SAR Reports to the Board
Question: We have an ongoing controversy about reporting the SARs to the Board of Directors. We only report the number filed in the official minutes and not the name or the details of the SAR. Actually, we try not to tell the Board anything unless they ask about it. If they ask, however, we do tell them the name and the situation.
We recently heard from one "expert" source that we should not give any information to the Board even if they ask because the safe harbor only protects the employee filing the SAR. The reasoning there is the fact that the more people that know about it, the greater the risk the information could be revealed.
When we checked with another "expert" at the OCC, he said that the board should be receiving all SAR information, otherwise their fiduciary responsibilities to the bank could be compromised. He has typically seen information provided to the board stating the person's name, date of filing, reasons for filing, and status, and that the directors should be getting the details of what was filed.
Do the Directors have a right to know due to the fact that they are ultimately liable? The Directors could perform an audit of the bank's records. I would think that they could audit the SAR reports to know that their employees are doing their job. Can you help us on this?
Answer: When a bank files a Suspicious Activity Report the bank and all in it are covered by the Safe Harbor that is written into the law. On the other hand, the SAR specifically states that if the filing of a SAR is disclosed, the bank can be liable - and the penalties are pretty steep. In order to reduce that liability, the fewer people who know the details, the better. There is nothing in the SAR or the accompanying rules in Regulation H that say you should reveal details of the SAR to the Board of Directors. It does say you must notify the Board when you file them. In many cases, the only thing they want or need to know is how many were filed, (no details necessary) and the fact that the employee who filed is meeting the requirements of the regulation. If a SAR is being filed on the activity of a member of the Board of Directors, and you reveal the name and detail to that member, you have lost your safe harbor. Also, there is always the chance of someone on the Board revealing the information about the SARs.
Consider, please, the Board of Directors of Chase or Citibank or Wachovia. They need to know that SARs are being filed as they should be, and the responsibility of the compliance officer and the BSA officer assume those duties. Certainly, these Boards do not want the details of the thousands of SARs filed for the bank. It is no different for the small financial institution.
There are a great many opinions on giving SAR details to the Board. I can refer you to many compliance and security officers who are considered to be "experts" who say information should go into the minutes, but details should not go to the Board. Sorry - I can't agree with your folks at OCC.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 1, 2/05>/span>
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