[Federal Register Volume 74, Number 44 (Monday, March 9, 2009)]
[Proposed Rules]
[Pages 10130-10135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4703]
[[Page 10129]]
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Part II
Department of the Treasury
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31 CFR Part 103
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Office of the Comptroller of the Currency
12 CFR Parts 4 and 21
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Office of Thrift Supervision
12 CFR Parts 510 and 563
Confidentiality of Suspicious Activity Reports; Standards Governing the
Release of a Suspicious Activity Report; Interpretive Guidances--
Sharing Suspicious Activity Reports; Proposed Rules
Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed
Rules
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 21
[Docket ID OCC-2009-0004]
RIN 1557-AD17
Confidentiality of Suspicious Activity Reports
AGENCY: The Office of the Comptroller of the Currency, Treasury (OCC).
ACTION: Notice of proposed rulemaking.
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SUMMARY: The OCC is proposing to amend its regulations implementing the
Bank Secrecy Act (BSA) governing the confidentiality of a suspicious
activity report (SAR) to: Clarify the scope of the statutory
prohibition on the disclosure by a financial institution of a report of
a suspicious transaction, as it applies to national banks; address the
statutory prohibition on the disclosure by the government of a SAR, as
that prohibition applies to the OCC's standards governing the
disclosure of SARs; clarify the exclusive standard applicable to the
disclosure of a SAR, or any information that would reveal the existence
of a SAR, by the OCC is ``to fulfill official duties consistent with
the purposes of the BSA;'' and modify the safe harbor provision in its
rules to include changes made by the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (USA PATRIOT) Act. These amendments are based upon a similar
proposal being contemporaneously issued by the Financial Crimes
Enforcement Network (FinCEN).
DATES: Comments must be received by June 8, 2009.
ADDRESSES: Because paper mail in the Washington, DC area and received
by the OCC is subject to delay, commenters are encouraged to submit
comments by the Federal eRulemaking Portal or e-mail, if possible.
Please use the title ``Confidentiality of Suspicious Activity Reports''
to facilitate the organization and distribution of the comments. You
may submit comments by any of the following methods:
Federal eRulemaking Portal--``Regulations.gov'': Go to http://www.regulations.gov, under the ``More Search Options'' tab click next
to the ``Advanced Docket Search'' option where indicated, select
``Comptroller of the Currency'' from the agency drop-down menu, then
click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2009-0004''
to submit or view public comments and to view supporting and related
materials for this notice of proposed rulemaking. The ``How to Use This
Site'' link on the Regulations.gov home page provides information on
using Regulations.gov, including instructions for submitting or viewing
public comments, viewing other supporting and related materials, and
viewing the docket after the close of the comment period.
E-mail: [email protected].
Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 2-3, Washington, DC 20219.
Fax: (202) 874-5274.
Hand Delivery/Courier: 250 E Street, SW., Mail Stop 2-3,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket Number OCC-2009-0004'' in your comment. In general, OCC will
enter all comments received into the docket and publish them on the
Regulations.gov Web site without change, including any business or
personal information that you provide such as name and address
information, e-mail addresses, or phone numbers. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this notice of proposed rulemaking by any of the following methods:
Viewing Comments Electronically: Go to http://www.regulations.gov, under the ``More Search Options'' tab click next
to the ``Advanced Document Search'' option where indicated, select
``Comptroller of the Currency'' from the agency drop-down menu, then,
click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2009-0004''
to view public comments for this rulemaking action.
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC, 250 E Street, SW., Washington, DC.
For security reasons, the OCC requires that visitors make an
appointment to inspect comments. You may do so by calling (202) 874-
4700. Upon arrival, visitors will be required to present valid
government-issued photo identification and submit to security screening
in order to inspect and photocopy comments.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
FOR FURTHER INFORMATION CONTACT: James Vivenzio, Senior Counsel for
BSA/AML, (202) 874-5200; Ellen Warwick, Assistant Director, Litigation,
(202) 874-5280; or Patrick Tierney, Senior Attorney, Legislative and
Regulatory Activities, (202) 874-5090; Office of the Comptroller of the
Currency, 250 E Street, SW., Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
I. Background
The BSA requires financial institutions, including national banks
regulated by the OCC, to keep certain records and make certain reports
that have been determined to be useful in criminal, tax, or regulatory
investigations or proceedings, and for intelligence or counter
intelligence activities to protect against international terrorism. In
particular, the BSA and its implementing regulations require a
financial institution to file a SAR when it detects a known or
suspected violation of Federal law or a suspicious activity related to
money laundering, terrorist financing, or other criminal activity.\1\
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\1\ The Annunzio-Wylie Anti-Money Laundering Act of 1992 (the
Annunzio-Wylie Act), amended the BSA and authorized the Secretary of
the Treasury to require financial institutions to report suspicious
transactions relevant to a possible violation of law or regulation.
See Public Law 102-550, Title XV, section 1517(b), 106 Stat. 4055,
4058-9 (1992); 31 U.S.C. 5318(g)(1). The OCC, Board of Governors of
the Federal Reserve System (FRB), Federal Deposit Insurance
Corporation (FDIC), Office of Thrift Supervision (OTS), and National
Credit Union Administration (NCUA), (collectively referred to as the
Federal bank regulatory agencies) subsequently issued virtually
identical implementing regulations on suspicious activity reporting.
See 12 CFR 21.11 (OCC); 12 CFR 208.62 (FRB); 12 CFR 353.3 (FDIC); 12
CFR 563.180 (OTS) and 12 CFR 748.1 (NCUA).
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SARs are used for law enforcement or regulatory purposes to combat
terrorism, terrorist financing, money laundering and other financial
crimes. For this reason, the BSA provides that a financial institution,
and its officers, directors, employees, and agents are prohibited from
notifying any person involved in a suspicious transaction that the
transaction was reported.\2\ To encourage the voluntary reporting of
possible violations of law and regulation, and the filing of SARs, the
BSA also contains a safe harbor provision which shields financial
institutions making such reports from civil liability.
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\2\ 31 U.S.C. 5318(g)(2)(A)(i).
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FinCEN has issued rules implementing the SAR confidentiality
provisions for various types of financial institutions that closely
mirror the statutory language.\3\ In addition, the
[[Page 10131]]
Federal bank regulatory agencies implemented these provisions through
similar regulations that provide SARs are confidential and generally no
information about or contained in a SAR may be disclosed.\4\ The
regulations issued by FinCEN and the Federal bank regulatory agencies
also describe the applicability of the safe harbor provision to both
voluntary reports of possible and known violations of law and the
required filing of SARs.\5\
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\3\ See, e.g., 31 CFR 103.18(e) (SAR confidentiality rule for
banks); 31 CFR 103.19(e) (SAR confidentiality rule for brokers or
dealers in securities).
\4\ See 12 CFR 21.11(k) (OCC); 12 CFR 208.62(j) (FRB); 12 CFR
353.3(g) (FDIC); 12 CFR 563.180(d)(12) (OTS); and 12 CFR 748.1
(NCUA).
\5\ 31 U.S.C. 5318(g)(3).
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The USA PATRIOT Act of 2001 strengthened the confidentiality of
SARs by adding to the BSA a new provision that prohibits officers or
employees of the Federal government or any State, local, tribal, or
territorial government within the United States with knowledge of a
SAR, from disclosing to any person involved in a suspicious transaction
that the transaction was reported, other than as necessary to fulfill
the official duties of such officer or employee.\6\ The USA PATRIOT Act
also clarified that the safe harbor shielding financial institutions
from liability covers voluntary disclosures of possible violations of
law and regulations to a government agency and expanded the scope of
the limit on liability to cover any civil liability which may exist
``under any contract or other legally enforceable agreement (including
any arbitration agreement).'' \7\
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\6\ See USA PATRIOT Act, section 351(b). Public Law 107-56,
Title III, section 351, 115 Stat. 272, 321 (2001); 31 U.S.C.
5318(g)(2).
\7\ See USA PATRIOT Act, section 351(a). Public Law 107-56,
Title III, section 351, 115 Stat. 272, 321 (2001); 31 U.S.C.
5318(g)(3).
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FinCEN \8\ is proposing to modify its SAR rules to interpret or
further interpret the provisions of the BSA that relate to the
confidentiality of SARs and the safe harbor for such reporting. The OCC
is proposing to amend its rules contemporaneously, based upon the
proposal being issued by FinCEN, to clarify the manner in which these
provisions apply to national banks and to the OCC's own standards
governing the disclosure of a SAR and any information that would reveal
the existence of a SAR (referred to in this preamble as ``SAR
information'').
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\8\ FinCEN is the agency designated by the Department of the
Treasury to administer the BSA, and with which SARs must be filed.
See 31 U.S.C. 5318; 12 CFR 21.11(c).
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II. Overview of Proposal
The proposed amendments to the OCC's rules include key changes that
would (1) clarify the scope of the statutory prohibition on the
disclosure by a financial institution of a SAR, as it applies to
national banks; (2) address the statutory prohibition on the disclosure
by the government of a SAR, which was added to the BSA by section
351(b) of the USA PATRIOT Act of 2001, as that prohibition applies to
the OCC's standards governing the disclosure of SAR information; and
(3) clarify that the exclusive standard applicable to the disclosure of
SAR information by the OCC is ``to fulfill official duties consistent
with the purposes of the BSA,'' in order to ensure that SAR information
is protected from inappropriate disclosures unrelated to the BSA
purposes for which SARs are filed. In addition, the proposed amendments
would modify the safe harbor provision in the OCC's SAR rules \9\ to
include changes made by the USA PATRIOT Act.
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\9\ 12 CFR 21.11(l).
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Furthermore, as described in section III of this SUPPLEMENTARY
INFORMATION, FinCEN is simultaneously issuing for notice and comment
proposed guidance regarding the sharing of SARs with affiliates. That
proposed guidance interprets a provision of the proposed rulemaking,
and, accordingly, should be read in conjunction with this notice.
In a separate rulemaking, the OCC also is simultaneously proposing
to amend its information disclosure regulation set forth in 12 CFR part
4, subpart C, to clarify that the exclusive standard governing the
release of SAR information is set forth in 12 CFR 21.11.\10\ The OCC is
issuing this proposed amendment to 12 CFR part 4, subpart C, at the
same time, to make clear that the OCC will disclose SAR information
only when necessary to satisfy the BSA purposes for which SARs are
filed.
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\10\ See elsewhere in this issue of the Federal Register.
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III. Section-by-Section Description of the Proposal
Section 21.11(b): Definition of a SAR
The primary purpose of the OCC's SAR rule is to ensure that a
national bank files a SAR when it detects a known or suspected
violation of a Federal law or a suspicious transaction related to a
money laundering activity or a violation of the BSA. See 12 CFR
21.11(a). Incidental to this purpose, the OCC's SAR rule includes a
section that addresses the confidentiality of SARs.
Under the current SAR rule, the term ``SAR'' means ``a Suspicious
Activity Report on the form prescribed by the OCC.'' The proposed rule
simply defines a ``SAR'' generically as ``a Suspicious Activity
Report.'' This change would extend the confidentiality provisions of
the OCC's SAR rule to all SARs, including those filed on forms
prescribed by FinCEN.\11\ As a consequence, a national bank that
obtained a SAR, for example, from a non-bank affiliate pursuant to the
provisions of this proposed rule, would be required to safeguard the
confidentiality of the SAR, even if the SAR had not been filed on a
form prescribed by the OCC.
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\11\ See, e.g., 31 CFR 103.19 (FinCEN regulations requiring
brokers or dealers in securities to file reports of suspicious
transactions on a SAR-S-F).
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Section 21.11(c): SARs Required
To clarify that a national bank must file a SAR on a form
``prescribed by the OCC,'' the OCC is proposing to add this phrase to
the introductory language of the section of the OCC's SAR rule that
describes the procedures for the filing of a SAR. Accordingly, the
proposed rules require a national bank to file a SAR with the
appropriate Federal law enforcement agencies and the Department of the
Treasury on the form prescribed by the OCC in accordance with the
form's instructions, by sending a completed SAR to FinCEN in particular
circumstances.\12\
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\12\ Cf. 12 CFR 21.11(c).
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Section 21.11(k): Confidentiality of SARs
The OCC is proposing to amend its rules regarding SAR
confidentiality \13\ by modifying the introductory sentence, and
dividing the remainder of the current provision into two sections. The
first section would describe the prohibition on disclosure of SAR
information by national banks, and the rules of construction applicable
to this prohibition. The second section would describe the prohibition
on the OCC's disclosure of SAR information.
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\13\ 12 CFR 21.11(k).
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Currently, the OCC's rules prohibiting the disclosure of SARs
begins with the statement that SARs are confidential. Over the years,
the OCC has received numerous questions regarding the scope of the
prohibition on the disclosure of a SAR in its current rules.
Accordingly, the OCC is proposing to clarify the scope of SAR
confidentiality by more clearly describing the information that is
subject to the prohibition. Like FinCEN, the OCC believes that all of
the reasons for maintaining the confidentiality of SARs are equally
applicable to any information that would reveal the existence of a SAR.
The OCC, like FinCEN recognizes that in order to protect the
confidentiality of
[[Page 10132]]
a SAR, any information that would reveal the existence of a SAR (such
as the draft of a SAR that has been filed) must be afforded the same
protection from disclosure. The confidentiality of SARs must be
maintained for a number of compelling reasons. For example, the
disclosure of a SAR could result in notification to persons involved in
the transaction that is being reported, and compromise any
investigations being conducted in connection with the SAR. In addition,
the OCC believes that even the occasional disclosure of a SAR could
chill the willingness of a national bank to file SARs, and to provide
the degree of detail and completeness in describing suspicious activity
in SARs that will be of use to law enforcement. If banks believe that a
SAR can be used for purposes unrelated to the law enforcement and
regulatory purposes of the BSA, the disclosure of such information
could adversely affect the timely, appropriate, and candid reporting of
suspicious transactions. Banks also may be reluctant to report
suspicious transactions, or may delay making such reports, for fear
that the disclosure of a SAR will interfere with the bank's
relationship with its customer. Further, a SAR may provide insight into
how a bank uncovers potential criminal conduct that can be used by
others to circumvent detection. The disclosure of a SAR also could
compromise personally identifiable information or commercially
sensitive information, or damage the reputation of individuals or
companies that may be named. Finally, the disclosure of a SAR for uses
unrelated to the law enforcement and regulatory purposes for which SARs
are intended increases the risk that bank employees or others who are
involved in the preparation or filing of a SAR could become targets for
retaliation by persons whose criminal conduct has been reported.
These reasons for maintaining the confidentiality of SARs also
apply to any information that would reveal the existence of a SAR.
Therefore, like FinCEN, the OCC is proposing to modify the general
introduction in its rules to state that confidential treatment must
also be afforded to ``any information that would reveal the existence
of a SAR.'' The introduction also would indicate that SAR information
may not be disclosed, except as authorized in the narrow circumstances
that follow.
Section 21.11(k)(i): Prohibition on Disclosure by National Banks
The OCC's current rules provide that any national bank or person
subpoenaed or otherwise requested to disclose a SAR or the information
contained in a SAR must (1) decline to produce the SAR or to provide
any information that would disclose that a SAR has been prepared or
filed, and (2) notify the OCC.
The proposed rules more specifically address the prohibition on the
disclosure of a SAR by a national bank. The rules provide that the
prohibition includes ``any information that would reveal the existence
of a SAR'' instead of using the phrase ``any information that would
disclose that a SAR has been prepared or filed.'' The OCC, like FinCEN,
believes that this phrase more clearly describes the type of
information that is covered by the prohibition on the disclosure of a
SAR. In addition, the proposed rules incorporate the specific reference
in 31 U.S.C. 5318(g)(2)(A)(i) to a ``director, officer, employees or
agent,'' in order to clarify that the prohibition on disclosure extends
to those individuals in a national bank who may have access to SAR
information.
Although 31 U.S.C. 5318(g)(2)(A)(i) provides that a person involved
in the transaction may not be notified that the transaction has been
reported, the proposed rules continue to reflect case law that has
consistently concluded, in accordance with applicable regulations, that
financial institutions are broadly prohibited from disclosing SAR
information to any person. Accordingly, these cases have held that, in
the context of discovery in connection with civil lawsuits, financial
institutions are prohibited from disclosing SAR information because
section 5318(g) and its implementing regulations have created an
unqualified discovery and evidentiary privilege for such information
that cannot be waived by financial institutions.\14\ Consistent with
case law and current regulation, the texts of the proposed rules do not
limit the prohibition on disclosure only to the person involved in the
transaction. Permitting disclosure to any outside party may make it
likely that SAR information would be disclosed to a person involved in
the transaction, which is absolutely prohibited by the statute.
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\14\ See, e.g., Whitney Nat'l Bank v. Karam, 306 F. Supp. 2d
678, 682 (S.D. Tex. 2004); Cotton v. Private Bank and Trust Co., 235
F. Supp. 2d 809, 815 (N.D. Ill. 2002).
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The proposed rules continue to provide that any national bank, or
any director, officer, employee or agent of a national bank, subpoenaed
or otherwise requested to disclose SAR information must decline to
provide the information, citing this section of the rules and 31 U.S.C.
5318(g)(2)(A)(i), and must give notice of the request to the OCC. In
addition, the proposed rules require the bank to notify the OCC of its
response to the request, and require the bank to provide the same
information to FinCEN. This new notification requirement was added to
the proposed rules so that either or both agencies can intervene to
prevent the disclosure of SAR information by a bank, if necessary.
Section 21.11(k)(1)(ii): Rules of Construction
The OCC, like FinCEN, is proposing rules of construction to address
issues that have arisen over the years about the scope of the SAR
disclosure prohibition, and to implement statutory modifications to the
BSA made by the USA PATRIOT Act. The proposed rules of construction
primarily describe situations that are not covered by the prohibition
on bank disclosure of SAR information. The introduction to these rules
makes clear that the rules of construction are each qualified by the
statutory mandate that no person involved in any reported suspicious
transaction can be notified that the transaction has been reported.
The first proposed rule of construction builds on existing language
to clarify that a national bank, or any director, officer, employee or
agent of a national bank may disclose SAR information to FinCEN or any
Federal, state, or local law enforcement agency; or any Federal or
state regulatory agency that examines the financial institution for
compliance with the BSA. Although the permissibility of such
disclosures may be readily apparent, the proposal contains this
statement to clarify that a national bank cannot use the prohibition on
bank disclosure of SAR information to withhold this information from
governmental authorities that are otherwise entitled by law to receive
SARs and to examine for and investigate suspicious activity.
The second proposed rule of construction provides that SAR
information does not include the underlying facts, transactions, and
documents upon which a SAR is based. This statement reflects case law
which has recognized that, while a financial institution is prohibited
from producing documents in discovery that evidence the existence of a
SAR, factual documents created in the ordinary course of business (for
example, business records and account information, upon which a SAR is
based), may be discoverable in civil litigation under the Federal Rules
of Civil Procedure.\15\
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\15\ See Cotton v. Private Bank and Trust Co., 235 F. Supp. 2d
809, 815 (N.D. Ill. 2002).
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[[Page 10133]]
This proposed rule of construction includes some examples of
situations where a national bank may disclose the underlying facts,
transactions, and documents upon which a SAR is based. The first
example clarifies that a bank may disclose this information \16\ to
another financial institution, or any director, officer, employee or
agent of the financial institution, for the preparation of a joint
SAR.\17\ The second example simply codifies a rule of construction
added to the BSA by section 351 of the USA PATRIOT Act which provides
that such underlying information may be disclosed in certain written
employment references and termination notices.\18\
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\16\ Although the underlying facts, transactions, and documents
upon which a SAR is based may include previously filed SARs or other
information that would reveal the existence of a SAR, these
materials cannot be disclosed as underlying documents.
\17\ On December 21, 2006, FinCEN and the Federal bank
regulatory agencies announced that the format for the SAR form for
depository institutions had been revised to support a new joint
filing initiative to reduce the number of duplicate SARs filed for a
single suspicious transaction. ``Suspicious Activity Report (SAR)
Revised to Support Joint Filings and Reduce Duplicate SARs,'' Joint
Release issued by FinCEN, the FRB, the OCC, the OTS, the FDIC, and
NCUA (Dec. 21, 2006). On February 17, 2006, FinCEN and the Federal
bank regulatory agencies published a joint Federal Register notice
seeking comment on proposed revisions to the SAR form. See 71 FR
8640. On May 1, 2007, FinCEN announced a delay in implementation of
the revised SAR form until further notice. See 72 FR 23891. Until
such time as a new SAR form is available that facilitates joint
filing, institutions authorized to jointly file should follow
FinCEN's guidance to use the words ``joint filing'' in the narrative
of the SAR and ensure that both institutions maintain a copy of the
SAR and any supporting documentation (See, e.g., http://www.fincen.gov/statutes_regs/guidance/html/guidance_faqs_sar_10042006.html).
\18\ 31 U.S.C. 5318(g)(2)(B).
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The third proposed rule of construction makes clear that the
prohibition on the disclosure of SAR information by a national bank
does not include the sharing by a national bank, or any director,
officer, employee or agent of a bank, of SAR information within the
bank's corporate organizational structure, for purposes consistent with
Title II of the BSA, as determined by regulation or in guidance issued
by the OCC or FinCEN. This proposed rule recognizes that a national
bank may find it necessary to share SAR information to fulfill its
reporting obligations under the BSA, and to facilitate more effective
enterprise-wide BSA monitoring and reporting, consistent with Title II
of the BSA. The term ``share'' used in this rule of construction is an
acknowledgement that sharing within a corporate organization for
purposes consistent with Title II of the BSA, as determined by
regulation or guidance issued by the OCC or FinCEN, is distinguishable
from a prohibited disclosure.
FinCEN and the Federal bank regulatory agencies have already issued
joint guidance making clear that the U.S. branch or agency of a foreign
bank may share a SAR with its head office, and that a U.S. bank or
savings association may share a SAR with its controlling company
(whether domestic or foreign). This guidance stated that the sharing of
a SAR with a head office or controlling company both facilitates
compliance with the applicable requirements of the BSA and enables the
head office or controlling company to discharge its oversight
responsibilities with respect to enterprise-wide risk management and
compliance with applicable laws and regulations.\19\
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\19\ ``Interagency Guidance on Sharing Suspicious Activity
Reports with Head Offices and Controlling Companies'' (January 20,
2006).
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Elsewhere in this issue of the Federal Register, FinCEN is issuing
additional guidance for notice and comment that further elaborates on
sharing of SAR information within a corporate organization that FinCEN
considers to be ``consistent with the purposes of the BSA.'' The
proposed guidance would generally permit sharing of SAR information by
depository institutions with their affiliates \20\ that are subject to
a SAR rule.\21\
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\20\ Under FinCEN's proposed guidance, an ``affiliate'' of a
depository institution means any company under common control with,
or controlled by, that depository institution.
\21\ See, e.g., 12 CFR 21.11 (SAR rule applicable to national
banks).
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Section 21.11(k)(2): Prohibition on Disclosure by the OCC
As previously noted, section 351 of the USA PATRIOT Act, 31 U.S.C.
5318(g)(2)(A)(ii), amended the BSA, and added a new provision
prohibiting officers and employees of the government from disclosing a
SAR to any person involved in the transaction that the transaction has
been reported, except ``as necessary to fulfill the official duties of
such officer or employee.'' The OCC is proposing rules to address this
new section that are comparable to those being proposed by FinCEN. The
proposed rules provide that the OCC will not, and no officer, employee
or agent of the OCC, shall disclose SAR information, ``except as
necessary to fulfill official duties consistent with Title II of the
Bank Secrecy Act.''
As stated in section 5318(g)(2)(A)(i), which prohibits a financial
institution's disclosure of a SAR, section 5318(g)(2)(A)(ii) also
prohibits the government from disclosing a SAR to ``any person involved
in the transaction.'' The OCC, like FinCEN, is proposing to address
sections 5318(g)(2)(A)(i) and (A)(ii) in a consistent manner, because
disclosure by a governmental authority of SAR information to any
outside party may make it likely that the information will be disclosed
to a person involved in the transaction. The OCC believes that the
purpose of section 5318(g)(2)(A)(ii) could be undermined unless the
OCC's rules generally address the disclosure of SAR information by the
OCC and its officers, employees and agents, not simply in the context
of disclosure to ``any person involved in the transaction.''
Accordingly, the proposed rules would generally bar disclosures of SAR
information by OCC officers, employees, or agents.
However, section 5318(g)(2)(A)(ii) also narrowly permits
governmental disclosures as necessary to ``fulfill official duties,'' a
phrase that is not defined in the BSA. Consistent with the rules being
proposed by FinCEN, the OCC is proposing to construe this phrase in the
context of the BSA, in light of the purpose for which SARs are filed.
Accordingly, the proposed rules interpret ``official duties'' to mean
``official duties consistent with the purposes of Title II of the
BSA,'' namely, for ``criminal, tax, or regulatory investigations or
proceedings, or in the conduct of intelligence or counterintelligence
activities, including analysis, to protect against international
terrorism.'' \22\ When disclosure is necessary to fulfill official
duties, the OCC will make a determination, through its internal
processes, that a SAR may be disclosed to fulfill official duties
consistent with the BSA. This standard would permit, for example,
disclosures responsive to a grand jury subpoena; a request from an
appropriate Federal or State law enforcement or regulatory agency; a
request from an appropriate Congressional committee or subcommittee;
and prosecutorial disclosures mandated by statute or the Constitution,
in connection with the statement of a government witness to be called
at trial, the impeachment of a government witness, or as material
exculpatory of a criminal defendant.\23\ This proposed interpretation
of section 5318(g)(2)(A)(ii) would ensure that SAR information will not
be disclosed for a reason that is unrelated to the purposes
[[Page 10134]]
of the BSA. For example, this standard would not permit disclosure of
SAR information to the media.
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\22\ 31 U.S.C. 5311 (setting forth the purposes of the BSA).
\23\ See, e.g., Giglio v. United States, 405 U.S. 150, 153-54
(1972); Brady v. State of Maryland, 373 U.S. 83, 86-87 (1963);
Jencks v. United States, 353 U.S. 657, 668 (1957).
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The proposed rules also specifically provide that ``official
duties'' shall not include the disclosure of SAR information in
response to a request for use in a private legal proceeding or in
response to a request for disclosure of non-public information under 12
CFR 4.33. This statement, which corresponds to a similar provision in
FinCEN's proposed rules, clearly establishes that the OCC will not
disclose SAR information to a private litigant for use in a private
legal proceeding, or pursuant to 12 CFR 4.33, because such a request
cannot be consistent with any of the purposes enumerated in Title II of
the BSA. The BSA exists, in part, to protect the public's interest in
an effective reporting system that benefits the nation by helping to
ensure that the U.S. financial system will not be used for criminal
activity or to support terrorism. The OCC, like FinCEN, believes that
this purpose would be undermined by the disclosure of SAR information
to a private litigant for use in a civil lawsuit for the reasons
described earlier, including, that such disclosures will chill full and
candid reporting by financial institutions, including national banks.
Finally, the proposed rules would apply to the OCC, in addition to
its officers, employees, and agents. Comparable to a provision being
proposed by FinCEN, the OCC is proposing to include the agency itself
in the scope of coverage, because requests for SAR information are
typically directed to the agency, rather than to individuals within the
OCC with authority to respond to the request. In addition, agents are
included in the proposed paragraph because agents of the OCC may have
access to SAR information. Accordingly, this proposed interpretation
would more comprehensively cover disclosures by the OCC, agents of the
OCC, and protect the confidentiality of SAR information.
Section 21.11(l): Limitation on Liability
In 1992, the Annunzio-Wylie Act amended the BSA by providing a safe
harbor for financial institutions and their employees from civil
liability for the reporting of known or suspected criminal offenses or
suspicious activity through the filing of a SAR.\24\ FinCEN and the OCC
incorporated the safe harbor provisions of the 1992 law into their SAR
rules.\25\ Section 351 of the USA PATRIOT Act amended section
5318(g)(3) to clarify that the scope of the safe harbor provision
includes the voluntary disclosure of possible violations of law and
regulations to a government agency, and to expand the scope of the
limit on civil liability to include any liability which may exist
``under any contract or other legally enforceable agreement (including
any arbitration agreement).'' The OCC, like FinCEN, has incorporated
the statutory expansion of the safe harbor by placing a cross-reference
to section 5318(g)(3) in the proposed rules.
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\24\ See supra note 1.
\25\ See 31 CFR 103.18(e) and 12 CFR 21.11(l). The safe harbor
regulations are also applicable to oral reports of violations. (In
situations requiring immediate attention, a financial institution
must immediately notify its regulator and appropriate law
enforcement by telephone, in addition to filing a SAR. See, e.g., 12
CFR 21.11(d).)
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In addition, consistent with the proposed rule issued by FinCEN,
this provision makes clear that the safe harbor also applies to a
disclosure by a bank made jointly with another financial institution
for purposes of filing a joint SAR.\26\
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\26\ See supra note 17.
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Conforming Amendments to 12 CFR Part 4, Subpart C
The OCC is proposing to amend its information disclosure rule set
forth in 12 CFR part 4, subpart C. Among other things, the proposal
clarifies that the OCC's disclosure of SAR information will be governed
exclusively by the standards set forth in the proposed amendments to
the OCC's SAR rule set forth in 12 CFR 21.11(k). See elsewhere in this
issue of the Federal Register. The effect of these proposed amendments
is that the OCC: (i) Will not release SAR information to private
litigants; and (ii) will only release SAR information to other
government agencies, in response to a request pursuant to 12 CFR
4.37(c) or in the exercise of its discretion as described in 12 CFR
4.36, when necessary to fulfill official duties consistent with the
purposes of Title II of the BSA.
IV. Request for Comments
The OCC welcomes comments on any aspect of these proposed
amendments to the SAR rules.
The OCC has timed the release of this proposal to coincide with the
issuance of the proposed rules to amend the information disclosure
rules set forth in 12 CFR part 4, subpart C, so that commenters can
consider each proposal in commenting on the other.
V. OCC Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, sec.
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OCC to use
plain language in all proposed and final rules published after January
1, 2000. Therefore, the OCC specifically invites your comments on how
to make this proposal easier to understand. For example:
Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the proposed regulations clearly
stated? If not, how could the regulations be more clearly stated?
Do the proposed regulations contain language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulations easier to
understand? If so, what changes to the format would make them easier to
understand?
What else could we do to make the regulations easier to
understand?
VI. OCC Community Bank Comment Request
The OCC invites your comments on the impact of this proposal on
community banks. The OCC recognizes that community banks operate with
more limited resources than larger institutions and may present a
different risk profile. Thus, the OCC specifically requests comment on
the impact of the proposal on community banks' current resources and
available personnel with the requisite expertise, and whether the goals
of the proposal could be achieved, for community banks, through an
alternative approach.
VII. OCC Regulatory Analysis
Regulatory Flexibility Act
Under section 605(b) of the Regulatory Flexibility Act (RFA), 5
U.S.C. 605(b), the regulatory flexibility analysis otherwise required
under section 604 of the RFA is not required if the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities and publishes its certification
and a short, explanatory statement in the Federal Register along with
its rule.
The OCC has determined that the costs, if any, associated with
proposed rules are de minimis, as they simply clarify the scope of the
statutory prohibition against the disclosure by financial institutions
and by the government of SAR information, and clarify the scope of the
safe harbor from liability for institutions that report suspicious
activities. Therefore,
[[Page 10135]]
pursuant to section 605(b) of the RFA, the OCC hereby certifies that
this proposal will not have a significant economic impact on a
substantial number of small entities. Accordingly, a regulatory
flexibility analysis is not needed.
Executive Order 12866
The OCC has determined that this proposal is not a significant
regulatory action under Executive Order 12866. We have concluded that
the changes that would be made by this proposed rule will not have an
annual effect on the economy of $100 million or more. The OCC further
concludes that this proposal does not meet any of the other standards
for a significant regulatory action set forth in Executive Order 12866.
Paperwork Reduction Act
We have reviewed the proposed rule in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320, Appendix A.1) (PRA)
and have determined that it does not contain any ``collections of
information'' as defined by the PRA.
Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in a Federal mandate that may result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year. If a
budgetary impact statement is required, section 205 of the Unfunded
Mandates Act also requires an agency to identify and consider a
reasonable number of regulatory alternatives before promulgating a
rule.
The OCC has determined that this proposed rule will not result in
expenditures by State, local, and tribal governments, or by the private
sector, of $100 million or more in any one year. Accordingly, this
proposal is not subject to section 202 of the Unfunded Mandates Act.
List of Subjects in 12 CFR Part 21
Crime, Currency, National banks, Reporting and recordkeeping
requirements, Security measures.
Authority and Issuance
For the reasons set forth in the preamble, part 21 of title 12 of
the Code of Federal Regulations is proposed to be amended as follows:
PART 21--MINIMUM SECURITY DEVICES AND PROCEDURES, REPORTS OF
SUSPICIOUS ACTIVITIES; AND BANK SECRECY ACT COMPLIANCE PROGRAM
1. The authority citation for part 21 continues to read as follows:
Authority: 12 U.S.C. 93a, 1818, 1881-1884, and 3401-3422; and 31
U.S.C. 5318.
2. Section 21.11 is amended by revising paragraphs (b)(3), (c)
introductory text, (k) and (l) to read as follows:
Sec. 21.11 Suspicious Activity Report.
* * * * *
(b) * * *
(3) SAR means a Suspicious Activity Report.
(c) SARs required. A national bank shall file a SAR with the
appropriate Federal law enforcement agencies and the Department of the
Treasury on the form prescribed by the OCC and in accordance with the
form's instructions. The bank should send the completed SAR to FinCEN
in the following circumstances:
* * * * *
(k) Confidentiality of SARs. A SAR, and any information that would
reveal the existence of a SAR, are confidential, and shall not be
disclosed except as authorized in this paragraph (k).
(1) Prohibition on disclosure by national banks--(i) General rule.
No national bank, and no director, officer, employee, or agent of a
national bank, shall disclose a SAR or any information that would
reveal the existence of a SAR. Any national bank, and any director,
officer, employee, or agent of any national bank that is subpoenaed or
otherwise requested to disclose a SAR, or any information that would
reveal the existence of a SAR, shall decline to produce the SAR or such
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and
shall notify the following of any such request and the response
thereto:
(A) Director, Litigation Division, Office of the Comptroller of the
Currency; and
(B) The Financial Crimes Enforcement Network (FinCEN).
(ii) Rules of construction. Provided that no person involved in any
reported suspicious transaction is notified that the transaction has
been reported, this paragraph (k)(1) shall not be construed as
prohibiting:
(A) The disclosure by a national bank, or any director, officer,
employee or agent of a national bank of:
(1) A SAR, or any information that would reveal the existence of a
SAR, to FinCEN or any Federal, State, or local law enforcement agency;
or any Federal or state regulatory authority that examines the bank for
compliance with the Bank Secrecy Act; or
(2) The underlying facts, transactions, and documents upon which a
SAR is based, including disclosures:
(i) To another financial institution, or any director, officer,
employee or agent of a financial institution, for the preparation of a
joint SAR; or
(ii) In connection with certain employment references or
termination notices, to the full extent authorized in 31 U.S.C.
5318(g)(2)(B); or
(B) The sharing by a national bank, or any director, officer,
employee, or agent of a national bank, of a SAR, or any information
that would reveal the existence of a SAR, within the bank's corporate
organizational structure, for purposes consistent with Title II of the
Bank Secrecy Act as determined by regulation or in guidance.
(2) Prohibition on disclosure by the OCC. The OCC will not, and no
officer, employee or agent of the OCC, shall disclose a SAR, or any
information that would reveal the existence of a SAR, except as
necessary to fulfill official duties consistent with Title II of the
Bank Secrecy Act. For purposes of this section, official duties shall
not include the disclosure of a SAR, or any information that would
reveal the existence of a SAR, in response to a request for use in a
private legal proceeding or in response to a request for disclosure of
non-public information under 12 CFR 4.33.
(l) Limitation on liability. A national bank and any director,
officer, employee or agent of a national bank that makes a voluntary
disclosure of any possible violation of law or regulation to a
government agency or makes a disclosure pursuant to this section or any
other authority, including a disclosure made jointly with another
financial institution, shall be protected from liability for any such
disclosure, or for failure to provide notice of such disclosure to any
person identified in the disclosure, or both, to the full extent
provided by 31 U.S.C. 5318(g)(3).
Dated: January 22, 2009.
John C. Dugan,
Comptroller of the Currency.
[FR Doc. E9-4703 Filed 3-6-09; 8:45 am]
BILLING CODE 4810-33-P