Sharing SAR's: Some Proposed Changes

FinCEN has announced proposed changes to BSA's regulations on SAR sharing and confidentiality rules. Since they're now just proposals subject to comment, I won't detail every change, but here's my summary:

The guidance on sharing with parent entities will remain intact--it will be built into the regulation so as to be all the more official. Here is the original guidance from January 2006: http://www.fincen.gov/statutes_regs/guidance/html/sarsharingguidance01202006.html You remember that it allowed BD's to share a SAR or the existence of a SAR with a holding or parent company, but not with affiliates. The guidance required that a confidentiality agreement be place with the holding co/parent entity.

BD's will now be allowed to share a SAR or the existence of a SAR with affiliate entities--that is, only if those entities are subject to SAR rules (i.e., banks, BD's, mutual funds, thrifts, insurance co's, casinos, money service business--not IA's or unregistered investment companies). BD's can only share this stuff if they filed the SAR and the affiliates can't go on to share the information with others (it's not like Facebook: 'friends of friends' don't get to see stuff...). Like with parent entities, confidentiality agreements should be in place when sharing with affiliates.

Other changes clarify some things that you might have otherwise assumed, like: the sharing prohibition applies to all employees, directors, agents, etc. (not just the firm); BD's can share SAR's or the existence of SAR's with their examining authorities; and BD's and their employees can share the information, facts, and documents underlying a SAR a) with financial institutions for the sake of filing a joint SAR and b) in connection with certain employment references or termination notices.

I would think FINRA would provide an announcement when these changes go into effect, so look for a Notice in the coming months. For the proposals and guidance, go to: http://www.fincen.gov/statutes_regs/frn/pdf/frnSAR_Confidentiality.pdf and http://www.fincen.gov/statutes_regs/frn/pdf/frnSF_SAR_Sharing.pdf .

FinCEN's Better Website

For those of you compliance professionals who keep up with FinCEN announcements, this is not news. For you others--too busy to click every link provided in every notification--check out FinCEN's website. http://www.fincen.gov/ They redesigned it a couple of months ago and I have to say, it's a great improvement. Whereas before, a user had to have a good sense of BSA and other regulation in order to navigate the site, now users are treated more sympathetically. The site presents information grouped in several different ways, such as: industry type (like 'securities & futures' for us), statutes and regulations, forms, and most requested. It's now very easy to find the form you have to file and equally easy to quickly reference all recent published guidance. While I may find it interesting to read about regulations affecting casinos, now I don't have to wade through it on my way to information I really need. Thanks, FinCEN!

(I remember years back putting a call into FinCEN and being extrememly underwhelmed by their adminstrative infrastructure. I have to imagine they've been well funded lately to the point of stepping up their game--hiring good webmasters, for instance. I think this is good. I mean, entities like broker-dealers and the 100's of thousands of people working for them are burdened daily by AML rules: it's only fair that they should expect to rely on a functional support system to enable their efforts.)

Also check out the "international" tab on FinCEN's site. This is nice, in that it provides links to other organizatoins such as OFAC and FATF. You won't find the same ease of locating informaton on these other sites--for instance, to locate the current NCCT list on FATF's site, you have to click Key Topics>Meeting FATF Standards>NCCT Initiative in order to get to a page that has a link (on the right side) to the NCCT list. Which is empty, by the way. The list hasn't had any names since October 2006.

By the way, you know that your AML program requires updating for rule changes and internal, firm policy/personnel changes. The good news is, there haven't been any substantive rule/regulation changes lately. If you haven't looked at your written program recently, take a look. Be sure it includes lots of references to 'risk-based' compliance and also Section 311 of the Patriot Act (on specially-designated nationals). Also make sure you have procedures for maintaining all supporting documentation for SAR filings and for responding to law enforcement requests to keep accounts open. These subjects have shown up recently in FINRA exam results.

Now get back to your more enjoyable reading... on a chaise lounge, in the sun, with some Beth Orton or Matt Costa playing in the background... ahhh, it's August.