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Information Sharing - Final Rule Issued: Section 314 Made More Tolerable

On September 18, 2002, the Treasury Department issued three final rules concerning sections 313, 314, and 319 under the provisions of the USA PATRIOT Act of 2001.

Section 313 and 319 cover correspondent accounts maintained by U.S. banks and securities brokers on behalf of foreign banks. The final rule, among other mandates, requires foreign banks with correspondent accounts to: certify that they are not shell banks; certify they will not permit shell banks access to the U.S. correspondent account; identify the owners of the bank; and identify a U.S. agent for service of process.

Sharing with Other Financial Institutions
The final rule on Section 314 addresses the questions raised by the banking industry regarding certification by eliminating the certification requirement. It has been replaced by the requirement of the financial institution simply to give notice once a year to FinCEN of intent to share with other financial institutions. Information may be shared with all financial institutions that are required to establish and maintain an anti-money laundering program. Prior to sharing information, an institution must take steps to verify that the receiving institution has also given the notice of intent to share to FinCEN. FinCEN will provide a list of institutions that have submitted notice of intent to share information, which will be updated quarterly. If the receiving institution is not on the list, it can give notice to the sharing bank that intent has been filed after the latest list was distributed. BOTH sharing financial institutions must give notice to FinCEN for the safe harbor provision to apply, and the notice will still have to be filed annually. The form can be submitted to FinCEN electronically.

Sharing with the Government
As for sharing of information with government entities, 314(a) now requires federal officials to certify, in writing, that there is credible evidence of terrorist financing or money laundering. This should, as ABA counsel John Byrne pointed out, prevent "fishing expeditions." Only FinCEN is authorized under the final rule to make a search request of a suspected terrorist or money launderer to a financial institution and all responses from the institution must be made only to FinCEN. Financial institutions will only have to research open accounts or accounts closed within the last year to determine if there is a match, and only transactions that occurred within the last six months must be reviewed. If a match is detected, the bank need only report the existence of a match to FinCEN. Reports of future customer activity by the named suspect is not required.

Non-disclosure
The provision of non-disclosure applies to all requests and information obtained as a result of a search regarding a suspect. Even if information is shared with another financial institution, it must not be disclosed that the subject's name was on a suspect search request from FinCEN. Closing the account or refusing to conduct business for any name on the suspect search request is not prohibited, however.

Contact Person
A financial institution must designate one person to be the point of contact for FinCEN regarding requests for information. The individual's name, title, mailing address, e-mail address, telephone number and fax number must be provided.

Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 7, 9/02

First published on 09/01/2002

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