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Full Disclosure of SAR Content

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When a SAR is filed and you report it to the board, should you list the name of the person on whom the SAR is filed or just give a synopsis?

The consensus that has formed among the BOL family is that the report should sketch the nature of the activity being reported upon without naming names.

The requirement to notify one's BOD is found not in FinCEN's BSA Regs, but in the individual financial regulator's rules - 12 CFR 353.3 (FDIC); 12 CFR 21.11 (OCC); 12 CFR 208.20 (FRB); 12 CFR 563.180 (OTS). Although each rule is a little different, they all require that the board be notified of any report [SAR] filed. None of the rules requires notification of the details of the filing. The OCC and OTS rules specifically prohibit the notification of any board member on whose activities a SAR is filed. The FDIC and FRB rules are silent on that subject, but the prohibition exists in the BSA regs anyhow.

The rules also permit notification to be made to a committee of directors or executive officers designated by the board to receive notice.

I believe the rule is designed to make sure the board knows what's going on in its bank. If an investigation results from the SAR, the board should not be caught unaware of the reasons. The board can also ask questions about whether management is addressing any tightening up of policies or procedures designed to prevent involvement of the bank in future such activity.

At the same time, the board is under the same "gag rule" as management preventing the discussion or leaking of information about SAR filings. In that light, it's better the board not have specifics such as names, lest an offhand comment become a source of significant litigation.

Some additional information quoted from Profit Protection, Inc.'s CTR/BSA Multipurpose Compliance Manual, page 3.G.3:

If should be realized that the regulation does not dictate whether the notification is to be in written form or a verbal [oral] report. It also does not dictate the content of the notification of the committee or full board. For example, when relatively minor crimes are reported on SARs, the regulators have stated that it may be completely appropriate to provide the committee or full board with only a "summary listing of the SARs filed." Conversely, for SARs filed involving insiders or potential material losses to the institution, the regulaotrs have stated that they expect "the management of [a] bank to provide a detailed notification" to the committee or full board of directors.

First published on 4/05/04

First published on 04/05/2004

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