I. INTRODUCTION
On December 10, 2002, the U.S. Department of the Treasury issued FIL-135-2002 (which superseded FIL-24-2002, issued March 14, 2002) announcing the final rule implementing § 314 of the “USA PATRIOT Act.” Section 314 authorizes law enforcement authorities to communicate with banking organizations and others about suspected money launderers and terrorists. The Treasury issued a final rule on September 26, 2002, to implement § 314 with the additions of §§ 103.100 and 103.110 to Bank Secrecy Act regulations. These sections establish procedures that encourage information sharing between governmental authorities and financial institutions, and among financial institutions themselves.
Section 103.100 establishes the mechanism for law enforcement to communicate names of suspected terrorists and money launderers to financial institutions in return for securing the ability to promptly locate accounts and transactions involving those suspects. Financial institutions receiving names of suspects must search their account and transaction records for potential matches and report positive results to Treasury’s Financial Crimes Enforcement Network (FinCEN) in the manner and time frame specified in the request. Section 103.110 outlines how financial institutions can share information concerning suspected terrorist and money laundering activity with other financial institutions under the protection of the statutory safe harbor from liability.
Financial institutions began receiving § 314(a) information requests in February 2003. FinCEN provided guidance by issuing “Instructions for Responding to Section 314(a) Requests” and “FAQs” for the purpose of compliance held with the new procedures. This article summarizes several issues addressed in the “Instructions” and the “FAQs”.
II. GENERAL INFORMATION
As a general rule, requests for information under § 314(a) are issued by e-mail or fax every two weeks. In an emergency situation, such requests will be more frequent. Upon receiving a request, the bank is required to search its records immediately (unless received after hours or on the weekend, in which case it must start the next business day) to determine if it maintains or has maintained accounts for or engaged in transactions with any individual, entity or organization (“named subject”) listed in the request. If the bank finds a match with a named subject, it must be reported to FinCEN. The search and response with any matches to an information request must be completed no later than 14 calendars days after receiving a § 314(a) request.
In responding to such information requests, the bank must provide information to identify one or more point-of-contact persons in charge of the § 314(a) search who may be contacted to respond to requests from FinCEN or a requesting federal law enforcement agency. Affiliated institutions may establish a central point of contact to respond to all requests on behalf of all affiliated institutions. Each point-of-contact identified must include: (1) name; (2) mailing address; (3) telephone number; and (4) e-mail address (if any). Contact information may be changed bysending an e-mail or fax to the bank’s primary federal regulator contact listed at the end of this article.
A § 314(a) request does not require the bank to close, block or freeze an account or terminate any relationship with respect to an account or a transaction just because of a “match” with any named subject. Note that the § 314(a) process is separate and distinct from OFAC requirements. Therefore, if a name also appears on an OFAC list, the bank must comply with OFAC rules regarding that name. The bank is advised, however, not to keep a list of named subjects of § 314(a) requests for the purpose of evaluating whether to open an account or to conduct a transaction, unless a § 314(a) request specifically states otherwise.
Note that § 314(a) requests are neither part of the customer identification program requirements of § 326 of the USA PATRIOT Act or OFAC rules. Also note that the FBI has discontinued the use of the “Control List” and it should not be used. The FBI will use the § 314(a) information request process to communicate with banking organizations and others about individuals and entities who are suspected of engaging in terrorist financing activities.
III. SEARCHES
Using identifying information contained in a § 314(a) request, the bank must conduct a one-time search, and not an ongoing search, of the following records either manually or electronically:
A. deposits accounts (including demand deposits, checking, savings and certificate of deposits) to determine whether a named subject is/was an accountholder;
B. funds transfer to determine whether a named subject was an originator/transmitter or a beneficiary/recipient of a funds transfer;
C. sale of monetary instruments (e.g., cashier’s checks, money orders or traveler’s checks) to determine whether a named subject was a purchaser;
D. loans to determine whether a named subject is/was a borrower;
E. trust accounts to determine whether a named subject matches the name in which an account is titled;
F. securities accounts to determine whether a named subject is/was an accountholder;
G. commodity futures, options or other derivative account to determine whether a named subject is/was an accountholder; and
H. safe deposit boxes to determine whether a named subject maintains/maintained or has/had access to a safe deposit box (applies only if such records are searchable electronically).
Searches are to cover account records for the preceding 12 months and transactions not linked to an account for the preceding 6 months. If a record is not maintained in electronic form, such record need only to be searched if it is required to be kept under federal law or regulation.
A record search does not include:
A. checks processed through an account to determine whether a named subject was a payee of a check;
B. monetary instruments issued by the bank to determine whether a named subject was a payee of the instrument;
C. signature cards to determine whether a named subject is a signatory to an account (unless such search is the only way to confirm whether a named subject maintains an account as described above); and
D. CTR and SAR reports previously filed with FinCEN.
Although information requests may be directed geographically, most will be sent nationwide. Therefore, the bank will likely encounter many “no match” search results.
Note that all requests and searches are confidential and may not be disclosed to anyone not necessary to complete a search. Third-party vendors and service providers of software used to conduct a search may be notified as long as the bank takes steps necessary to ensure the third party safeguards the information.
IV. MATCHES
When a match occurs, the search for that name may be stopped and the named person reported to FinCEN on a “Subject Information Form.” If an information request contains multiple names, the search must continue regarding the unmatched entities. A match does not occur if only a portion of a name (e.g., last name) matches and none of the other information corresponds to the account or transaction in question.
A “Subject Information Form” only requires the placing of an “X” next to the name for which a match is found. Subject Information Forms must be either e-mailed (sys314a@fincen.treas.gov) or faxed (703-905-3660) to FinCEN. Responses must contain FinCEN’s Tracking Number in the subject line of an e-mail or on the fax cover sheet. This number is found in the upper right-hand corner of the Subject Information Form. If no match occurs, no Subject Information Form or any other report should be filed with FinCEN. Records or other information is not to be submitted with the form.
If a match is found and a Subject Information Form filed, the bank will likely receive a Grand Jury Subpoena, a National Security Letter (request from the FBI or other government authority for a matter relating to terrorism) or an Administrative Summons. In the case of an Administrative Summons, a customer must be given notice and opportunity for challenge and the bank must obtain a certificate of compliance with the Right to Financial Privacy Act from the law enforcement agency issuing the summons prior to disclosure of a customer’s records. Although a bank with matches is not required to close the account, if the decision is made to do so, the bank is encouraged, before closing the account, to contact the law enforcement agency who initiated the request. Should the law enforcement agency request that an account remain open, the bank should request written confirmation from the agency.
Note: Finding a match does not require the filing of a SAR.
V. CONCLUSION
A bank should note the date it receives each batch of information requests so that searches are completed within 14 calendar days of the date of receipt. If the bank has no “match”, it need not respond, but if a match is discovered, the bank may stop the search on other accounts and transactions relating to the named party.
FinCEN maintains a Regulatory Helpline (1-800-949-2732) for general questions concerning information requests and has also published an FAQ on its website at www.fincen.gov. Should there be questions regarding a possible match with any named subject, the bank may directly contact the requesting federal law enforcement agency referenced in the § 314(a) request.
Although there are no specific recordkeeping requirements regarding § 314(a) requests, the bank would be well advised to appropriately document a request and record search for a reasonable period to demonstrate compliance and provide an examination trail.
The FAQ lists the following points of contact that may be used by banks to provide new or updated information or to field any questions that you may have regarding § 314(a) information requests:
Federal Reserve Board
E-mail: patriotact@frb.gov
Fax: (202) 736-5641
Telephone: Cheryl Paret, Senior Financial Analyst at (202) 452-3675 or Jennifer White, Senior Financial Analyst at (202) 452-3964
FDIC
E-mail: fdicadvisory@fdic.gov
Fax: (202) 898-3627
Telephone: Anti-Money Laundering Section at (202) 898-6783
OCC
All changes must be made through the quarterly Call Report or by filing an amended Call Report. Fax: (301) 333-7038 Additional Information: OCC Alert 2004-6 http://www.ffiec.gov/bsa_aml_infobase/documents/OCC_DOCs/ALERT_2004_6.pdf