"There Will Be A Slight Delay..."

New Criminal Referral Form Issue Date Unknown
The new Interagency Criminal Referral Form (CRF) completion and distribution date has been put off again-this time indefinitely.

When the Interagency CRF was first conceived, it sounded like a good idea to the financial institution officers that have to file them. There were to be definite requirements, and instead of sending the form to five or seven different government agencies, regulators and law enforcement locations, there was a hint of a possibility that there would be only one to complete and send. That one would go to a newly created agency, FinCEN (Financial Crimes Enforcement Network), who would make it available to all the other concerned agencies.

The old CRF is used in cases of embezzlement and insider abuse, Bank Secrecy Act violations, and for large criminal acts. There are two forms. Two pages of instructions, and then a short form of three pages for offenses under $10,000 and a long seven page form for those problems over $10,000.

No less work...
Then we got a glimpse of the new forms. Four pages of instructions, and nine pages of the form. It didn't sound like a step in the right direction.

And forget that "only one to fill out and file." The new instructions call for one to FinCEN, AND a copy to either the FBI, the Secret Service, or the IRS, AND a copy to the U.S. Attorney's Office in your area, AND a copy to your regulator, AND, if required, one to your state, AND a copy in your file. If you were keeping count, that's six.

The new form is required to be typed, not written. It cannot be folded, stapled, or fastened together. (One of the more amusing lines on the new CRF is the notation that all necessary work on the form should take 30 minutes!)

It has many requirements spelled out, but leaves many questions unanswered.

Non-disclosure
For instance, there is a "Non-disclosure" requirement. If a financial institution officer completes a criminal referral, the subject of the referral is NOT to know that it has been filed.That seems easy enough to adhere to if the subject is a customer who is suspected of money laundering or structuring. The CRF can be completed and filed without the customer ever being aware of it. If a suspicious transaction can truly be identified, it can be reported.

But what about a case of insider abuse or embezzlement? If, after a confession is signed, an employee (or ex-employee) asks if they're going to be reported to a government agency, what is the auditor or security officer or attorney to tell this person? If a copy of the CRF is placed in the personnel file, and that file is subsequently subpoenaed, is that disclosure?

When that question was put to several of the agencies involved with the creation and decisions on the CRF, several answers were given. The most common is that "this has yet to be determined." The most positive answer came from the Federal Reserve Board of Governors Office. It was, "Non-disclosure means non-disclosure...in all situations."

In a discussion involving many security officers in a recent session on this problem, it was suggested that the response to the employee simply be, "We will file all reports that we are required to file."

CRF Filing Criteria
The four circumstances under which a CRF filing is required sound easy to define, but they aren't. Very briefly stated, a CRF has to be filed in case of:
Any insider caused loss or attempt-any amount
A loss (or potential loss) of $1,000 when you have a suspect other than an insider
A loss (or potential loss) of $5,000 when you have no suspect

Any Bank Secrecy Act or Money Laundering violation-including structuring and suspicious transactions
What is a suspicious transaction?
Number four is the one causing the most problems. Structuring is a violation, aggregating can be suspicious-but what exactly is a suspicious transaction?
Also-if a deposit is considered suspicious, do you file on every transaction after the initial filing? If you file a CRF on a customer, should you close the account?

"With" Documentation
One of the instructions on the CRF calls for filing with FinCEN "with documentation". But many financial institution attorneys say that even though this is a form instruction, they will not release documentation without a subpoena. They fear action concerning the Financial Privacy Act-even with the safe harbor promised by law.

The Federal Reserve Board of Governor's Office also responded to that objection. They said, "The financial institution should use discretion as to the documentation filed, but documentation must be filed with the report to FinCEN."

Common sense tells us that if there are ten boxes of documentation (as there can be in a multi- million dollar kite) that FinCEN is not going to want it. But in order to initiate an investigation, documentation with the report will be necessary. As for sending it with the other copies of the CRF, the FBI is on record as saying they don't want it. But there is no clarification as to whether documentation is to be sent only to one or to all agencies that get the CRF.

Ten years worth of records
Then there is the matter of holding original records for ten years after filing the CRF. Security officers, auditors, and even bank lawyers have only just so much space in their offices! The Bank Secrecy Act mandates holding only five years of records, and some states require financial institutions to hold the bulk of their records seven years. Holding them for ten years can put a considerable burden on most facilities.

One of the most frequent complaints of security officers regarding criminal referral filing is so few results of the effort and expense of the work involved. They hear about the five or six major cases brought about by CRFs-but know from statistics that financial institutions filed 40,000 CRFs with the FBI alone last year.

Two major reasons for delay
The latest delay on the new CRF distribution, we are told, is twofold. First the CRF was to be released in both hard copy (to be typed) and also on a computer diskette (to be used with a laser printer). When the diskette was produced, something went wrong, and it has to be redone. In order to avoid confusion, the Federal Reserve doesn't want to release the hard copy without the disk, so the whole thing is being held up until it can be produced and distributed.

The second part of the delay is that there is a "Bank Secrecy Act Advisory Group" reconsidering and reviewing the whole 'shebang'-the Currency Transaction Report and the Criminal Referral Form. Reportedly, they are even to consider a suggestion that the suspicious transaction box be done away with on the CTR and a whole NEW form created for Bank Secrecy Act violations-removing suspicious transaction reporting from both the CTR and the new Interagency CRF. (Did you follow that?!)

We understand this BSA Advisory Group welcomes your suggestions and ideas. BANKERS' HOTLINE Advisors John Byrne, Sr. Legislative Counsel of the ABA and Sarah Welling, Professor, College of Law, University of Kentucky are both on this Committee. Their addresses and FAX numbers appear below. Let them hear from you.

Be patient...
Until you get the new CRF, you are to continue using the two old forms, short and long. Let the BSA Advisory Group know your feelings and ideas.

BANKERS' HOTLINE will continue to keep you as up to date as we can.

In the meantime, be patient... very patient.

We encourage you to contact the Bankers' Hotline advisors who are members of the BSA Advisory Group with your ideas/suggestions/ complaints.

John Byrne
Sr. Legislative Counsel
American Bankers Association
1120 Connecticut Ave., N.W.
Washington DC 20036
FAX: (202) 828-4547

Professor Sarah Welling
College of Law
University Of Kentucky
Lexington KY 40506
FAX: (606) 323-1061

Copyright © 1994 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 4, No. 9, 3/94