Importance of information sharing among financial institutions
AML AND COMPLIANCE NEWS |
USA PATRIOT Act section 314(b) permits financial institutions, upon providing notice to the United States Department of the Treasury, to share information with one another in order to identify and report to the federal government activities that may involve money laundering or terrorist activity. Financial institutions wanting to share information under 314(b) should notify the Treasury Department.
Under section 314(b), financial institutions may share information relating to activities that they suspect may involve possible terrorist financing or money laundering. This includes, but is not limited to, information about activities they suspect involve the proceeds of a specified unlawful activity. Participation in information sharing, pursuant to section 314(b), is voluntary and the U.S. Treasury's Financial Crimes Enforcement Network (FinCen) strongly encourages financial institutions to participate.
Eligible section 314(b) participants
Financial institutions subject to an anti-money laundering program requirement under FinCEN regulations and any association of such financial institutions are eligible to share information under section 314(b). Financial institutions and related associations include the following:
- Banks (31 CFR 1020.540)
- Casinos and card clubs (31 CFR 1021.540)
- Money services businesses (31 CFR 1022.540)
- Brokers or dealers in securities (31 CFR 1023.540)
- Mutual funds (31 CFR 1024.540) Insurance companies (31 CFR 1025.540) Futures commission merchants and introducing brokers in commodities (31 CFR 1026.540) Loan or finance companies (31 CFR 1029.540)
- Operators of credit card systems (31 CFR 1028.540)
Important facts about section 314(b) information sharing
- Financial institutions have the ability to share information with one another under a safe harbor that offers protections from liability.
- Financial institutions do not need to provide specific information indicating activities directly relate to proceeds of a specified unlawful activity (SUA) or have identified specific proceeds of an SUA being laundered.
- Financial institutions do not need to make a conclusive determination that the activity is suspicious.
- Financial institutions may share information about activities as described even if such activities do not constitute a “transaction.” This clarification is significant and addresses some uncertainty with sharing incidents involving possible fraud, cybercrime and other predicate offenses when financial institutions suspect those offenses may involve terrorist acts or money laundering activities.
- In addition, guidance notes there is no limitation under section 314(b) on the sharing of personally identifiable information or the type or medium of information that can be shared (to include sharing information verbally).
- When financial institutions identify suspicious activity through collaboration pursuant to section 314(b), they may submit a joint suspicious activity report (SAR) if a joint SAR would be the most efficient way to provide highly useful information to law enforcement.
314(b) program participant conditions
Financial institutions must satisfy the following requirements, set forth by FinCen regulation 31 CFR 1010.540, in order to benefit from 314(b) safe harbor protection:
- Financial institutions must submit a registration to FinCEN’s secure information sharing system (SISS).
- After submitting SISS registration, financial institutions must submit a 314(b) registration.
- Prior to sharing information under 314(b), financial institutions and associations must take reasonable steps such as verifying the FinCEN 314(b) participant list to ensure the other financial institution is a 314(b) registrant.
- Financial institutions and associations must establish and maintain procedures to safeguard the security and confidentiality of shared information.
- Financial institutions and associations must only use shared information for the purpose of:
- Identifying and, where appropriate, reporting on activities that may involve terrorist financing or money laundering
- Determining whether to establish or maintain an account, or to engage in a transaction
- Assisting in compliance with anti-money laundering requirements
Who may register as an association of a financial institution?
- An entity that is not itself a financial institution may form and operate an association of financial institutions whose members can use 314(b)
- An unincorporated association of financial institution, governed by a contract between its financial institutions’ members, may engage in information sharing under section 314(b)
Benefits of 314(b) voluntary information sharing
While information sharing is voluntary, it can help financial institutions enhance compliance with their anti-money laundering/counter-terrorist financing (AML/CFT) requirements. Benefits include:
- Shedding more light upon overall financial trails, especially if they are complex and appear to be layered among numerous financial institutions, entities and jurisdictions.
- Building a more comprehensive and accurate picture of a customer’s activities that may involve suspected money laundering or terrorist financing, allowing for more precise decision-making in due diligence and transaction monitoring.
- Alerting other participating financial institutions to customers whose suspicious activities may not have been previously known.
- Facilitating the filing of more comprehensive SARs than would otherwise be filed in the absence of 314(b) information sharing.
- Facilitating efficient SAR reporting decisions by obtaining a more complete picture of activity through the voluntary information sharing process.
- Identifying and aiding in the detection of money laundering and terrorist financing methods and schemes.
Information that can be shared
Financial institutions or associations of financial institutions may share information with each other regarding individuals, entities, organizations and countries for purposes of identifying, and where appropriate, reporting activities that may involve possible terrorist activity or money laundering.