[Federal Register Volume 60, Number 136 (Monday, July 17, 1995)]
[Proposed Rules]
[Pages 36366-36370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17485]



 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 60, No. 136 / Monday, July 17, 1995 / 
Proposed Rules  


[[Page 36366]]


DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563

[No. 95-145]
RIN 1550-AA62


Operations--Suspicious Activity Reports and Other Reports and 
Statements

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OTS) is proposing to amend 
its regulations to implement a new interagency suspicious activity 
referral process and to update and clarify the underlying reporting 
regulation. The proposal reduces substantially the burden on savings 
associations and service corporations in reporting suspicious 
activities while enhancing access to such information by the Federal 
law enforcement agencies, the Federal financial institutions 
supervisory agencies, and the Department of the Treasury.

DATES: Comments must be received by September 15, 1995.

ADDRESSES: Comments should be sent to: Chief, Dissemination Branch, 
Records Management and Information Policy, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552, Attention Docket 
No. 95-145. These submissions may be hand-delivered to 1700 G Street, 
NW., from 9:00 A.M. to 5:00 P.M. on business days; they may be sent by 
facsimile transmission to FAX Number (202) 906-7755. Comments will be 
available for inspection at 1700 G Street, NW., from 1:00 P.M. until 
4:00 P.M. on business days.

FOR FURTHER INFORMATION CONTACT: Richard Stearns, Deputy Chief Counsel, 
Enforcement Division, (202) 906-7966, or Karen Osterloh Counsel 
(Banking and Finance), Regulations and Legislation Division, (202) 906-
6639, Chief Counsel's Office, Office of Thrift Supervision, 1700 G 
Street, NW., Washington DC 20552.

SUPPLEMENTARY INFORMATION:

Background

    The Federal financial institutions supervisory agencies (Agencies) 
1 and the Department of the Treasury (Treasury) 2 are 
responsible for ensuring that financial institutions apprise Federal 
law enforcement authorities of any known or suspected violation of a 
Federal criminal statute and of any suspicious financial transaction. 
Suspicious financial transactions (which will be the subject of 
regulations and other guidance to be issued by Treasury) can include 
transactions that a savings association or service corporation suspects 
involved funds derived from illicit activities, were conducted for the 
purpose of hiding or disguising funds from illicit activity, otherwise 
violated the money laundering statutes,3 were potentially designed 
to evade the reporting or recordkeeping requirements of the Bank 
Secrecy Act (the BSA),4 and transactions that the savings 
association or service corporation believes were suspicious for any 
other reason.

    \1\ The Federal financial institutions supervisory agencies are 
the OTS, the Office of the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, and the National Credit Union Administration.
    \2\ Through its Financial Crimes Enforcement Network (FinCEN).
    \3\ 18 U.S.C. 1956 and 1957.
    \4\ 31 U.S.C. 5311 through 5330.
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    Fraud, abusive insider transactions, check kiting schemes, money 
laundering, and other crimes can pose serious threats to a financial 
institution's continued viability and, if unchecked, can undermine the 
public confidence in the nation's financial industry. The Agencies and 
Federal law enforcement agencies need to receive timely and detailed 
information regarding suspected criminal activity to determine whether 
investigations, administrative actions, or criminal prosecutions are 
warranted.
    An interagency Bank Fraud Working Group (BFWG), consisting of 
representatives from many Federal agencies, including the Agencies and 
law enforcement agencies, was formed in 1984. The BFWG addresses 
substantive issues, promotes cooperation among the Agencies and Federal 
and State law enforcement agencies, and improves the Federal 
government's response to white collar crime in financial institutions. 
Today's revisions to this regulation and the reporting requirements are 
being made under the auspices of the BFWG.

Suspicious Activity Report

    The Agencies have been working on a project to improve the criminal 
referral process, to reduce unnecessary reporting burdens on financial 
institutions, and to eliminate confusion associated with the current 
duplicative reporting of suspicious financial transactions in criminal 
referral forms and currency transaction reports (CTRs). 
Contemporaneously, Treasury analyzed the need to implement the 
procedures for reporting suspicious financial transactions by financial 
organizations following the enactment of the Annuzio-Wylie Anti-Money 
Laundering Act of 1992. As a result of these reviews, the Agencies and 
Treasury approved the development of a new referral process that 
includes suspicious financial transaction reporting.
    To implement the reporting process, and to reduce unnecessary 
burdens associated with these various reporting requirements, the 
Agencies and FinCEN developed a new report form for reporting known or 
suspected Federal criminal law violations and suspicious financial 
transactions. The new form is designated the Suspicious Activity Report 
(SAR).5 The SAR is a simplified and shortened version of its 
predecessors.

    \5\ The reporting requirements contained in the SAR will be 
submitted to the Office of Management and Budget for review in 
accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3504(h)) and the OTS will seek comments on the SAR in a separate 
notice.
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    The new referral process and the SAR reduce the burden on savings 
associations and service corporations for reporting known or suspected 
violations and suspicious financial transactions. The agencies 
anticipate that the new process will be instituted by October, 1995.

Proposal

    The OTS proposes to revise 12 CFR 563.180 by updating and 
clarifying the current rule governing the filing of criminal referral 
reports, implementing the new SAR, and eliminating current 

[[Page 36367]]
confusing and overly burdensome reporting requirements. This action 
should improve reporting of known or suspected violations and 
suspicious financial transactions relating to Federally insured 
financial institutions while providing uniform data for entry into the 
new interagency computer database. The OTS expects that each of the 
other Agencies will be making substantially similar changes 
contemporaneously.
    The proposed changes to the current OTS rules are discussed below. 
The principal changes include: (1) raising the mandatory reporting 
thresholds for criminal offenses, thereby reducing unnecessary 
reporting burdens; (2) requiring the filing of only one form with a 
single repository, rather than multiple filings to several Federal law 
enforcement agencies and the Agencies, thereby further reducing 
reporting burdens; and (3) clarifying the criminal referral and 
suspicious financial transaction reporting requirements of the Agencies 
and Treasury, thereby eliminating duplicative referrals.

Section 563.180(d)(1)  Purpose and Scope

    The proposal clarifies the scope of the current rule. Under the 
proposal, the SAR will replace the various criminal referral forms that 
the Agencies currently require institutions to file. The purpose of the 
proposed rule is to ensure that savings associations or service 
corporations file a SAR when they detect known or suspected violations 
of Federal criminal law or suspicious financial transactions.6

    \6\ As noted above, there has been some confusion regarding 
filing of criminal referrals and CTRs for suspicious cash 
transactions. The BSA requires all financial institutions to file 
CTRs in accordance with Treasury's implementing regulations (31 CFR 
part 103). Part 103 requires financial institutions to file a CTR 
whenever a currency transaction exceeds $10,000. If a currency 
transaction exceeds $10,000 and is suspicious, the institution, 
under these new requirements, will file both a CTR (reporting the 
currency transaction) and a SAR (reporting the suspicious criminal 
aspect of the transaction). If a currency transaction equals or is 
below $10,000 but is suspicious, the institution will only file a 
SAR.
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    The proposed rule continues to require reporting by savings 
associations and by service corporations. It does not, however, impose 
a separate reporting obligation on operating subsidiaries established 
by savings associations. OTS regulations provide that all Federal laws 
and regulations governing the operation of savings associations apply 
to operating subsidiaries, unless otherwise provided by statute, 
regulations or policies of the OTS. The OTS general policy is to 
consolidate regulatory requirements for the operating subsidiary with 
the parent. Accordingly, the reporting obligation of parent savings 
associations under Sec. 563.180 will be deemed to include the duty to 
report events or conduct occurring at the operating subsidiary level, 
as well as the parent level.
    Under the current regulation, savings association holding companies 
are not required to file reports. Holding companies are encouraged to 
do so when actions have a substantial impact on the depository 
institutions that they own. The OTS solicits comment on whether to 
amend the rule so that it expressly requires savings association 
holding companies to file SARs regarding known or suspected criminal 
violations or suspicious financial transactions that affect their 
depository institution subsidiaries.

Section 563.180(d)(2)  Definitions

    Proposed Sec. 563.180(d)(2) defines the following terms: 
``FinCEN,'' ``institution-affiliated party,'' ``instructions,'' ``known 
or suspected violation,'' and ``SAR.'' The definitions should make the 
rule easier to interpret and apply.
    In particular, the definition of ``known or suspected violation'' 
refers to any matter for which a savings association or service 
corporation has a basis to believe that a violation of any Federal 
criminal statute (including a pattern of criminal violations) has 
occurred or has been attempted, is occurring, or may occur, coupled 
with a basis to believe that a savings association or service 
corporation was an actual or potential victim of the criminal violation 
or was involved in or was used to facilitate the criminal violation. 
This definition supplants the definition of suspected crimes, the 
illustrative listing of crimes requiring reporting, and other 
descriptions of known or suspected crimes in the existing rule at 12 
CFR 563.180(d) (1) and (2) (1995).

Section 563.180(d)(3)  Reports Required

    The proposal clarifies the categories of violations that are 
subject to the reporting obligation. In addition, the proposal reduces 
the regulatory burden on savings associations and service corporations 
by increasing applicable dollar thresholds for two categories of 
violations, and by eliminating the requirement for duplicative filings 
with multiple Federal agencies.
    Proposed Sec. 563.180(d)(3)(i) requires a savings association or 
service corporation to file a SAR, regardless of the dollar amount 
involved, whenever it has a substantial basis for believing that a 
director, officer, employee, agent or other institution-affiliated 
party (as defined in the regulation, which cross references section 
3(u) of the FDIA) committed or aided in the commission of a Federal 
crime. This provision is substantially identical to the existing rule 
at 12 CFR 563.180(d)(1)(i)(1995), with one exception. The existing rule 
applies to violations involving ``affiliated parties,'' as defined in 
12 CFR 561.5(1995). Unfortunately, the cited definition is both too 
narrow and too broad. For example, ``affiliated persons'' under 12 CFR 
561.5 does not include all shareholders who may participate in the 
conduct of the affairs of the institution, but does include members of 
a director's or officer's immediate family who have no connection to 
the institution. The OTS believes that the proposed rule describes 
relevant insiders with greater precision.
    OTS's current rules further require savings associations and 
service corporations to report known or suspected criminal acts that 
involve actual or anticipated losses of: (1) $1,000 or more where there 
is a basis for identifying a non-insider suspect; or (2) $5,000 or more 
regardless of whether a suspect has been identified.7 The proposed 
rule at Secs. 563.180(d)(3) (ii) and (iii) would reduce this reporting 
burden by increasing the $1,000 and $5,000 thresholds to $5,000 and 
$25,000, respectively. Moreover, the proposed rule clarifies that 
threshold amounts are based on actual or potential losses to the 
savings association or service corporation, without regard to possible 
reimbursement or recovery.

    \7\ 12 CFR 563.180(d)(1) (ii) and (iii) (1995).
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    Proposed Sec. 563.180(d)(3)(iv) requires a savings association or 
service corporation to report any financial transaction, regardless of 
the dollar amount if: (1) the institution suspects the transaction 
involved funds derived from illicit activity, was conducted for the 
purpose of hiding or disguising funds from illicit activity, or in any 
way violated the money laundering statutes; 8 (2) the institution 
suspects the transaction was potentially designed to evade the 
reporting or recordkeeping requirements of the BSA; 9 or (3) the 
institution believes the transaction to be suspicious for any reason. 
This revision makes minor clarifying changes to the existing 
requirements at 12 CFR 563.180(d)(1)(iv) (1995).

    \8\ 18 U.S.C. 1956 and 1957.
    \9\ 31 U.S.C. 5311 through 5330.
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    The current rules require savings associations and service 
corporations to file a criminal referral report with 

[[Page 36368]]
appropriate Federal law enforcement authorities. Because this process 
results in multiple filings with several agencies, the Agencies propose 
to reduce the filing burden by permitting institutions to file a single 
SAR at one location. Accordingly, under proposed Sec. 563.180(d)(3), a 
savings association or service corporation will file a SAR with all 
appropriate Federal law enforcement agencies by sending a single copy 
of the SAR to the FinCEN, whose address will be printed on the SAR.
    FinCEN will input the information contained on the SARs into a 
newly created database that FinCEN will maintain. This process will 
fulfill the regulatory requirement that a savings association or 
service corporation refer any known or suspected criminal violation to 
appropriate Federal law enforcement agencies. The database will enhance 
Federal law enforcement and supervisory agencies' ability to track, 
investigate and prosecute individuals suspected of violating Federal 
criminal law. This change will ensure that all SARs are placed in the 
database at FinCEN and that the information is made available on 
computer to the appropriate law enforcement and supervisory agencies as 
quickly as possible.
    To further reduce the reporting burden, the Agencies are modifying 
the manner in which financial institutions file a SAR. In following the 
Instructions on a SAR, a savings association or service corporation may 
file the referral form in several ways, including submitting an 
original form or a photocopy, and filing a SAR by magnetic means, such 
as by a computer disk.10 In the future, the OTS and the other 
Agencies anticipate that a financial institution will be able to file a 
SAR electronically.

    \10\ FinCEN, however, will not be able to receive SARs by 
facsimile machine.
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    The Agencies, working with FinCEN, are developing computer software 
to assist financial institutions in preparing and filing SARs. The 
software will allow an institution to complete a SAR, to save the SAR 
on its computers, and to print a hard copy of the SAR for its own 
records. The computer software will also enable an institution to file 
a SAR using various forms of magnetic media, such as computer disk or 
magnetic tape. The OTS will make the software available to all savings 
associations and service corporations. A savings association or service 
corporation, of course, may complete and file a SAR using printed forms 
without using this software, if it so desires. The Instructions to the 
SAR will address new permissible filing methods as the methods are 
developed.

Section 563.180(d)(4)  Service Corporations

    When a service corporation must file a report under the current 
rule, the required filing may be made either by the service corporation 
or by a saving association that wholly or partially owns the service 
corporation. This provision is retained in the proposed rule at 12 CFR 
563.180(d)(4).

Section 563.180(d)(5)  Time for Reporting

    Proposed Sec. 563.180(d)(5) requires a savings association or 
service corporation to file the SAR within 30 calendar days after the 
date of detection of the act triggering the reporting requirement. If 
no suspect is identified on that date, the savings association or 
service corporation may delay the filing of a SAR for an additional 30 
calendar days after the identification of a suspect. Filings, however, 
may not be delayed for more than 60 calendar days after detection. The 
proposal substantially modifies the current regulation at 
Sec. 563.180(d)(2) which requires the savings association or service 
corporation to file within 14 business days after discovery of the 
activity.

Section 563.180(d)(6)  Reports to State and Local Authorities

    The proposed rule includes a new provision encouraging savings 
associations and service corporations to file SARs with State and local 
law enforcement agencies where appropriate.

Section 563.180(d)(7)  Retention of Records

    Existing OTS rules require savings associations and service 
corporations to retain a copy of the criminal referral report and 
related records for a period of ten years.11 This requirement is 
retained in the proposed rules at Sec. 563.180(d)(7).

    \11\ 12 CFR 563.180(d)(5) (1995). This time frame corresponds 
with the statute of limitations for most Federal criminal statutes 
involving financial institutions.
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    The current instructions to the criminal referral form require 
savings associations and service corporations to submit copies of all 
related documentation when a criminal referral is filed. The new SAR 
reduces the regulatory burdens on the industry by eliminating this 
requirement altogether. Instead, the proposal requires that the 
documentation be identified and treated as filed with the SAR and that 
the savings association or service corporation maintain the 
documentation, along with a copy of the SAR, for ten years from the 
submission date. This approach ensures that Federal law enforcement 
agencies and the Agencies, upon request, have access to any 
documentation necessary to prosecute a violation or pursue 
administrative action by requiring the preservation of the underlying 
documentation for ten years.
Section 563.180(d)(8)  Exemptions

    The proposed rule would exempt robberies and burglaries and 
attempted robberies and burglaries that are reported to the appropriate 
local law enforcement authorities. This exemption is substantially 
similar to the existing exemption at 12 CFR 563.180(d)(2)(1995).

Section 563.180(d)(9)  Notification of the Board of Directors

    Proposed Sec. 563.180(d)(9) requires the management of a savings 
association to promptly notify the board of directors (or a committee 
of directors or executive officers designated by the board to receive 
notice) whenever the savings association or a service corporation in 
which the savings association has an ownership interest has filed a 
SAR. Where an executive officer or director is a suspect, the proposal 
requires management to notify the entire board of directors, except the 
suspect.
    This proposed rule generally incorporates the requirements of the 
existing rules at Sec. 563.180(d)(4) (1995), but includes several 
modifications designed to provide savings associations with greater 
flexibility. These modifications: (1) permit notification to a 
designated committee in lieu of the entire board; (2) require 
``prompt'' notification, rather than notification at the first 
regularly scheduled board meeting after the filing of the SAR; and (3) 
assign notification responsibility to management of the savings 
association rather than the chief executive officer. The OTS expects 
each savings association to maintain appropriate mechanisms to ensure 
that the board of directors will be informed promptly of SAR filings.

Section 563.180(d)(10)  Compliance

    The proposed rule includes a new provision stating that the failure 
to file a SAR in accordance with the regulation and the Instructions 
may result in supervisory actions, including enforcement actions. 

[[Page 36369]]


Section 563.180(d)(11)  Obtaining the SAR

    Proposed Sec. 563.180(d)(11) states that savings associations and 
service corporations may obtain the SAR form from the appropriate OTS 
Regional Office at the address listed in 12 CFR 516.1(b) (1995). The 
current rule does not contain a comparable instruction.

Section 563.180(d)(12)  Confidentiality of SARs

    The proposed rule contains a new provision preserving the 
confidentiality of SARs and the information contained in SARs.

Comments

    The OTS invites public comment on all aspects of this proposal.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
OTS hereby certifies that this proposed rule will not have a 
significant economic impact on a substantial number of small entities. 
This proposal primarily reorganizes the process for reporting crimes 
and suspicious activities and has no material impact on savings 
associations and service corporations, regardless of size. Accordingly, 
a regulatory flexibility analysis is not required.

Executive Order 12866

    The OTS has determined that this document is not a significant 
regulatory action under Executive Order 12866.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (signed into law on March 22, 1995) requires that an agency 
prepare a budgetary impact statement before promulgating a rule that 
includes a Federal mandate that may result in expenditure by State, 
local, and tribal governments, in the aggregate, or by the private 
sector of $100 million or more in one year. If the budgetary impact 
statement is required, section 205 of the Act also requires an agency 
to identify and consider a reasonable number of regulatory alternatives 
before promulgating a rule. This proposal reorganizes the process for 
reporting crimes and suspicious activities by savings associations and 
service corporations to Federal agencies. The OTS has determined that 
the final rule will not result in expenditure by State, local, or 
tribal governments or by the private sector of more than $100 million. 
Accordingly, the Unfunded Mandates Reform Act does not apply.
List of Subjects in 12 CFR Part 563

    Accounting, Advertising, Crime, Currency, Flood insurance, 
Investments, Reporting and recordkeeping requirements, Savings 
associations, Securities, Surety bonds.

Authority and Issuance

    For the reasons set out in the preamble, part 563 of chapter V of 
title 12 of the Code of Federal Regulations is proposed to be amended 
as set forth below:

SUBCHAPTER D--REGULATIONS APPLICABLE TO ALL SAVINGS ASSOCIATIONS

PART 563--OPERATIONS

    1. The authority citation for part 563 continues to read as 
follows:

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1828, 3806; 42 U.S.C. 4012a, 4104a, 4104b, 4106, 4128.

    2. Section 563.180 is amended by revising the section heading and 
paragraph (d) to read as follows:


Sec. 563.180  Suspicious Activity Reports and other reports and 
statements.

* * * * *
    (d) Suspicious Activity Reports.--(1) Purpose and scope. This 
paragraph (d) ensures that savings associations and service 
corporations file a Suspicious Activity Report when they detect a known 
or suspected violation or a suspicious transaction.
    (2) Definitions. For the purposes of this paragraph (d):
    (i) FinCEN means the Financial Crimes Enforcement Network of the 
Department of the Treasury.
    (ii) Institution-affiliated party means any institution-affiliated 
party as that term is defined in sections 3(u) and 8(b)(8) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(8)).
    (iii) Instructions means the instructions on the SAR.
    (iv) Known or suspected violation means any matter for which there 
is a basis to believe that a violation of a Federal criminal statute 
(including a pattern of criminal violations) has occurred or has been 
attempted, is occurring, or may occur, and there is a basis to believe 
that a savings association or service corporation was an actual or 
potential victim of the criminal violation or was involved in or was 
used to facilitate the criminal violation.
    (v) SAR means a Suspicious Activity Report.
    (3) SARs required. A savings association or service corporation 
shall file a SAR with the appropriate Federal law enforcement agencies 
and the Department of the Treasury, in accordance with the 
Instructions, by sending a completed SAR to FinCEN, in the following 
circumstances:
    (i) Whenever the savings association or service corporation detects 
a known or suspected violation of Federal criminal law and has a 
substantial basis to believe that one of its directors, officers, 
employees, agents, or other institution-affiliated parties committed or 
aided in the commission of the violation;
    (ii) Whenever the savings association or service corporation 
detects a known or suspected violation of Federal criminal law, there 
is an actual or potential loss to the savings association or service 
corporation (before reimbursement or recovery) aggregating $5,000 or 
more, and the savings association or service corporation has a 
substantial basis for identifying a possible suspect or group of 
suspects, where none of the suspects are included in paragraph 
(d)(3)(i) of this section;
    (iii) Whenever the savings association or service corporation 
detects a known or suspected violation of Federal criminal law, there 
is an actual or potential loss to the savings association or service 
corporation (before reimbursement or recovery) aggregating $25,000 or 
more, and the savings association or service corporation has no 
substantial basis for identifying a possible suspect or group of 
suspects; or
    (iv) Whenever a financial transaction is conducted, or attempted, 
at the savings association or service corporation and:
    (A) The savings association or service corporation suspects that 
the transaction involved funds derived from illicit activity, was 
conducted for the purpose of hiding or disguising funds from illicit 
activity, or in any way violated the money laundering statutes (18 
U.S.C. 1956 and 1957);
    (B) The savings association or service corporation suspects that 
the transaction was potentially designed to evade the reporting or 
recordkeeping requirements of the Bank Secrecy Act (31 U.S.C. 5311 
through 5330) or regulations issued thereunder; or
    (C) The savings association or service corporation believes that 
the transaction was suspicious for any reason.
    (4) Service corporations. When a service corporation is required to 
file a SAR under paragraph (d)(3) of this section, either the service 
corporation or a savings association that wholly or partially owns the 
service corporation, may file the SAR.
    (5) Time for reporting.--(i) Generally. A savings association or 
service corporation shall file the SAR required 

[[Page 36370]]
by paragraph (d)(3) of this section within 30 calendar days after the 
date of initial detection of an act described in paragraph (d)(3) of 
this section. In situations involving violations that require immediate 
attention, such as when a reportable violation is on-going, the savings 
association or service corporation shall immediately notify, by 
telephone, the appropriate law enforcement authority in addition to 
filing a timely SAR.
    (ii) No suspect identified. If no suspect was identified on the 
date of detection of an act described in paragraph (d)(3) of this 
section, the savings association or service corporation may delay 
filing the SAR for an additional 30 calendar days after the 
identification of a suspect, but in no case may savings association or 
service corporation delay filing a SAR for more than 60 calendar days 
after the date of detection of an act described in paragraph (d)(3) of 
this section.
    (6) Reports to State and local authorities. A savings association 
or service corporation is encouraged to file a copy of the SAR with 
State and local law enforcement agencies where appropriate.
    (7) Retention of records. A savings association or service 
corporation shall maintain a copy of any SAR filed and the original of 
any related documentation for a period of ten years from the date of 
filing the SAR, unless the OTS informs the savings association or 
service corporation in writing that it may discard the materials 
sooner. A savings association or service corporation must make all 
supporting documentation available to appropriate law enforcement 
agencies upon request. Supporting documentation shall be identified and 
treated as filed with the SAR.
    (8) Exemptions. A savings association or service corporation need 
not file a SAR for a robbery or burglary committed or attempted that is 
reported to appropriate law enforcement authorities.
    (9) Notification to board of directors.--(i) Generally. Whenever a 
savings association (or a service corporation in which the savings 
association has an ownership interest) files a SAR pursuant to this 
paragraph (d), the management of the savings association shall promptly 
notify its board of directors or a committee of directors or executive 
officers designated by the board of directors to receive such notice.
    (ii) Suspect is a director or officer. If the savings association 
or service corporation files a SAR pursuant to paragraph (d)(3) of this 
section and the suspect is a director or executive officer of the 
savings association, the savings association must not notify the 
suspect in accordance with 31 U.S.C. 5318, but must notify all 
directors who are not suspects.
    (10) Compliance. Failure to file a SAR in accordance with this 
paragraph (d) and the Instructions may subject the savings association 
or service corporation, its directors, officers, employees, agents, or 
other institution-affiliated parties to supervisory actions including 
enforcement actions.
    (11) Obtaining SARs. A savings association or service corporation 
may obtain SARs and the Instructions from the appropriate OTS Regional 
Office listed in 12 CFR 516.1(b).
    (12) Confidentiality of SARs. SARs are confidential. Any person 
subpoenaed or otherwise requested to disclose a SAR or the information 
contained in a SAR shall decline to produce the information citing 
these regulations, applicable law (e.g., 31 U.S.C. 5318(g)), or both.
* * * * *
    Dated: July 12, 1995.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-17485 Filed 7-14-95; 8:45 am]
BILLING CODE 6720-01-P