I. INTRODUCTION
Section 314(b) of the USA PATRIOT Act and its implementing regulation, 31 C.F.R. 103.110, permits financial institutions and associations of financial institutions, upon providing notice to the United States Department of Treasury, to voluntarily share information with one another in order to better identify and report to the federal government those activities regarding individuals, entities, organizations and countries for purposes of detecting, identifying or report activities that the financial institution or association suspects may involve money laundering or terrorist activity. A “spin-off” benefit to such information sharing may also lead to a reduction in fraud losses.
FinCEN issued an interim ruling implementing § 314(b), effective on March 4, 2002.
II. REGULATORY PROCEDURES
Prior to engaging in information sharing, financial institution or association of financial institutions must submit a certification form to FinCEN that confirms: the name of the financial institution or association of financial institution; that the financial institution is a financial institution as defined by the regulation, or in the case of an association, that the association’s members that intend to engage in information sharing or financial institutions is defined by the regulation; that the institution or association will maintain adequate procedures to protect the security and confidentiality of such information; that the institution or association will not use any shared information for any purpose other than is authorized by the regulation; and the identity of a contact person at the financial institution or association for matters pertaining to information sharing.
This certification form is accomplished by filing, either electronically or by paper, a “Notice of Intent to Share” with the United States Department of Treasury. The “certification form” appears in Appendix A of the regulation (reproduced below) and the completed form is mailed to FinCEN, P.O. Box 39, Mailstop 100, Vienna, VA 22183. A “certification form” may be filed electronically by accessing FinCEN’s website (https://www.fincen.gov/314b/314b_notification.php).
A certification is effective for a one-year period beginning on the date of the certification (the execution date appearing on the certification form). To continue the sharing of information after the end of the one-year period, a financial institution or association of financial institutions must submit a new certification form.
III. SAFE HARBOR FROM LIABILITY PROVISION
The law and regulations provide that a financial institution or association of financial institutions that engages in the sharing of information in compliance with the notification to the Department of Treasury requirements:
shall not be liable to any person under any law or regulation of the United States, under any constitution, law, or regulation of any state or political subdivision thereof, or under any contract or other legally enforceable agreement (including any arbitration agreement), for such disclosure or for any failure to provide notice of such disclosure to the person who is the subject of such disclosure, or any other person identified in the disclosure, except where such transmission, receipt, or sharing violates this section or regulations promulgated pursuant to this section.
The Financial Crimes Enforcement Network (“FinCEN”) has issued an interpretive guidance to clarify the application of the rule implementing Section 314(b) of the USA PATRIOT Act. Specifically, this guidance clarifies that a financial institution participating in the Section 314(b) program may share information relating to transactions that the institution suspects may involve the proceeds of one or more specified unlawful activities (“SUAs”) and such an institution will still remain within the protection of the Section 314(b) safe harbor from liability.
The covered SUAs listed include an array of fraudulent and other criminal activities. Information related to the SUAs may be shared appropriately within the 314(b) safe harbor to the extent that the financial institution suspects that the transaction may involve the proceeds of one or more SUAs and the purpose of the permitted information sharing under the 314(b) rule is to identify and report activities that the financial institution “suspects may involve possible terrorist activity or money laundering.” Therefore, to the extent that financial institutions share information related to possible money laundering activities, including those associated with the underlying SUAs, or related to possible terrorist activity, such information sharing remains within the protection of the rule’s safe harbor, provided the aforementioned conditions are met.
IV. INFORMATION SHARING BETWEEN FINANCIAL INSTITUTIONS AND THE FEDERAL GOVERNMENT
If, as a result of information shared pursuant to the regulation, a financial institution knows, suspects or has reason to suspect that an individual, entity, or organization is involved in, or may be involved in terrorist activity or money laundering and the institution is subject to a suspicious activity reporting requirement, the institution must file a Suspicious Activity Report (SAR). In situations involving violations requiring immediate attention (e.g., when a reportable violation involves terrorist activity or is an ongoing violation), the financial institution must immediately notify, by telephone, an appropriate law enforcement authority and financial institution supervisory authorities in addition to filing timely a SAR. A financial institution not subject to a suspicious activity reporting requirement is not required to file a SAR or otherwise to notify law enforcement of suspicious activity that is detected as a result of information sharing, but is encouraged to voluntarily report such activity to FinCEN.
The information sharing provisions do not otherwise affect the obligation of a financial institution to file a SAR or to otherwise contact directly a federal agency concerning individuals or entities suspected of engaging in terrorist activity or money laundering.In order to record the highest priority to suspected terrorists activity, a financial institution should report such information to FinCEN by calling the financial institution’s hotline (1-866-556-3974) which should facilitate the immediate transmittal of information to law enforcement. Once again, the use of the hotline is voluntary and does not alleviate an institution’s responsibility to file a SAR in compliance with regulations.
V. CONCLUSION
The safe harbor information sharing protection is good for only those institutions that make disclosures in compliance with the law and regulation, meaning that the “Notice of Intent to Share” must be properly completed and filed and that the notice is refiled annually (otherwise, it expires one year from the date of the notice).
Financial institutions and financial associations may only share with other financial institutions or associations that have similarly filed a Notice of Intent to Share. Prior to sharing information, a financial institution or an association of financial institutions must take reasonable steps to verify that the other financial institution or association of financial institutions with which it intends to share information has submitted to FinCEN the required notice. At one time, it was anticipated that FinCEN would publish a list of all financial institutions and associations of financial institutions that had filed notice under 314(b). In this way, such list would be used by a financial institution prior to sharing information with another financial institution. Rather than publishing the list of institutions that have filed notice, it appears that the list is being sent to institutions that have filed notice and is updated quarterly. Should the financial institution that you wish to share information with (or your own institution) does not appear on the latest list, you may request (or your own institution may provide) a copy of FinCEN’s confirmation of the notice of intent to share. Use of the list or direct confirmation will satisfy the regulatory verification requirement.
Appendix A to Subpart H – Notice for Purposes of Subsection 314(b) of the USA Patriot Act and 31 C.F.R. 103.110
Notice for Purposes of Subsection 314(b) of the USA Patriot Act and 31 C.F.R. 103.110
Notice is given, on behalf of (insert name, address, and federal employer identification number (EIN) of financial institution or association of financial institutions)
that:
(1) (i) The financial institution specified above is a “financial institution” as such term is defined in 31 C.F.R. 103.110(a)(2), or (ii) the association specified above is an “association of financial institutions” as such term is defined in 31 C.F.R. 103.110(a)(3).
(2) The financial institution or association specified above intends, for a period of one (1) year beginning on the date of this notice, to engage in the sharing of information with other financial institutions or associations of financial institutions regarding individuals, entities, organizations, and countries, as permitted by subsection 314(b) of the USA Patriot Act of 2001 (Public Law 107-56) and the implementing regulations of the Department of the Treasury, Financial Crimes Enforcement Network (31 C.F.R. 103.110).
(3) The financial institution or association of financial institutions specified above has established and will maintain adequate procedures to safeguard the security and confidentiality of such information.
(4) Information received by the above named financial institution or association pursuant to section 314(b) and 31 C.F.R. 103.110 will not be used or disclosed for any purpose other than as permitted by 31 C.F.R. 103.110(b)(4).
(5) In the case of a financial institution, the primary federal regulator, if applicable, of the above named financial institution is ________________________________________________________.
(6) The following person may be contacted in connection with inquiries related to the information sharing under subsection 314(b) of the USA Patriot Act and 31 C.F.R. 103.110:
NAME:________________________________________________________
TITLE: ________________________________________________________
MAILING ADDRESS: __________________________________________________________
________________________________________________________
E-MAIL ADDRESS: ________________________________________________________
TELEPHONE NUMBER: ________________________________________________________
FACSIMILE NUMBER: ________________________________________________________
BY: ________________________________________________________
Name: ________________________________________________________
Title: ________________________________________________________