On December 10, 2020, Kenneth Blanco, Director of FinCEN, issued public comments at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference announcing new FinCEN guidance for covered financial institutions to utilize the voluntary information sharing provisions of section 314(b) of the USA Patriot Act (“Guidance”). The Guidance encourages information sharing under section 314(b) and emphasizes the potential breadth of the provision, which protects compliant financial institutions from civil liability.
Section 314(b) Summarized
Section 314(b) provides that a financial institution required by the Bank Secrecy Act (“BSA”) to have an anti-money laundering program, or an association of such financial institutions, may “share information with any other financial institution or association of financial institutions regarding individuals, entities, organizations, and countries for purposes of identifying and, where appropriate, reporting activities that the financial institution or association suspects may involve possible terrorist activity of money laundering.” Financial institutions eligible to participate in section 314(b) information sharing are banks, credit unions and other depository institutions; casinos and card clubs; money service businesses; brokers or dealers in securities; mutual funds; insurance companies; futures commission merchants and introducing brokers in commodities; dealers in precious metals, precious stones, or jewels; operators of credit card systems; loan or finance companies; and housing government sponsored enterprises.
A financial institution or association of financial institutions sharing information pursuant to section 314(b) is shielded from civil liability for doing so as long as it complies with all applicable provisions of section 314(b), including that: (i) it provides annual notice to FinCEN that it is registering as a section 314(b) participant; (ii) it verifies that the recipient financial institution or association of financial institutions is also registered; and (iii) the information is used only identify and reporting terrorist activities or money laundering, determining whether to establish or maintain an account or accept a transaction, or assisting the financial institution with its compliance obligations. Because “money laundering” involves such a broad array of potential illicit behavior (as the Guidance notes, the money laundering statute at 18 U.S.C. § 1956 lists many different types of “specified unlawful activity” that may underlie a money laundering transaction), section 314(b) in practice applies to almost any information involving suspicious activity.
Moreover, a financial institution that shares information must maintain adequate procedures to protect the security and confidentiality of such information. If these requirements are satisfied, then a financial institution that shares information is protected from civil liability for doing so, or for any failure to provide notice of such sharing.
The FinCEN Announcement
In announcing the new guidance, Director Blanco noted the historical lack of clarity regarding application of and compliance with 314(b). He explained that the new guidance was developed in consultation with financial institutions and through FinCEN’s own experience administering the program with the aim of increasing financial institution participation in the program. Against that background, Director Blanco outlined the themes of the guidance as ensuring information subject to 314(b) information sharing is not narrowly defined and the nature of a financial institution’s suspicions need not be overly-specific or conclusive.
Beyond section 314(b), the general topic of information sharing has been stressed by prior public speeches by Director Blanco, as well as by FinCEN’s recent Advanced Notice of Public Rulemaking. Information sharing is also addressed by the pending amendments to the BSA contained within the defense funding bill that has been passed by Congress but not yet signed into law by President Trump, who has been threatening to veto the funding bill for various stated reasons.
The Guidance
As the purpose of issuing updated guidance was to encourage financial institution participation in the 314(b) program, the Guidance leads with the benefits of 314(b) information sharing. Those benefits primarily relate to “help[ing] financial institutions enhance compliance with their anti-money laundering/counter-terrorist financing (AML/CTF) requirements.” For instance, 314(b) participation enhances financial institutions’ ability to gather additional information on suspicious customers or transactions, “including previously unknown accounts, activities, and/or associated entities or individuals.” It also provides insight in unknown or complex financial trails and allows a financial institution to flesh out a customer’s financial activities. It also facilitates a financial institution’s SAR decision-making and filing by enabling more comprehensive insight into a customer or transaction.
To achieve these goals, the Guidance clarifies what information is subject to sharing under section 314(b). While financial institutions may – but are not obligated to – share information “that the financial institution or association suspects may involve possible terrorist activity of money laundering,” the Guidance clarifies that the information need not include specific information that the activities directly relate to proceeds of SUA or identify specific proceeds of SUA. Instead, for information sharing to fall within the safe harbor, “it is sufficient that the financial institution or association has a reasonable basis to believe that the information shared relates to activities that may involve money laundering or terrorist activity, and it is sharing the information for an appropriate purpose under Section 314(b) and its implementing regulations.” A financial institution need not conclude that the activities are in fact suspicious – it merely needs a reasonable basis for believing the activities are suspicious.
Additionally, “activities” as used in section 314(b) are not limited to an actual “transaction,” as that term is defined under the BSA. Thus, financial institutions may report on, for instance, attempted transactions or activities directed to inducing others to engage in transactions.
Section 314(b) places no limitation on the sharing of personally identifiable information or restrict the type or medium of information shared, such as video surveillance or cyber-related data. Finally, the Guidance explains that an entity that is not itself a financial institution still may form and operate an association of financial institutions whose members can use section 314(b) (this includes compliance service providers), and that an unincorporated association of financial institutions, governed by a contract between its financial institutions’ members, may engage in information sharing under section 314(b).
In addition to clarifying the scope of section 314(b), the Guidance encourages financial institutions to note in any SAR filing whether the reported suspicious activity includes information derived from section 314(b) information sharing.
