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More On SARs

Editor's note: We felt the following email to be of sufficient importance to our readers to include it in full:

Dear Editor:
In Volume XI, No. 2, in February, you headlined an article titled "Suspicious Activity Reports - Still Questions - After All This Time". In it you report that FinCEN released another list of frequently asked questions, due to the increase of calls about SARs, which prompted them to address certain problems that have come up.

In fact, the issues addressed are contained within the SAR Activity Review that was released in October. And rather than being a FinCEN release of frequently asked questions, this is a publication that was put together and released by FinCEN, the bank supervisory agencies, and the ABA. It is a publication that has been in the works for quite some time, with the next edition due for distribution sometime after the end of April. In fact, in the introduction of the SAR Activity Review, at page 1, it states that, "the publication reflects the recognition of both relevant government agencies and the nation's financial institutions of the desirability of a continuing public exchange of information about the SAR System and its results."

One section of the publication is the section on issues that need to be addressed for SAR filings. It is this section that contains the information that you have addressed in your article and for which I would like to provide some clarification to you.In your article you state that you are not allowed to disclose to anyone that you have filed a SAR. While the disclosure of a SAR filing is severely restricted, the article appears to say that you cannot even tell a prosecutor that SAR has been filed. I hope that it was not your intention to convey such information as it is perfectly acceptable to tell a prosecutor that a SAR has been filed.

You also state that the guidance in the SAR Review says that you cannot supply a copy of a SAR in response to a court order. In fact, the publication does not say this, rather it says that court ordered disclosure raises special issues, which is the reason that the primary regulator should be contacted. Disclosures of SARs have occurred in response to a court order when we could not convince a court otherwise. While these cases have been rare, we have been able to get protective orders so that there was no public disclosure of the SAR.

You comment that the SAR Review states that the time to file a SAR is within 30 days of initial detection, not the initial activity. Our explanation was a little more detailed. We said that the filing should be within 30 days of a determination that the activity in question is believed to be suspicious or potentially illegal.

Also, you stated that you can immediately notify law enforcement "as soon as you file." A bank can contact law enforcement at anytime it so desires, whether or not a SAR has been filed. Contact with law enforcement without a SAR still has the same safe harbor protections.

Finally, you editorialized with regard to FinCEN's sidestepping of the account closing issue. Again, this was not a FinCEN decision, but rather the consensus of all government agencies. I would disagree with you that the industry standard is to close an account when a SAR is filed. If this were the case, based on the number of SAR filings there would be a heck of a lot of account closings. I also don't agree that we sidestepped the issue of account closings. It is certainly not our place to tell banks when to close accounts. While there may be instances where such a decision is obvious there are many instances where this is not the case, which, therefore, requires a determination by the bank based on all of the information it has available.I hope this clarifies and helps.

Rick Small, Deputy Associate Director
Division of Banking Supervision & Regulation
Board of Governors of the Federal Reserve System
Washington, DC
(202) 452-5235

Copyright © 2001 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 11, No. 4, 4/01

First published on 04/01/2001

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