Standards Governing the Release of a Suspicious Activity Report, 10145-10148 [E9-4699]

Download as PDF Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed Rules an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OTS has determined that this proposed rule will not result in expenditures by State, local, and tribal governments, or by the private sector, of $133 million or more in any one year. Accordingly, this proposal is not subject to section 202 of the Unfunded Mandates Act. List of Subjects in 12 CFR Part 563 Crime, Currency, Savings associations, Reporting and recordkeeping requirements, Security measures. Authority and Issuance For the reasons set forth in the preamble, part 563 of title 12 of the Code of Federal Regulations is proposed to be amended as follows: PART 563—SAVINGS ASSOCIATIONS—OPERATIONS 1. The authority citation for part 563 continues to read as follows: Authority: 12 U.S.C. 375b, 1462a, 1463, 1464, 1467a, 1468, 1817, 1828, 3806; 31 U.S.C 5318; 2. Section 563.180 is amended by revising paragraphs (d)(2)(iii), (d)(3) introductory text, (d)(12), and (d)(13) to read as follows: § 563.180 Suspicious Activity Reports and Other Reports and Statements. pwalker on PROD1PC71 with PROPOSALS2 * * * * * (d) * * * (2) * * * (iii) 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 on the form prescribed by the OTS and in accordance with the form’s instructions, by sending a completed SAR to FinCEN in the following circumstances: * * * * * (12) Confidentiality of SARs. A SAR, and any information that would reveal the existence of a SAR, are confidential, and shall not be disclosed except as authorized in this paragraph (d)(12). (i) Prohibition on disclosure by savings associations—(A) General rule. No savings association or Service Corporation, and no director, officer, employee, or agent of a savings association or service corporation, shall disclose a SAR or any information that would reveal the existence of a SAR. Any savings association or service corporation, and any director, officer, VerDate Nov<24>2008 16:25 Mar 06, 2009 Jkt 217001 employee, or agent of any savings association or service corporation that is subpoenaed or otherwise requested to disclose a SAR, or any information that would reveal the existence of a SAR, shall decline to produce the SAR or such information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and shall notify the following of any such request and the response thereto: (1) Deputy Chief Counsel, Litigation Division, Office of Thrift Supervision; and (2) The Financial Crimes Enforcement Network (FinCEN). (ii) Rules of Construction. Provided that no person involved in any reported suspicious transaction is notified that the transaction has been reported, subparagraph (k)(1) shall not be construed as prohibiting: (A) The disclosure by a savings association or service corporation, or any director, officer, employee or agent of a savings association or service corporation of: (1) A SAR, or any information that would reveal the existence of a SAR, to FinCEN or any Federal, state, or local law enforcement agency; or any Federal or state regulatory authority that examines the savings association for compliance with the Bank Secrecy Act; or (2) The underlying facts, transactions, and documents upon which a SAR is based, including disclosures: (i) To another financial institution, or any director, officer, employee or agent of a financial institution, for the preparation of a joint SAR; or (ii) In connection with certain employment references or termination notices, to the full extent authorized in 31 U.S.C. 5318(g)(2)(B); or (B) The sharing by a savings association, or any director, officer, employee, or agent of a savings association, of a SAR, or any information that would reveal the existence of a SAR, within the savings association’s corporate organizational structure, for purposes consistent with Title II of the Bank Secrecy Act as determined by regulation or in published guidance. (iii) Prohibition on disclosure by OTS. Neither OTS (nor any officer, employee or agent of OTS) shall disclose a SAR, or any information that would reveal the existence of a SAR, except as necessary to fulfill official duties consistent with Title II of the Bank Secrecy Act. For purposes of this section, official duties shall not include the disclosure of a SAR, or any information that would reveal the existence of a SAR, in response to a request for use in a private legal proceeding or in response to a PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 10145 request for disclosure of non-public information under 12 CFR 510.5. (13) Limitation on liability. A savings association or service corporation and any director, officer, employee or agent of a savings association or service corporation that makes a voluntary disclosure of any possible violation of law or regulation to a government agency or makes a disclosure pursuant to this section or any other authority, including a disclosure made jointly with another institution, shall be protected from liability for any such disclosure, or for failure to provide notice of such disclosure to any person identified in the disclosure, or both, to the full extent provided by 31 U.S.C. 5318(g)(3). * * * * * Dated: November 18, 2008. By the Office of Thrift Supervision. John M. Reich, Director. Editorial Note: This document was received in the Office of the Federal Register on February 27, 2009. [FR Doc. E9–4701 Filed 3–6–09; 8:45 am] BILLING CODE 6720–01–P DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12 CFR Part 510 [Docket ID OTS–2008–0018] RIN 1550–AC28 Standards Governing the Release of a Suspicious Activity Report AGENCY: Office of Thrift Supervision, Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: The Office of Thrift Supervision (OTS) is proposing to revise its regulations governing the release of unpublished OTS information. The primary change being proposed would clarify that the OTS’s decision to release a Suspicious Activity Report (SAR) will be governed by the standards set forth in proposed amendments to the OTS’s SAR regulation that are part of a separate, but simultaneous, rulemaking. DATES: Comments must be received by June 8, 2009. ADDRESSES: You may submit comments, identified by OTS–2008–0018 by any of the following methods: • Federal Rulemaking Portal:— ‘‘Regulations.gov’’: Go to http:// www.regulations.gov, under the ‘‘More Search Options’’ tab click next to the ‘‘Advanced Docket Search’’ option where indicated, select ‘‘Office of Thrift E:\FR\FM\09MRP2.SGM 09MRP2 pwalker on PROD1PC71 with PROPOSALS2 10146 Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed Rules Supervision’’ from the agency dropdown menu, then click ‘‘Submit.’’ In the ‘‘Docket ID’’ column, select ‘‘OTS– 2008–0018’’ to submit or view public comments and to view supporting and related materials for this notice of proposed rulemaking. The ‘‘How to Use This Site’’ link on the Regulations.gov home page provides information on using Regulations.gov, including instructions for submitting or viewing public comments, viewing other supporting and related materials, and viewing the docket after the close of the comment period. • E-mail address: regs.comments@ots.treas.gov. Please include OTS–2008–0018 in the subject line of the message and include your name and telephone number in the message. • Fax: (202) 906–6518. • Mail: Regulation Comments, Chief Counsel’s Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, Attention: OTS– 2008–0018. • Hand Delivery/Courier: Guard’s Desk, East Lobby Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: Regulation Comments, Chief Counsel’s Office, OTS–2008–0010. Instructions: All submissions received must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. All comments received will be posted without change to the OTS Internet Site at http://www.ots.treas.gov/ Supervision&Legal.Laws&Regulations, including any personal information provided. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that could be considered confidential or inappropriate for public disclosure. • Viewing Comments Electronically: Go to http://www.regulations.gov, under the ‘‘More Search Options’’ tab click next to the ‘‘Advanced Document Search’’ option where indicated, select ‘‘Office of Thrift Supervision’’ from the agency drop-down menu and click ‘‘Submit.’’ In the ‘‘Docket ID’’ column, select ‘‘OTS–2008–0018’’ to view public comments for this rulemaking action. • Viewing Comments On-Site: You may inspect comments at the Public Reading Room, 1700 G Street, NW by appointment. To make an appointment call (202) 906–5922, send an e-mail to public.info@ots.treas.gov, or send a facsimile transmission to (202) 906– 6518. (Prior notice identifying the VerDate Nov<24>2008 16:25 Mar 06, 2009 Jkt 217001 materials you will be requesting will assist us in serving you.) We schedule appointments on business days between 10 a.m. and 4 p.m. In most cases, appointments will be available the next business day following the date we receive a request. FOR FURTHER INFORMATION CONTACT: Marvin Shaw, Senior Attorney, Regulations and Legislation (202–906– 6639); Dirk Roberts, Deputy General Counsel, Litigation (202–906–7631), Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552. SUPPLEMENTARY INFORMATION: I. Introduction The Office of Thrift Supervision (OTS) is proposing to amend its regulations set forth in 12 CFR part 510, governing the release of unpublished OTS information. First, the proposed amendments would conform section 510.5 to amendments to the OTS’s SAR confidentiality rule, 12 CFR 563.180, that are being proposed as part of a separate, but simultaneous, rulemaking that the OTS is conducting. Under the standards that the OTS is proposing to incorporate into section 510.5, the OTS would only release a SAR, or any information that would reveal the existence of a SAR (referred to in this preamble as ‘‘SAR information’’), when ‘‘necessary to fulfill official duties consistent with Title II of the Bank Secrecy Act (BSA).’’ The effect of these proposed amendments is that the OTS would not release SAR information in response to a request from a private litigant arising out of a civil lawsuit or administrative proceeding to which the OTS is not a party. The Director also would not disclose SAR information to any other person or entity, and the OTS would not release SAR information in response to a request by another government agency, except to fulfill official duties in light of the purposes of the BSA. In addition to the clarification of the standards governing the release of SAR information, the proposed amendments to section 510.5 clarify that the OTS would deny a request for non-public information made under 12 CFR section 510.5(d), if the release is prohibited by law. This proposal would amend part 510 to make it consistent with the proposed amendments to OTS’s SAR regulation that implements section 351 of the USA PATRIOT Act, thus ensuring that the appropriate standard is applied to OTS’s disclosure of SAR information. Section 510.5 sets forth OTS’s standards and Frm 00018 Fmt 4701 1 See 12 CFR 510.5. 12 CFR 510.5(d). 3 31 U.S.C. 5318(g)(1). 4 31 U.S.C. 5318(g)(2)(A)(i). 5 The phrase ‘‘any person involved in the transaction’’ has been construed to apply to ‘‘any person’’ because the disclosure of SAR information to any outside party may make it likely that SAR information would be disclosed to a person involved in the transaction, which is absolutely prohibited by the BSA. See Cotton v. Private Bank and Trust Co., 235 F. Supp. 2d 809, 815 (N.D. Ill. 2002). 2 See II. Background PO 00000 procedures for the release of ‘‘unpublished OTS information,’’ and sets forth the restrictions on the dissemination of such information. Generally, ‘‘unpublished OTS information’’ is confidential and privileged information that is the property of the OTS, and that the OTS is not required to release under the Freedom of Information Act (5 U.S.C. 552 et seq.) or that the OTS has not yet published or made available pursuant to 12 U.S.C. 1818(u), the statute requiring publication of certain enforcement orders. Section 510.5 describes procedures for requesting unpublished OTS information from the OTS, such as, where to submit a request, the form of the request, information that must be included in any request involving an adversarial matter, and various bases for the OTS’s denial of such a request.1 Section 510.5 authorizes the OTS to make unpublished OTS information available to a supervised entity and to other persons, at the sole discretion of the Director or his or her delegate.2 Section 510.5(d)(5) also indicates that the OTS may condition release of information that it discloses under this section. Although a SAR may be considered ‘‘unpublished OTS information,’’ it is the OTS’s position that the release of a SAR must be governed by standards set forth in the BSA. The BSA and its implementing regulations require a financial institution to file a SAR when it detects a known or suspected violation of Federal law or a suspicious activity related to money laundering, terrorist financing, or other criminal activity.3 The BSA also provides that a financial institution, and its officers, directors, employees, and agents are prohibited from notifying any person involved in a suspicious transaction that the transaction was reported.4 Most importantly, in 2001, section 351 of the USA PATRIOT Act added a new provision to the BSA prohibiting officers or employees of the Federal government or any State, local, tribal, or territorial government within the United States from disclosing to any person 5 involved in a suspicious transaction that Sfmt 4702 E:\FR\FM\09MRP2.SGM 09MRP2 Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed Rules pwalker on PROD1PC71 with PROPOSALS2 the transaction was reported, other than as necessary to fulfill the official duties of such officer or employee.6 Accordingly, it is this provision that now governs the ability of the OTS to disclose SAR information to any person. The OTS is revisiting the treatment of SAR information in section 510.5 in light of the 2001 amendments to the BSA, added by section 351 of the USA PATRIOT Act that specifically addresses governmental disclosures of SARs. Under the proposed amendments to section 510.5, the OTS will decide whether to release SAR information based upon the standard in the OTS’s proposed amendments to its SAR rules, 12 CFR 563.180, implementing section 351, rather than upon the factors set out in section 510.5(d). The standard in the proposed amendments to the OTS’s SAR rule provides that ‘‘Neither OTS (nor any officer, employee or agent of OTS) shall disclose a SAR, or any information that would reveal the existence of a SAR except as necessary to fulfill official duties consistent with Title II of the BSA.’’ In addition, the standard provides that ‘‘official duties’’ shall not include the disclosure of SAR information in response to a request for use in a private legal proceeding or in response to a request for disclosure of non-public information under 12 CFR 510.5.7 The proposed SAR rules interpret ‘‘official duties’’ to mean ‘‘official duties consistent with the purposes of Title II of the BSA,’’ namely, for ‘‘criminal, tax, regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism.’’ 8 This standard would permit disclosures responsive to a grand jury subpoena; a request from an appropriate Federal or State law enforcement or regulatory agency; and prosecutorial disclosures mandated by statute or the Constitution, in connection with the statement of a government witness to be called at trial, the impeachment of a government 6 See USA PATRIOT Act, section 351(b). Public Law 107–56, Title III, § 351, 115 Stat. 272, 321 (2001). 7 For purposes of this provision ‘‘official duties’’ means official disclosures necessary to accomplish a governmental purpose consistent with Title II of the BSA entrusted to the agency, the officer or employee. For example, prosecutorial disclosures mandated by statute or the Constitution, such as a statement of a government witness to be called at trial, impeachment of a government witness, or material exculpatory of a criminal defendant. See, e.g., Giglio v. United States, 405 U.S. 150, 153–54 (1972); Brady v. State of Maryland, 373 U.S. 83, 86– 87 (1963); Jencks v. United States, 353 U.S. 657, 668 (1957). 8 31 U.S.C. 5311 (setting forth the purposes of the BSA). VerDate Nov<24>2008 16:25 Mar 06, 2009 Jkt 217001 witness, or as material exculpatory of a criminal defendant.9 III. Section-by-Section Description of the Proposal Section 510.5(a) and (b) Scope and Purpose Section 510(b) currently includes several standards for the release of unpublished OTS information. A person seeking such information, generally must submit a request in writing to the OTS that addresses the factors set forth in section 510.5(b). Section 510.5(d) describes how the OTS will make its determination to release the information. That provision also provides that OTS will deny a request if it deems the information to be (A) not highly relevant, (B) privileged, (C) available from other sources, or (D) information that should not be disclosed for reasons that warrant restriction under the Federal Rules of Civil Procedure.10 This proposal adds a new paragraph (iv) to the scope section of 12 CFR 510.5, which states that this section does not apply to OTS’s decision to disclose records or testimony involving a SAR filed pursuant to regulations implementing 12 U.S.C. 5318(g) or any information that would reveal the existence of a SAR. Accordingly, the OTS’s decision to disclose records or testimony involving SAR information would be governed solely by the standard in 12 CFR 563.180. Paragraph (iv) makes clear that the standard in 12 CFR 563.180 would apply in place of the standards for denial set forth in 12 CFR 510.5(d)(4). Accordingly, the OTS would not release SAR information in response to any request received pursuant to section 510.5, including from a federal, state, or foreign government, and the Director would not disclose SAR information to any person, except to fulfill the OTS’s official duties in light of the purposes of the BSA. Consistent with the OTS’s longstanding commitment to protect the confidentiality of SARs, the proposed SAR rule also states that ‘‘official duties’’ does not include the disclosure of SAR information in response to a request for use in a private legal proceeding or in response to a request for disclosure of non-public information under 12 CFR 510.5. 9 See, e.g., Giglio v. United States, 405 U.S. 150, 153–54 (1972); Brady v. State of Maryland, 373 U.S. 83, 86–87 (1963); Jencks v. United States, 353 U.S. 657, 668 (1957). 10 See 12 CFR 510.5(d)(4). PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 10147 Section 510.5(d) Consideration of Requests Section 510.5 generally describes how the OTS makes its determination to release or to withhold unpublished OTS information in response to requests received under section 510.5(b) and (d).11 Section 510.5(d)(4) specifically lists four examples of reasons for which the OTS will deny the release of unpublished OTS information. The OTS is proposing to add ‘‘when not prohibited by law’’ as a fifth reason for denial of requests made under section 510.5(d)(4). This addition would simply make the language in section 510.5(d), consistent with the standard applicable to disclosures to government entities, which includes the condition that such disclosures only be made ‘‘when not prohibited by law.’’ IV. Request for Comments The OTS welcomes comments on any aspect of these proposed amendments to the SAR rule. The OTS has timed the release of this proposal to coincide with the issuance of the proposed rule to amend its SAR confidentiality rule set forth in 12 CFR part 563.180, so that commenters can consider each proposal in commenting on the other. V. OTS Solicitation of Comments on Use of Plain Language Section 722 of the Gramm-LeachBliley Act, Public Law 106–102, sec. 722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OTS to use plain language in all proposed and final rules published after January 1, 2000. Therefore, the OTS specifically invites your comments on how to make this proposal easier to understand. For example: • Have we organized the material to suit your needs? If not, how could this material be better organized? • Are the requirements in the proposal clearly stated? If not, how could the requirements be more clearly stated? • Does the proposal contain language or jargon that is not clear? If so, which language requires clarification? • Would a different format make the regulations easier to understand? If so, what changes to the format would make them easier to understand? • What else could we do to make the regulations easier to understand? Regulatory Flexibility Act Under section 605(b) of the Regulatory Flexibility Act (RFA), 5 U.S.C. 605(b), the regulatory flexibility 11 As described earlier, § 510.5 does not apply to SAR information. E:\FR\FM\09MRP2.SGM 09MRP2 10148 Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed Rules analysis otherwise required under section 604 of the RFA is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities and publishes its certification and a short, explanatory statement in the Federal Register along with its rule. The OTS has determined that the proposed rules do not impose any economic costs as they simply clarify the scope of the statutory prohibition against the disclosure by financial institutions and by the government of SAR information. Therefore, pursuant to section 605(b) of the RFA, the OTS hereby certifies that this proposal will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not needed. Executive Order 12866 The OTS has determined that this proposal is not a significant regulatory action under Executive Order 12866. We have concluded that the changes that would be made by the proposed amendments will not have an annual effect on the economy of $100 million or more. The OTS further concludes that this proposal does not meet any of the other standards for a significant regulatory action set forth in Executive Order 12866. Paperwork Reduction Act We have reviewed the proposed amendments in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320, Appendix A.1) (PRA) and have determined that they do not contain any ‘‘collections of information’’ as defined by the PRA. pwalker on PROD1PC71 with PROPOSALS2 Unfunded Mandates Reform Act of 1995 Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104–4 (UMRA) requires that an agency prepare a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more (adjusted annually for inflation) in any one year. If a budgetary impact statement is required, section 205 of the UMRA also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OTS has determined that its proposed rule will not result in expenditures by state, local, and tribal governments, or by the private sector, of $133 million or more. Accordingly, OTS has not prepared a budgetary impact VerDate Nov<24>2008 16:25 Mar 06, 2009 Jkt 217001 statement or specifically addressed the regulatory alternatives considered. List of Subjects in 12 CFR Part 510 Administrative practice and procedure, Freedom of information, Individuals with disabilities, Minority businesses, Organization and functions (Government agencies), Reporting and recordkeeping requirements, Women. Authority and Issuance For the reasons set forth in the preamble, part 510 of title 12 of the Code of Federal Regulations is proposed to be amended as follows: PART 510—MISCELLANEOUS ORGANIZATIONAL REGULATIONS 1. The authority citation for part 510 continues to read as follows: Authority: 12 U.S.C. 1462a, 1463, 1464; Pub.L. 101–410, 104 Stat 890; Pub.L. 104– 134, 110 Stat 1321–358. 2. Amend § 510.5 by: a. Adding paragraph (a)(3)(iv); b. Removing, at the end of paragraph (d)(4)(i)(C), the word ‘‘or’’; c. Removing the period at the end of paragraph (d)(4)(i)(D) and adding in its place ‘‘; or’’ and d. Adding paragraph (d)(4)(i)(E) as follows: § 510.5 Release of unpublished OTS information. (a) * * * (3) * * * (iv) Requests for a Suspicious Activity Report (SAR), or any information that would reveal the existence of a SAR. * * * * * (d) * * * (4) * * * (i) * * * (E) Information that should not be disclosed, because such disclosure is prohibited by law. * * * * * Dated: November 18, 2009. By the Office of Thrift Supervision. John M. Reich, Director. Editorial Note: This document was received at the Office of the Federal Register on February 27, 2009. [FR Doc. E9–4699 Filed 3–6–09; 8:45 am] BILLING CODE 6720–01–P PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AA99 [Docket Number: TREAS–FinCEN–2008– 0022] Financial Crimes Enforcement Network; Confidentiality of Suspicious Activity Reports AGENCY: The Financial Crimes Enforcement Network (FinCEN), Department of the Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: The Financial Crimes Enforcement Network (‘‘FinCEN’’), a bureau of the Department of the Treasury (‘‘Treasury’’), is proposing to revise the regulations implementing the Bank Secrecy Act (‘‘BSA’’) regarding the confidentiality of a report of suspicious activity (‘‘SAR’’) to: Clarify the scope of the statutory prohibition against the disclosure by a financial institution of a SAR; address the statutory prohibition against the disclosure by the government of a SAR; clarify that the exclusive standard applicable to the disclosure of a SAR by the government is to fulfill official duties consistent with the purposes of the BSA; modify the safe harbor provision to include changes made by the Uniting and Strengthening America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (‘‘USA PATRIOT Act’’); and make minor technical revisions for consistency and harmonization among the different rules. These amendments are consistent with similar proposals to be issued by some of the Federal bank regulatory agencies.1 DATES: Comments must be received by June 8, 2009. ADDRESSES: You may submit comments, identified by RIN 1506–AA99 or docket number TREAS-FinCen-2008–0022,2 by any of the following methods: 1 The Federal bank regulatory agencies have parallel SAR requirements for their supervised entities: See 12 CFR 208.62 (the Board of Governors of the Federal Reserve System (‘‘Fed’’)); 12 CFR 353.3 (the Federal Deposit Insurance Corporation (‘‘FDIC’’)); 12 CFR 748.1 (the National Credit Union Administration (‘‘NCUA’’)); 12 CFR 21.11 (the Office of the Comptroller of Currency (‘‘OCC’’)) and 12 CFR 563.180 (the Office of Thrift Supervision (‘‘OTS’’)). Of these agencies the OCC and OTS are proposing corollary regulation changes contemporaneously. 2 This single docket number is shared by three related documents (this notice of proposed rulemaking, and two related pieces of proposed guidance) published simultaneously by FinCEN in today’s Federal Register. Accordingly, commenters may submit comments related to any of the proposals, or any combination of proposals, in a single comment letter. E:\FR\FM\09MRP2.SGM 09MRP2

Agencies

[Federal Register Volume 74, Number 44 (Monday, March 9, 2009)]
[Proposed Rules]
[Pages 10145-10148]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-4699]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 510

[Docket ID OTS-2008-0018]
RIN 1550-AC28


Standards Governing the Release of a Suspicious Activity Report

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Office of Thrift Supervision (OTS) is proposing to revise 
its regulations governing the release of unpublished OTS information. 
The primary change being proposed would clarify that the OTS's decision 
to release a Suspicious Activity Report (SAR) will be governed by the 
standards set forth in proposed amendments to the OTS's SAR regulation 
that are part of a separate, but simultaneous, rulemaking.

DATES: Comments must be received by June 8, 2009.

ADDRESSES: You may submit comments, identified by OTS-2008-0018 by any 
of the following methods:
     Federal Rulemaking Portal:--``Regulations.gov'': Go to 
http://www.regulations.gov, under the ``More Search Options'' tab click 
next to the ``Advanced Docket Search'' option where indicated, select 
``Office of Thrift

[[Page 10146]]

Supervision'' from the agency drop-down menu, then click ``Submit.'' In 
the ``Docket ID'' column, select ``OTS-2008-0018'' to submit or view 
public comments and to view supporting and related materials for this 
notice of proposed rulemaking. The ``How to Use This Site'' link on the 
Regulations.gov home page provides information on using 
Regulations.gov, including instructions for submitting or viewing 
public comments, viewing other supporting and related materials, and 
viewing the docket after the close of the comment period.
     E-mail address: regs.comments@ots.treas.gov. Please 
include OTS-2008-0018 in the subject line of the message and include 
your name and telephone number in the message.
     Fax: (202) 906-6518.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: OTS-2008-0018.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: 
Regulation Comments, Chief Counsel's Office, OTS-2008-0010.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted without change to the 
OTS Internet Site at http://www.ots.treas.gov/
Supervision&Legal.Laws&Regulations, including any personal information 
provided. Comments received, including attachments and other supporting 
materials, are part of the public record and subject to public 
disclosure. Do not enclose any information in your comment or 
supporting materials that could be considered confidential or 
inappropriate for public disclosure.
     Viewing Comments Electronically: Go to http://
www.regulations.gov, under the ``More Search Options'' tab click next 
to the ``Advanced Document Search'' option where indicated, select 
``Office of Thrift Supervision'' from the agency drop-down menu and 
click ``Submit.'' In the ``Docket ID'' column, select ``OTS-2008-0018'' 
to view public comments for this rulemaking action.
     Viewing Comments On-Site: You may inspect comments at the 
Public Reading Room, 1700 G Street, NW by appointment. To make an 
appointment call (202) 906-5922, send an e-mail to 
public.info@ots.treas.gov, or send a facsimile transmission to (202) 
906-6518. (Prior notice identifying the materials you will be 
requesting will assist us in serving you.) We schedule appointments on 
business days between 10 a.m. and 4 p.m. In most cases, appointments 
will be available the next business day following the date we receive a 
request.

FOR FURTHER INFORMATION CONTACT: Marvin Shaw, Senior Attorney, 
Regulations and Legislation (202-906-6639); Dirk Roberts, Deputy 
General Counsel, Litigation (202-906-7631), Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Office of Thrift Supervision (OTS) is proposing to amend its 
regulations set forth in 12 CFR part 510, governing the release of 
unpublished OTS information. First, the proposed amendments would 
conform section 510.5 to amendments to the OTS's SAR confidentiality 
rule, 12 CFR 563.180, that are being proposed as part of a separate, 
but simultaneous, rulemaking that the OTS is conducting. Under the 
standards that the OTS is proposing to incorporate into section 510.5, 
the OTS would only release a SAR, or any information that would reveal 
the existence of a SAR (referred to in this preamble as ``SAR 
information''), when ``necessary to fulfill official duties consistent 
with Title II of the Bank Secrecy Act (BSA).''
    The effect of these proposed amendments is that the OTS would not 
release SAR information in response to a request from a private 
litigant arising out of a civil lawsuit or administrative proceeding to 
which the OTS is not a party. The Director also would not disclose SAR 
information to any other person or entity, and the OTS would not 
release SAR information in response to a request by another government 
agency, except to fulfill official duties in light of the purposes of 
the BSA.
    In addition to the clarification of the standards governing the 
release of SAR information, the proposed amendments to section 510.5 
clarify that the OTS would deny a request for non-public information 
made under 12 CFR section 510.5(d), if the release is prohibited by 
law.

II. Background

    This proposal would amend part 510 to make it consistent with the 
proposed amendments to OTS's SAR regulation that implements section 351 
of the USA PATRIOT Act, thus ensuring that the appropriate standard is 
applied to OTS's disclosure of SAR information. Section 510.5 sets 
forth OTS's standards and procedures for the release of ``unpublished 
OTS information,'' and sets forth the restrictions on the dissemination 
of such information. Generally, ``unpublished OTS information'' is 
confidential and privileged information that is the property of the 
OTS, and that the OTS is not required to release under the Freedom of 
Information Act (5 U.S.C. 552 et seq.) or that the OTS has not yet 
published or made available pursuant to 12 U.S.C. 1818(u), the statute 
requiring publication of certain enforcement orders.
    Section 510.5 describes procedures for requesting unpublished OTS 
information from the OTS, such as, where to submit a request, the form 
of the request, information that must be included in any request 
involving an adversarial matter, and various bases for the OTS's denial 
of such a request.\1\ Section 510.5 authorizes the OTS to make 
unpublished OTS information available to a supervised entity and to 
other persons, at the sole discretion of the Director or his or her 
delegate.\2\ Section 510.5(d)(5) also indicates that the OTS may 
condition release of information that it discloses under this section.
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    \1\ See 12 CFR 510.5.
    \2\ See 12 CFR 510.5(d).
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    Although a SAR may be considered ``unpublished OTS information,'' 
it is the OTS's position that the release of a SAR must be governed by 
standards set forth in the BSA. The BSA and its implementing 
regulations require a financial institution to file a SAR when it 
detects a known or suspected violation of Federal law or a suspicious 
activity related to money laundering, terrorist financing, or other 
criminal activity.\3\ The BSA also provides that a financial 
institution, and its officers, directors, employees, and agents are 
prohibited from notifying any person involved in a suspicious 
transaction that the transaction was reported.\4\ Most importantly, in 
2001, section 351 of the USA PATRIOT Act added a new provision to the 
BSA prohibiting officers or employees of the Federal government or any 
State, local, tribal, or territorial government within the United 
States from disclosing to any person \5\ involved in a suspicious 
transaction that

[[Page 10147]]

the transaction was reported, other than as necessary to fulfill the 
official duties of such officer or employee.\6\ Accordingly, it is this 
provision that now governs the ability of the OTS to disclose SAR 
information to any person.
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    \3\ 31 U.S.C. 5318(g)(1).
    \4\ 31 U.S.C. 5318(g)(2)(A)(i).
    \5\ The phrase ``any person involved in the transaction'' has 
been construed to apply to ``any person'' because the disclosure of 
SAR information to any outside party may make it likely that SAR 
information would be disclosed to a person involved in the 
transaction, which is absolutely prohibited by the BSA. See Cotton 
v. Private Bank and Trust Co., 235 F. Supp. 2d 809, 815 (N.D. Ill. 
2002).
    \6\ See USA PATRIOT Act, section 351(b). Public Law 107-56, 
Title III, Sec.  351, 115 Stat. 272, 321 (2001).
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    The OTS is revisiting the treatment of SAR information in section 
510.5 in light of the 2001 amendments to the BSA, added by section 351 
of the USA PATRIOT Act that specifically addresses governmental 
disclosures of SARs. Under the proposed amendments to section 510.5, 
the OTS will decide whether to release SAR information based upon the 
standard in the OTS's proposed amendments to its SAR rules, 12 CFR 
563.180, implementing section 351, rather than upon the factors set out 
in section 510.5(d). The standard in the proposed amendments to the 
OTS's SAR rule provides that ``Neither OTS (nor any officer, employee 
or agent of OTS) shall disclose a SAR, or any information that would 
reveal the existence of a SAR except as necessary to fulfill official 
duties consistent with Title II of the BSA.'' In addition, the standard 
provides that ``official duties'' shall not include the disclosure of 
SAR information in response to a request for use in a private legal 
proceeding or in response to a request for disclosure of non-public 
information under 12 CFR 510.5.\7\ The proposed SAR rules interpret 
``official duties'' to mean ``official duties consistent with the 
purposes of Title II of the BSA,'' namely, for ``criminal, tax, 
regulatory investigations or proceedings, or in the conduct of 
intelligence or counterintelligence activities, including analysis, to 
protect against international terrorism.'' \8\ This standard would 
permit disclosures responsive to a grand jury subpoena; a request from 
an appropriate Federal or State law enforcement or regulatory agency; 
and prosecutorial disclosures mandated by statute or the Constitution, 
in connection with the statement of a government witness to be called 
at trial, the impeachment of a government witness, or as material 
exculpatory of a criminal defendant.\9\
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    \7\ For purposes of this provision ``official duties'' means 
official disclosures necessary to accomplish a governmental purpose 
consistent with Title II of the BSA entrusted to the agency, the 
officer or employee. For example, prosecutorial disclosures mandated 
by statute or the Constitution, such as a statement of a government 
witness to be called at trial, impeachment of a government witness, 
or material exculpatory of a criminal defendant. See, e.g., Giglio 
v. United States, 405 U.S. 150, 153-54 (1972); Brady v. State of 
Maryland, 373 U.S. 83, 86-87 (1963); Jencks v. United States, 353 
U.S. 657, 668 (1957).
    \8\ 31 U.S.C. 5311 (setting forth the purposes of the BSA).
    \9\ See, e.g., Giglio v. United States, 405 U.S. 150, 153-54 
(1972); Brady v. State of Maryland, 373 U.S. 83, 86-87 (1963); 
Jencks v. United States, 353 U.S. 657, 668 (1957).
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III. Section-by-Section Description of the Proposal

Section 510.5(a) and (b) Scope and Purpose

    Section 510(b) currently includes several standards for the release 
of unpublished OTS information. A person seeking such information, 
generally must submit a request in writing to the OTS that addresses 
the factors set forth in section 510.5(b). Section 510.5(d) describes 
how the OTS will make its determination to release the information. 
That provision also provides that OTS will deny a request if it deems 
the information to be (A) not highly relevant, (B) privileged, (C) 
available from other sources, or (D) information that should not be 
disclosed for reasons that warrant restriction under the Federal Rules 
of Civil Procedure.\10\
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    \10\ See 12 CFR 510.5(d)(4).
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    This proposal adds a new paragraph (iv) to the scope section of 12 
CFR 510.5, which states that this section does not apply to OTS's 
decision to disclose records or testimony involving a SAR filed 
pursuant to regulations implementing 12 U.S.C. 5318(g) or any 
information that would reveal the existence of a SAR. Accordingly, the 
OTS's decision to disclose records or testimony involving SAR 
information would be governed solely by the standard in 12 CFR 563.180. 
Paragraph (iv) makes clear that the standard in 12 CFR 563.180 would 
apply in place of the standards for denial set forth in 12 CFR 
510.5(d)(4). Accordingly, the OTS would not release SAR information in 
response to any request received pursuant to section 510.5, including 
from a federal, state, or foreign government, and the Director would 
not disclose SAR information to any person, except to fulfill the OTS's 
official duties in light of the purposes of the BSA. Consistent with 
the OTS's longstanding commitment to protect the confidentiality of 
SARs, the proposed SAR rule also states that ``official duties'' does 
not include the disclosure of SAR information in response to a request 
for use in a private legal proceeding or in response to a request for 
disclosure of non-public information under 12 CFR 510.5.

Section 510.5(d) Consideration of Requests

    Section 510.5 generally describes how the OTS makes its 
determination to release or to withhold unpublished OTS information in 
response to requests received under section 510.5(b) and (d).\11\ 
Section 510.5(d)(4) specifically lists four examples of reasons for 
which the OTS will deny the release of unpublished OTS information.
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    \11\ As described earlier, Sec.  510.5 does not apply to SAR 
information.
---------------------------------------------------------------------------

    The OTS is proposing to add ``when not prohibited by law'' as a 
fifth reason for denial of requests made under section 510.5(d)(4). 
This addition would simply make the language in section 510.5(d), 
consistent with the standard applicable to disclosures to government 
entities, which includes the condition that such disclosures only be 
made ``when not prohibited by law.''

IV. Request for Comments

    The OTS welcomes comments on any aspect of these proposed 
amendments to the SAR rule. The OTS has timed the release of this 
proposal to coincide with the issuance of the proposed rule to amend 
its SAR confidentiality rule set forth in 12 CFR part 563.180, so that 
commenters can consider each proposal in commenting on the other.

V. OTS Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, sec. 
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OTS to use 
plain language in all proposed and final rules published after January 
1, 2000. Therefore, the OTS specifically invites your comments on how 
to make this proposal easier to understand. For example:
     Have we organized the material to suit your needs? If not, 
how could this material be better organized?
     Are the requirements in the proposal clearly stated? If 
not, how could the requirements be more clearly stated?
     Does the proposal contain language or jargon that is not 
clear? If so, which language requires clarification?
     Would a different format make the regulations easier to 
understand? If so, what changes to the format would make them easier to 
understand?
     What else could we do to make the regulations easier to 
understand?

Regulatory Flexibility Act

    Under section 605(b) of the Regulatory Flexibility Act (RFA), 5 
U.S.C. 605(b), the regulatory flexibility

[[Page 10148]]

analysis otherwise required under section 604 of the RFA is not 
required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities 
and publishes its certification and a short, explanatory statement in 
the Federal Register along with its rule.
    The OTS has determined that the proposed rules do not impose any 
economic costs as they simply clarify the scope of the statutory 
prohibition against the disclosure by financial institutions and by the 
government of SAR information. Therefore, pursuant to section 605(b) of 
the RFA, the OTS hereby certifies that this proposal will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, a regulatory flexibility analysis is not needed.

Executive Order 12866

    The OTS has determined that this proposal is not a significant 
regulatory action under Executive Order 12866. We have concluded that 
the changes that would be made by the proposed amendments will not have 
an annual effect on the economy of $100 million or more. The OTS 
further concludes that this proposal does not meet any of the other 
standards for a significant regulatory action set forth in Executive 
Order 12866.

Paperwork Reduction Act

    We have reviewed the proposed amendments in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320, Appendix 
A.1) (PRA) and have determined that they do not contain any 
``collections of information'' as defined by the PRA.
Unfunded Mandates Reform Act of 1995
    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (UMRA) requires that an agency prepare a budgetary impact 
statement before promulgating a rule that includes a Federal mandate 
that may result in the expenditure by state, local, and tribal 
governments, in the aggregate, or by the private sector of $100 million 
or more (adjusted annually for inflation) in any one year. If a 
budgetary impact statement is required, section 205 of the UMRA also 
requires an agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. The OTS has 
determined that its proposed rule will not result in expenditures by 
state, local, and tribal governments, or by the private sector, of $133 
million or more. Accordingly, OTS has not prepared a budgetary impact 
statement or specifically addressed the regulatory alternatives 
considered.

List of Subjects in 12 CFR Part 510

    Administrative practice and procedure, Freedom of information, 
Individuals with disabilities, Minority businesses, Organization and 
functions (Government agencies), Reporting and recordkeeping 
requirements, Women.

Authority and Issuance

    For the reasons set forth in the preamble, part 510 of title 12 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS

    1. The authority citation for part 510 continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464; Pub.L. 101-410, 104 Stat 
890; Pub.L. 104-134, 110 Stat 1321-358.

    2. Amend Sec.  510.5 by:
    a. Adding paragraph (a)(3)(iv);
    b. Removing, at the end of paragraph (d)(4)(i)(C), the word ``or'';
    c. Removing the period at the end of paragraph (d)(4)(i)(D) and 
adding in its place ``; or'' and
    d. Adding paragraph (d)(4)(i)(E) as follows:


Sec.  510.5  Release of unpublished OTS information.

    (a) * * *
    (3) * * *
    (iv) Requests for a Suspicious Activity Report (SAR), or any 
information that would reveal the existence of a SAR.
* * * * *
    (d) * * *
    (4) * * *
    (i) * * *
    (E) Information that should not be disclosed, because such 
disclosure is prohibited by law.
* * * * *

    Dated: November 18, 2009.

    By the Office of Thrift Supervision.
John M. Reich,
Director.

    Editorial Note: This document was received at the Office of the 
Federal Register on February 27, 2009.

 [FR Doc. E9-4699 Filed 3-6-09; 8:45 am]
BILLING CODE 6720-01-P