SAR Disclosure as part of Civil Litigation

The possible disclosure of a SAR as part of discovery in civil litigation has been a recurring issue. The federal financial institution supervisors, as well as FinCEN, have always maintained that a request for the disclosure of a SAR in civil litigation pursuant to the federal discovery rules should be denied and the institution should identify for the court the relevant provisions of Title 31, Section 5318(g) of the United States Code (the BSA provision that prohibits disclosure). (However, institutions should never disobey the order of a court to make the disclosure, although they should appeal an adverse order and seek a stay when possible.)

Two recent cases support the position that discovery in civil cases does not require the production or disclosure of a SAR. In one case27, a discovery demand for SARs was made, notwithstanding the language in the Office of Thrift Supervision's (OTS) SAR regulation28 barring any disclosure of a SAR filing or information contained therein. The bank had objected to the discovery demand for SARs so the plaintiff filed a motion to compel production of SARs, and, subsequently, the OTS submitted a letter to the court in support of the bank's position. The court denied the motion for discovery finding that the SAR regulations establish an unqualified privilege against discovery. The court held that even though the statute only prohibits notice of the SAR filing to persons involved in the transaction, the production of the SAR in discovery would increase the likelihood that the person involved in the transaction would receive notice of the SAR filing.

Similarly, in another case29, the court upheld a lower court's issuance of a protective order against the discovery of the SARs, relying on the nondisclosure provisions of the Office of the Comptroller of the Currency's (OCC) regulation.30

It should be noted, however, that while there is now further judicial support for the proposition that SARs are not subject to disclosure in civil litigation, this does not apply to the underlying documentation (such as account statements, wire transfer records, etc.) that may evidence suspicious activity. In fact, in one of the cases the court specifically held that the prohibition from disclosure covered the SAR but not the underlying documentation.31

An institution that finds itself in the position as described herein should notify the court of the prohibition from disclosure and also, pursuant to the regulations of the federal financial institution supervisory agencies, notify its federal supervisor, or, if it has no such supervisor, notify FinCEN, that such a demand has been made.

27 Weil v. The Long Island Savings Bank, 2001 U.S. Dist. LEXIS 23408 (E.D.N.Y. 2001). 28 12 C.F.R. 563(d)(12).
29 Dubai Islamic Bank v. Citibank, 2001 U.S. Dist. LEXIS 18525 (S.D.N.Y. 2001).
30 12 CFR 21.11(k), and FinCEN's rule, 31 CFR 103.18.
31 Weil v. The Long Island Savings Bank.
Excerpted from SAR Activity Review Issue 4, page 50