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#2240167 - 07/27/20 03:42 PM Anonymous reports to SBA
Ollie the Obtuse
Unregistered

The SBA has issued guidance detailing red flags for SBA program fraud related to COVID-related programs.

They instruct financial institutions to file a SAR, but, to additionally submit a complaint (which can be done anonymously) to the SBA OIG, using a toll-free number, US mail, or an online submission form (which it logically seems would capture your IP address, no matter how "anonymous" they claim that process is).

My question is, as a financial institution, have you fulfilled your obligation to identify, detect, and report suspicious activity merely by filing the SAR?

My concern with notifying SBA is that they are not a "law enforcement agency" and therefore I do not trust them to handle my reporting data confidentially. I expect they might contact the scammer (our customer) and tell them, "Someone has complained to us that you may have received SBA funds when you don't even have a small business..." etc. Basically, I barely trust federal agencies with access to SAR data not to handle it in that manner, so why should I trust an agency that lacks access to SAR data to handle it in the way that SAR-related data must be handled?

Would you agree that deciding against notifying SBA is in the best interests of the bank? We have SAR instructions that say that we must notify, when appropriate, an appropriate law enforcement agency by telephone, in addition to filing the SAR. In this case SBA isn't even a law enforcement agency so I see no obligation and no reason to make that call.

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#2240168 - 07/27/20 03:50 PM Re: Anonymous reports to SBA Anonymous
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Why do you care? It is the SBA's loan not yours, you are basically nothing more than a servicing agent. If you have knowledge and you fail to tell the SBA, it probably makes the lender culpable in a government guaranteed loan fraud.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2240172 - 07/27/20 04:05 PM Re: Anonymous reports to SBA Anonymous
Ollie the Obtuse
Unregistered

OP here. My position, which may be a little extreme compared to other banks is as follows.

Banks are not law enforcement agencies or prosecutors; we are not in a position to accuse any customer of a crime.

We have our hands bound by the SAR regulations and Patriot Act, and must file a SAR whenever a reasonable person would have or "should have" suspected that something suspicious and reportable occurred or was even attempted.

We file that SAR and then over two dozen federal law enforcement agencies have access to it. We are gagged regarding our ability to disclose the SAR or its contents to the customer. We therefore treat the entire SAR and its contents as highly sensitive, confidential information - we don't disclose its contents to anyone who doesn't have access to the SAR database.

We believe that having an inadvertent disclosure of SAR contents to a customer, through any means, would damage the nation's BSA program and potentially expose the bank and its employees to various risks and potential liabilities.

We therefore shy away from any FAQs or public notices that say, essentially, "Go file your secret SAR, and then tell this other party everything that your secret SAR says."

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#2240174 - 07/27/20 04:12 PM Re: Anonymous reports to SBA Anonymous
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Since your mind is made up - then I have no idea why you originally bothered posting here anonymously. You asked if people agreed - I can bet you 9 of out 10 do not.

Everyone makes their own bed they need to sleep in.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2240175 - 07/27/20 04:31 PM Re: Anonymous reports to SBA Anonymous
Ollie the Obtuse
Unregistered

OP here. You make it sound as though I'm disinterested in the opinions of other bankers. I'm not. That's why I posted.

I appreciate your replies and welcome any additional ones.

I recognize that my outlook is based on past experiences, which have included the inappropriate disclosure of SAR contents by a member of law enforcement. In one scenario we had a federal agent come to pick up SAR documentation, and just in the spirit of making conversation, he told us about a couple of SARs filed by other banks. He included the suspect names (which were not our customers) and the nature of the suspected activity, and described his methods of surveillance.

So yeah, I barely trust (or maybe: don't trust at all?) that our SAR data is being protected as it should be, and I hesitate to be the one to disclose it to an outside party. But if someone here sees a regulatory or legal obligation for us to report to the SBA, I'm interested to hear other perspectives. Maybe we shouldn't be worried at all about the chance that a customer, investigated for SBA fraud, will blame us or sue us for turning over their data to SBA, even if it turns out there was no fraud? (We almost never have conclusive evidence of fraud; only the "red flags" which lead to the SAR.)

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#2240178 - 07/27/20 04:59 PM Re: Anonymous reports to SBA Anonymous
HappyGilmore Offline
10K Club
Joined: Jun 2004
Posts: 19,844
Pulling people out of the ditc...
Suppose...

You have a customer that has received a SBA loan, and you think it is suspicious and therefore file a SAR, per SAR guidelines. You further decide to contact the SBA through their hotline to report a potential fraud. you have not accused anyone of any crime, simply stated that a transaction is suspicious. so, lets imagine, just for giggles, that someone blabs to the customer that potential suspicious activity has taken place. so they come to your bank, or call. I assume that would go to your BSA area, and their simple response would be "we are not allowed to comment on any type of filing we may or may not have made, not even to confirm or deny having made any. thank you."

and my question to you is:

you have a customer that is potentially defrauding an agency of the US Government, and your okay with that and not reporting it, because "you don't trust the government" and, "if someone says the bank did it, that potentially your bank has liability." so, as long as they are not defrauding your bank, you're okay with them defrauding others, potentially?
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#2240185 - 07/27/20 05:44 PM Re: Anonymous reports to SBA Anonymous
Lindsay H Offline
Junior Member
Joined: Mar 2012
Posts: 35
Why does your referral to the SBA have to disclose SAR filing in the first place. If it is anonymous tip line (even in theory) can't it be as simple as stating ABC Inc located at 123 Main St USA appears to have either fraudulently applied for or are misusing PPP loans. The SBA would have access to the loan docs and would be able to request a subpoena for any additional information needed.

You've done nothing here to imply a SAR has been filed. You are reporting a suspicion just as you have with the SAR filing but with less detailed information. If the SBA chooses not to move forward with an investigation you have still met your obligation under FinCEN guidelines.

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#2240197 - 07/27/20 06:24 PM Re: Anonymous reports to SBA Anonymous
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
I agree with Lindsay - I see no connection between your obligation to file a SAR and the request that you report suspected fraudulent activity to the SBA. There is no disclosure regarding a SAR filing here.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2240203 - 07/27/20 06:46 PM Re: Anonymous reports to SBA Anonymous
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Also, if you think the SBA is not "law enforcement" then you are mistaken. Those SBA fraud tips go directly to the SBA Office of Inspector General and IG Act of 1978, Section 6(e)(3); and 5 U.S.C. Appendix §6(e)(3), gives the Inspector General direct law enforcement authority.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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