Alert March 10, 2009

FinCEN Proposes Guidance and Regulations on Sharing SARs with Affiliates and the Scope of Confidentiality Requirements for SARs

The Financial Crimes Enforcement Network (“FinCEN”) joined with the federal financial institution functional regulators to issue proposed interpretive guidance (the “Guidance”) and proposed regulations (“Regulations”) to clarify when suspicious activity reports (“SARs”) may be disclosed.  Comments on both proposals are due by June 8, 2009.

SAR Sharing with Affiliates.  The Guidance would extend previously issued guidelines about sharing SARs within a corporate enterprise.  Specifically, the Guidance would provide that a depository institution, securities broker-dealer, or other US financial institution obligated to file SARs (a “SAR Reporter”) may share a SAR that has been filed, and information that would reveal the existence of the SAR, with the SAR Reporter’s affiliates that also are subject to SAR rules.  The Guidance calls on a SAR Reporter to have written confidentiality agreements in place with its affiliates to protect SARs from disclosure.

In 2006, FinCEN stated that SARs could be shared, but only with head offices and parent companies, and not among affiliated entities.  The Guidance – long-requested by industry participants – would expand the 2006 guidelines to allow affiliate sharing, so long as the affiliate with which a SAR is shared also is subject to SAR reporting requirements.  Under the Guidance, a SAR Reporter could not, however, share a SAR with a US or foreign affiliate that is not subject to the SAR rules (e.g., a registered investment adviser affiliate).  Moreover, the Guidance would not allow an affiliate receiving a SAR from a SAR Reporter to, in turn, reveal that SAR to any other party, including to another affiliate. 

Clarification of Confidentiality Requirements.  In a contemporaneous release, FinCEN proposed the Regulations to clarify the scope of the confidentiality provisions of the SAR rules.  Among other things, the Regulations would clarify that SAR confidentiality requirements extend to any information that would reveal the existence of a SAR filing and that SAR Reporters may not disclose SARs to any person, not just those involved in the suspicious transaction.  The Regulations would also clarify that, in response to subpoenas or other requests for disclosure, SAR Reporters may neither disclose a SAR filing nor any information that would reveal the existence of such a filing.  The Regulations would allow certain SAR disclosures to government and self-regulatory organizations that examine a financial institution for compliance with the Bank Secrecy Act.  Under the Regulations, governmental and self-regulatory entities with access to SAR information would also be subject to SAR confidentiality requirements.