Terrorists, Specially Designated Terrorists, Foreign Terrorist Organizations, Specially Designated Narcotics Trafficker Kingpins and Specially Designated Narcotics Traffickers fulfill the requirement to file suspicious activity reports (“SAR”) on such transactions for purposes of FinCEN’s SAR rules.
NOTE: The filing of a blocking report with OFAC will not satisfy a financial institution’s obligation to file a SAR if the transactions would be reportable under FinCEN’s SAR rules even if there were no OFAC match. In addition, if a financial institution is in possession of information not included on the blocking report filed with OFAC, a separate SAR should be filed with FinCEN including such information.
III. CONCLUSION
Under previous Guidance (SAR Activity Review, November 2003), FinCEN instructed financial institutions to file SARs on verified matches of persons designated by OFAC, which, in effect, required financial institutions to complete two separate filings with the Department of the Treasury – one with OFAC pursuant to its Reporting, Procedures and Penalties Regulations and another with FinCEN pursuant to its SAR rules.
By revising the previous guidance, FinCEN has eliminated the need for duplicative reporting in cases where a financial institution identifies a verified match with individuals or entities designated by OFAC; however, this revised interpretation does not affect a financial institution’s obligation to identify and report suspicious activity beyond the fact of the OFAC match. If a financial institution is in possession of information not included on the blocking report filed with OFAC, a separate SAR should be filed with FinCEN to include such information. Furthermore, the revised interpretation does not affect a financial institution’s obligation to file a SAR even if it has filed a blocking report with OFAC, to the extent that the facts and circumstances surrounding the OFAC match are independently suspicious – and are otherwise required to be reported under FinCEN regulations. In such cases, the OFAC blocking report would not satisfy a financial institution’s SAR filing obligation.
The revised guidance does not prevent a financial institution from filing a SAR that discloses additional information concerning an OFAC match nor does it stop a financial institution from filing a SAR if the financial institution has reason to believe that terrorism or drug trafficking is taking place, even without an OFAC match.
Finally, the revised guidance does not apply to blocking reports filed to report transactions and accounts involving persons owned by, or who are nationals of, countries subject to OFAC-administered sanctions programs. These transactions are reported on SARs under the suspicious activity reporting rules if, and only, if, the activity itself appears to be suspicious under the criteria established by the suspicious activity reporting rules.