The Financial Crimes Enforcement Network (“FinCEN”) issued an administrative ruling, FIN-2012-R006 (the “Administrative Ruling”), concerning participation by an “association of financial institutions” in voluntary information sharing programs implemented pursuant to Section 314(b) of the USA Patriot Act (“Section 314(b)”) and the limits on the type of information that may be shared under Section 314(b). Section 314(b) provides a safe harbor from liability for the voluntary sharing of information by financial institutions or by an association of financial institutions for the purposes of identifying terrorist activity or money laundering.
The Delaware limited liability company (the “LLC”) that made the request to which FinCEN responded in the Administrative Ruling stated that it is wholly-owned by “financial institutions” as defined in 32 CFR §1010.100(t). The LLC, itself, it said, is not required to have a Bank Secrecy Act (“BSA”)/anti-money laundering (“AML”) compliance program. The LLC further stated that it had developed a capability to assist in the detection of money laundering or fraud and wants to offer this AML or fraud detection service to qualified “financial institutions” for a fee. A participant that contributes information used on the LLC database would receive revenue sharing for the use of the data it contributes. The LLC also stated that participating financial institutions would be restricted from transmitting or disclosing information received from the LLC’s program to other third parties.
FinCEN first concluded in the Administrative Ruling that since the LLC is owned entirely by one or more “financial institutions,” the LLC meets the definition of “association of financial institutions” under Section 314(b).
FinCEN next found that the LLC, its owners and participants in the LLC’s program could avail themselves of the safe harbor under Section 314(b) if the shared information is used for the purposes of identifying money laundering and terrorist financing. FinCEN concluded in the Administrative Ruling, however, that the Section 314(b) safe harbor for sharing information would not extend to information concerning fraud that is not related to money laundering or terrorist financing.