On Jan. 19, the Financial Crimes Enforcement Network (FinCEN) and the four federal banking regulators issued a set of answers to frequently asked questions (FAQs) to clarify policies on suspicious activity report (SAR) filing and its relationship to other anti-money laundering (AML) practices.
These FAQs and their answers do not mention the recent FinCEN Files controversy and its criticism of AML practices associated with SAR filing, but the questions do directly address some of the critiques. The answers refute those attempts at policy prescriptions as disconnected from the actual conduct of AML regulation and enforcement.
FinCEN, in unison with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency, issued answers to seven FAQs:
1. Can a financial institution maintain an account or customer relationship for which it has received a written “keep open” request from law enforcement, even though the financial institution has identified suspicious or potentially illicit activity? (Answer: Yes.)
2. Should a financial institution file a SAR solely on the basis of receiving a grand jury subpoena or other law enforcement inquiries? (Answer: No.)
3. Is a financial institution required to terminate a customer relationship following the filing of a SAR or multiple SARs? (Answer: No.)
4. Is a financial institution required to file a SAR based solely on negative news? (Answer: No.)
5. If there are multiple negative news alerts based on the same event, is a financial institution expected to independently investigate each of those alerts? (Answer: No.)
6. Do financial institutions need to repeat information in the SAR narrative that has already been included in other SAR data fields? (Answer: No.)
7. Should financial institutions file additional SARs on the same suspicious activity to accommodate narratives that are longer than the SAR narrative character limits? (Answer: No.)
These FAQs and their answers (explained at length in the document) address SAR filing issues that were familiar and settled in the early 2000s. Their authors do not explain why addressing them is necessary now, other than stating vaguely that they were developed in response to recent Bank Secrecy Act Advisory Group recommendations described in FinCEN’s Advance Notice of Proposed Rulemaking on Anti-Money Laundering Program Effectiveness published in September 2020.
However, the distinct resemblance of FAQs 1 through 5 to FinCEN Files criticism of SAR filing practices, also published in September 2020, indicate that those FAQs are presented in response to that criticism. (FAQs 6 and 7 differ, addressing narrow technical issues about the SAR filing form.)
FinCEN Files Criticism of SAR Filing
The FinCEN Files media project, which is based on a large leak of SAR filings stolen from FinCEN, has made SAR filing practices one of the key subjects of its criticism. FinCEN Files-related reporting has featured numerous stories about large international banks filing SARs on suspected money laundering activity but not closing accounts used for the activity, with complaints from bank compliance officers who work to file reports but have no power to compel their employers to close accounts. The policy measures promoted by the FinCEN Files reporting consortium include a measure to “empower bank compliance officers” to close accounts as well as file SARs.
FAQs 1 through 5 should dispel concerns that the FinCEN Files campaign has created. FAQs 1 and 2 address the relationship between AML regulatory compliance and law enforcement that FinCEN Files coverage has muddled. FAQ 3 clarifies that regulators do not consider the filing of a SAR or multiple SARs on activity in a customer account to require closing the account, regardless of what the FinCEN Files campaign has advocated. And FAQs 4 and 5 reassure financial institutions that regulators do not expect a wave of new SAR reporting based on negative news from the FinCEN Files or other sources.
As a step toward clarifying the issues that the FinCEN Files have raised, these new SAR FAQs should reassure U.S. financial institutions that their regulators are not suddenly changing long-established AML regulatory policies in response to media pressure.
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