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FinCEN issued a Notice of Proposed Rulemaking ("NPRM") for a limited-duration pilot program to allow U.S. financial institutions to share suspicious activity reports ("SARs") with non-U.S. branches, subsidiaries and affiliates.
U.S. financial institutions seeking to participate in the pilot must first submit a written application to FinCEN specifying, among other things, (i) the jurisdiction of the non-U.S. entities with which it plans to share SARs, (ii) how the shared SAR information will be used, and (iii) the internal controls in place to prevent unauthorized disclosures of shared SAR information.
Commentary
Under current FinCEN guidance, U.S. financial institutions may share SAR information outside the U.S. only in limited circumstances with a head office or controlling entity. The newly proposed pilot program implements Section 6212 of the Anti-Money Laundering Act of 2020, which requires Treasury to test drive broader SAR sharing between U.S. financial institutions and their non-U.S. branches, subsidiaries, and affiliates.
Certainly some financial institutions will view the pilot program as an opportunity to build rapport with a key regulator. But any participation also entails risk, particularly due to thorny issues of foreign law. For example, once a U.S. financial institution has shared SAR information with a foreign branch, subsidiary, or affiliate, a foreign regulator may request, or even have a right under foreign law, to view the information. A U.S. financial institution may have little ability to protect SAR confidentiality in such a situation, and the NPRM provides no safe harbor.
Primary Sources
- FinCEN Press Release: FinCEN Issues Proposed Rule for Suspicious Activity Report Sharing Pilot Program to Combat Illicit Finance Risks
- FinCEN NPRM: Pilot Program on Sharing of Suspicious Activity Reports and Related Information with Foreign Branches, Subsidiaries, and Affiliates
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