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Law Enforcement Requests for SAR Data Must be Handled Carefully
By Brian Monroe
printNew York State Police investigator Kevin Sullivan has a good chuckle when he recalls some noteworthy gaffes that banks have made trying to send him information about suspicious activity at their institutions. In one instance, a bank gathered the appropriate records, transaction information and related documents concerning a customer that they suspected of criminal behavior, and then sent them all – to the customer. The institution had to do some "serious tap dancing" to explain the documents, Sullivan said. "Luckily, the guy didn't catch on." In another episode, Sullivan requested supporting documentation for a suspicious activity report (SAR) and the...
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Bankers are more frequently rejecting law enforcement requests to keep open accounts held for the targets of criminal probes despite assurances that the institutions won't be penalized for subsequent transactions, say sources.
Once confined to large banks, the practice of forming teams to review suspicious activity reports ahead of regulatory filing deadlines is increasingly being adopted by midsize financial institutions, say compliance professionals.
The U.S. Attorney's Office for the Southern District of New York is merging its counterterrorism and anti-narcotics divisions, a move expected to streamline related investigations.
Poorly thought out responses to law enforcement requests for additional information on suspicious activity can end up exposing banks to civil lawsuits or regulatory actions, according to compliance professionals.
The U.S. Treasury needs to improve its collaboration with law enforcement and other stakeholders as it tries again to revise its process for reporting suspicious financial transactions, according to a U.S. Government Accountability Office released Monday.
The U.S. Treasury Department may be denying state and federal law enforcement authorities a critical source of information for money laundering and terrorist financing investigations by opting not to forward to money services businesses information requests authorized under the Patriot Act.
Some 17 federal law enforcement agencies issued 826 requests to financial institutions, garnering nearly 49,000 positive matches and 41 convictions, a rate of about 5 percent, according to the Financial Crimes Enforcement Network.
The system, expected to be in operation next month, will help banks streamline the process of providing examiners with proof of compliance with law enforcement requests, FinCEN Director James Freis said.
Because data protection laws in Europe and elsewhere make it difficult for a multinational financial institution to share data among all of its branches, the laws "will be the biggest impediment to protection from terrorism," the officials said.
A financial institution should ask for a written request from any law enforcement agency that asks it to keep an account open, according to the U.S. Treasury Financial Crimes Enforcement Network.
Limits such as a rule prohibiting financial institutions from sharing SAR information with nonbank affiliates hinder banks due diligence efforts, Bank of America Compliance Chief William Fox said at a compliance conference in Atlanta.
Many bank employees can't differentiate between SAR-related and other information requests they receive from law enforcement agencies, regulators and other financial institutions. As a result, some hinder financial investigations by ignoring the requests.