Confidentiality of Suspicious Activity Reports, 10139-10145 [E9-4701]
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Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed Rules
standards for determining whether a
SAR should be disclosed will not have
an annual effect on the economy of $100
million or more. The OCC 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 (2 U.S.C. 1532) (Unfunded
Mandates Act), requires that an agency
prepare a budgetary impact statement
before promulgating any rule likely to
result in 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 for inflation) in any
one year. If a budgetary impact
statement is required, section 205 of the
Unfunded Mandates Act also requires
an agency to identify and consider a
reasonable number of regulatory
alternatives before promulgating a rule.
The OCC has determined that these
proposed amendments, which change
the standards the OCC will apply when
determining whether to release a SAR,
will not result in expenditures by State,
local, and tribal governments, or by the
private sector, of $100 million or more
(adjusted for inflation) 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 4
Administrative practice and
procedure, Freedom of information,
Individuals with disabilities, Minority
businesses, Organization and functions
(Government agencies), Reporting and
recordkeeping requirements, Women.
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Authority and Issuance
For the reasons set forth in the
preamble, part 4, subpart C, of title 12
of the Code of Federal Regulations is
proposed to be amended as follows:
PART 4—ORGANIZATION AND
FUNCTIONS, AVAILABILITY AND
RELEASE OF INFORMATION,
CONTRACTING OUTREACH
PROGRAM, POST-EMPLOYMENT
RESTRICTIONS FOR SENIOR
EXAMINERS
1. Revise the authority citation for
part 4 to read as follows:
Authority: 12 U.S.C. 93a. Subpart A also
issued under 5 U.S.C. 552. Subpart B also
issued under 5 U.S.C. 552; E.O. 12600 (3 CFR
1987 Comp., p. 235). Subpart C also issued
under 5 U.S.C. 301, 552; 12 U.S.C. 161, 481,
482, 484(a), 1442, 1817(a)(2) and (3), 1818(u)
and (v), 1820(d)(6), 1820(k), 1821(c), 1821(o),
1821(t), 1831m, 1831p–1, 1831o, 1867, 1951
et seq., 2601 et seq., 2801 et seq., 2901 et seq.,
3101 et seq., 3401 et seq.; 15 U.S.C. 77uu(b),
78q(c)(3); 18 U.S.C. 641, 1905, 1906; 29
U.S.C. 1204; 31 U.S.C. 5318(g)(2), 9701; 42
U.S.C. 3601; 44 U.S.C. 3506, 3510. Subpart D
also issued under 12 U.S.C. 1833e.
2. Add § 4.31(b)(4) to read as follows:
§ 4.31
Purpose and scope.
*
*
*
*
*
(b) * * *
(4) For purposes of §§ 4.35(a)(1),
4.36(a) and 4.37(c), the OCC’s decision
to disclose records or testimony
involving a Suspicious Activity Report
(SAR) filed pursuant to the regulations
implementing 12 U.S.C. 5318(g), or any
information that would reveal the
existence of a SAR, is governed solely
by 12 CFR 21.11(k).
*
*
*
*
*
§ 4.32
[Amended]
3. Amend § 4.32(b) by:
a. Removing paragraph (b)(1)(vii).
b. Adding the word ‘‘and’’ at the end
of paragraph (b)(1)(v); and
c. Removing, at the end of paragraph
(b)(1)(vi), ‘‘; and’’ and adding a period
in its place;
4. Amend § 4.35(a)(2) by:
a. Removing the word ‘‘or’’ at the end
of paragraph (a)(2)(iv);
b. Removing, in paragraph (a)(2)(v),
the period and by adding in lieu thereof
‘‘; or’’; and
c. Adding a new paragraph (a)(2)(vi)
to read as follows:
§ 4.35
Consideration of requests.
(a) * * *
(2) * * *
(vi) When prohibited by law.
*
*
*
*
*
§ 4.37
[Amended]
5. In paragraph § 4.37(c), remove the
reference to ‘‘§ 4.37’’ in the last sentence
and add in lieu thereof ‘‘§ 4.38.’’
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Dated: January 22, 2009.
John C. Dugan,
Comptroller of the Currency.
[FR Doc. E9–4700 Filed 3–6–09; 8:45 am]
BILLING CODE 4810–33–P
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563
[Docket ID OTS–2008–0015]
RIN 1550–AC26
Confidentiality of Suspicious Activity
Reports
AGENCY: The Office of Thrift
Supervision, Treasury (OTS).
ACTION: Notice of proposed rulemaking.
SUMMARY: The OTS is proposing to
amend its regulations implementing the
Bank Secrecy Act (BSA) governing the
confidentiality of a Suspicious Activity
Report (SAR) to: clarify the scope of the
statutory prohibition on the disclosure
by a financial institution of a report of
a suspicious transaction, as it applies to
savings associations and service
corporations; address the statutory
prohibition on the disclosure by the
government of a report of a suspicious
transaction, as that prohibition applies
to the OTS’s standards governing the
disclosure of SARs; clarify the exclusive
standard applicable to the disclosure of
a SAR, or any information that would
reveal the existence of a SAR, by the
OTS is ‘‘to fulfill official duties
consistent with the purposes of the
BSA’’; and modify the safe harbor
provision in its rules to include changes
made by the Uniting and Strengthening
America by Providing Appropriate
Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT)
Act. These amendments are based upon
a similar proposal being
contemporaneously issued by the Office
of Comptroller of the Currency (OCC)
and the Financial Crimes Enforcement
Network (FinCEN).
DATES: Comments must be received by
June 8, 2009.
ADDRESSES: You may submit comments,
identified by OTS–2008–0015 (‘‘docket
number’’) by any of the following
methods:
• Federal eRulemaking Portal:—
‘‘Regulations.gov’’: Go to https://
www.regulations.gov, under the ‘‘More
Search Options’’ tab click next to the
‘‘Advanced Docket Search’’ option
where indicated, select ‘‘Office of Thrift
Supervision’’ from the agency dropdown menu, then click ‘‘Submit.’’ In the
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Federal Register / Vol. 74, No. 44 / Monday, March 9, 2009 / Proposed Rules
‘‘Docket ID’’ column, select ‘‘OTS–
2008–0015’’ 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–2008–0015 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–
2008–0015.
• 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–2008–0015.
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 https://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 https://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–2008–0015]’’ to view
public comments for this rulemaking
action.
• Viewing Comments On-Site: You
may inspect comments at the OTS’s
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
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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:
Louise Batdorf, Analyst, BSA and
Compliance Examinations (202–906–
7087); Marvin Shaw, Senior Attorney,
Regulations and Legislation (202–906–
6639); Margaret McPartlin, Senior
Attorney, Enforcement (202–906–6831);
or Noelle Kurtin, Senior Attorney,
Enforcement (202–906–6739).
SUPPLEMENTARY INFORMATION:
I. Background
The BSA requires financial
institutions, including savings
associations and service corporations
regulated by the OTS, to keep certain
records and make certain reports that
have been determined to be useful in
criminal, tax, or regulatory
investigations or proceedings, and for
intelligence or counter intelligence
activities to protect against international
terrorism. In particular, 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
transaction related to a money
laundering activity or a violation of the
BSA, terrorist financing, or other
criminal activity.1
SARs are used for law enforcement or
regulatory purposes to combat terrorism,
terrorist financing, money laundering
and other financial crimes. For this
reason, the BSA 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. To
encourage the reporting of possible
violations of law and regulation, and the
filing of SARs, the BSA also contains a
safe harbor provision which shields
financial institutions making such
reports from civil liability. In 2001, the
USA PATRIOT Act clarified that the
1 The Annunzio-Wylie Anti-Money Laundering
Act of 1992 (the Annunzio-Wylie Act), amended the
BSA and authorized the Secretary of the Treasury
to require financial institutions to report suspicious
transactions relevant to a possible violation of law
or regulation. See Public Law 102–550, Title XV,
§ 1517(b), 106 Stat. 4055, 4058–9 (1992); 31 U.S.C.
5318(g)(1). The OCC, Board of Governors of the
Federal Reserve System (FRB), the Federal Deposit
Insurance Corporation (FDIC), the Office of Thrift
Supervision (OTS), and the National Credit Union
Administration (NCUA), (collectively referred to as
the Federal bank regulatory agencies) subsequently
issued virtually identical implementing regulations
on suspicious activity reporting. See 12 CFR 21.11
(OCC); 12 CFR 208.62 (FRB); 12 CFR 353.3 (FDIC);
12 CFR 563.180 (OTS) and 12 CFR 748.1 (NCUA).
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safe harbor covers voluntary disclosure
of possible violations of law and
regulations to a government agency and
expanded the scope of the limit on
liability to cover any civil liability
which may exist ‘‘under any contract or
other legally enforceable agreement
(including any arbitration agreement.)’’ 2
FinCEN 3 has issued rules
implementing SAR confidentiality
provisions for various types of financial
institutions that closely mirror the
statutory language.4 In addition, the
federal bank regulatory agencies
implemented these provisions through
similar regulations that provide that
SARs are confidential and generally no
information about or contained in a SAR
may be disclosed.5 The regulations
issued by FinCEN and the federal bank
regulatory agencies also describe the
applicability of the safe harbor
provision to both voluntary reports of
possible and known violations of law
and regulation and the required filing of
SARs.
The USA PATRIOT Act of 2001
strengthened the confidentiality of SARs
by adding to the BSA a new provision
that prohibits officers or employees of
the Federal government or any State,
local, tribal, or territorial government
within the United States from disclosing
to any person involved in a suspicious
transaction that the transaction was
reported, other than as necessary to
fulfill the official duties of such officer
or employee.6 The USA PATRIOT Act
also expanded the safe harbor provision
shielding financial institutions from
liability for voluntary reporting of
possible violations of law and
regulations, and the filing of SARs, to
cover any civil liability which may exist
‘‘under any contract or other legally
enforceable agreement (including any
arbitration agreement).’’ 7
FinCEN is proposing to modify its
SAR rule to interpret or further interpret
the provisions of the BSA that relate to
the confidentiality of SARs and the safe
harbor for such reporting. The OTS is
2 See USA PATRIOT Act, section 351(a). Pub. L.
107–56, Title III, § 351, 115 Stat. 272, 321 (2001).
3 FinCEN is the agency designated by the
Department of Treasury to administer the BSA, and
with which SARS must be filed. See 31 U.S.C. 5318;
12 CFR 563.180(d).
4 See, e.g., 31 CFR 103.18(e) (SAR confidentiality
rule for banks); 31 CFR 103.19(e) (SAR
confidentiality rule for brokers or dealers in
securities).
5 See 12 CFR 21.11(k) (OCC); 12 CFR 208.62(j)
(FRB); 12 CFR 353.3(g) (FDIC); 12 CFR
563.180(d)(12) (OTS); and 12 CFR 748.1 (NCUA).
6 See USA PATRIOT Act, section 351(b). Public
Law 107–56, Title III, § 351, 115 Stat. 272, 321
(2001). 31 U.S.C. 5318(g)(2).
7 See USA PATRIOT Act, section 351(a). Public
Law 107–56, Title III, § 351, 115 Stat. 272, 321
(2001).
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proposing to amend its rule
contemporaneously, based upon the
proposal being issued by FinCEN, to
clarify the manner in which these
provisions apply to savings associations
and service corporations and the OTS’s
own standards governing the disclosure
of a SAR and any information that
would reveal the existence of a SAR
(referred to in this preamble as ‘‘SAR
information’’).
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II. Overview of Proposal
The proposed amendments to the
OTS’s rule include key changes that
would (1) clarify the scope of the
statutory prohibition on the disclosure
by a financial institution of a report of
a suspicious transaction, as it applies to
savings associations and service
corporations; (2) address the statutory
prohibition on the disclosure by the
government of a report of a suspicious
transaction, which was added to the
BSA by section 351(b) of the USA
PATRIOT Act of 2001, as that
prohibition applies to the OTS’s
standards governing the disclosure of
SAR information; and (3) clarify that the
exclusive standard applicable to the
disclosure of SAR information by the
OTS is ‘‘to fulfill official duties
consistent with the purposes of the
BSA,’’ in order to ensure that SAR
information is protected from
inappropriate disclosures unrelated to
the BSA purposes for which SARs are
filed. In addition, the proposed
amendments would modify the safe
harbor provision in the OTS’s SAR
rules 8 to include changes made by the
USA PATRIOT Act.
In addition, as described in Section
III, FinCEN is issuing for notice and
comment proposed guidance regarding
the sharing of SARs with affiliates.
FinCEN’s proposed guidance interprets
a provision of the proposed rulemaking,
and, accordingly, should be read in
conjunction with this notice.
In a separate rulemaking, the OTS
also is simultaneously proposing to
amend its information disclosure
regulation set forth in 12 CFR 510.5, to
clarify that the exclusive standard
governing the release of a SAR is set
forth in 12 CFR 563.180. The OTS is
issuing this proposed amendment to 12
CFR part 510, at the same time, to make
clear that the OTS will disclose SAR
information only when necessary to
satisfy the BSA purposes for which
SARs are filed.
8 12
CFR 563.180(d)(13).
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III. Section-by-Section Description of
the Proposal
Section 563.180(d)(2)(iii): Definition of a
SAR
The primary purpose of the OTS’s
SAR rule is to ensure that a savings
association or service corporation files a
SAR when it detects a known or
suspected violation of a federal law or
a suspicious transaction related to a
money laundering activity or a violation
of the BSA. See 12 CFR 563.180.
Incidental to this purpose, the OTS’s
SAR rule includes a section that
addresses the confidentiality of SARs.
Under the current SAR rule, the term
‘‘SAR’’ means ‘‘a Suspicious Activity
Report on the form prescribed by the
OTS.’’ The proposed rule simply defines
a ‘‘SAR’’ generically as ‘‘a Suspicious
Activity Report.’’ This change would
extend the confidentiality provisions of
the OTS’s SAR rule to all SARs,
including those filed on forms
prescribed by FinCEN.9 As a
consequence, a savings association or
service corporation that obtained a SAR,
for example, from a non-bank affiliate
pursuant to the provisions of this
proposed rule, would be required to
safeguard the confidentiality of the SAR,
even if the SAR had not been filed on
a form prescribed by the OTS.
Section 563.180(d)(3): SARs Required
To clarify that a savings association or
service corporation must file a SAR on
a form ‘‘prescribed by the OTS,’’ the
OTS is proposing to add this phrase to
the introductory language of the section
of the OTS’s SAR rule that describes the
procedures for filing of a SAR.
Accordingly, the proposed rules require
a savings association or service
corporation to file a SAR with the
appropriate Federal law enforcement
agencies and the Department of the
Treasury on the form prescribed by the
OTS in accordance with the form’s
instructions, by sending a completed
SAR to FinCEN.
Section 563.180(d)(12): Confidentiality
of SARs
The OTS is proposing to amend its
rules regarding SAR confidentiality 10
by modifying the introductory sentence,
and dividing the remainder of the
current provision into two sections. The
first section would describe the
prohibition on disclosure of SAR
information by savings associations and
service corporations, and the rules of
construction applicable to this
9 See, e.g., 31 CFR 103.19 (FinCEN regulations
requiring brokers or dealers in securities to file
reports of suspicious transactions on a SAR–S–F).
10 12 CFR 563.180(d)(12).
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prohibition. The second section would
describe the prohibition on the OTS’s
disclosure of SAR information.
Currently, the OTS’s rules prohibiting
the disclosure of SARs begins with the
statement that SARs are confidential.
Over the years, the OTS has received
numerous questions regarding the scope
of the prohibition on the disclosure of
a SAR in the OTS’s current rules.
Accordingly, the OTS is proposing to
clarify the scope of SAR confidentiality
by more clearly describing the
information that is subject to the
prohibition. Like FinCEN, the OTS
believes that all of the reasons for
maintaining the confidentiality of SARs
are equally applicable to any
information that would reveal the
existence of a SAR.
The OTS believes that the
confidentiality of a SAR cannot be
maintained unless any information that
would reveal the existence of a SAR
(such as the draft of a SAR that has been
filed) is protected from disclosure. The
confidentiality of SARs must be
maintained for a number of compelling
reasons. For example, the disclosure of
a SAR could result in notification to
persons involved in the transaction that
is being reported, and compromise any
investigations being conducted in
connection with the SAR. In addition,
even the occasional disclosure of a SAR
could chill the willingness of a savings
association or service corporation to file
SARs, and to provide the degree of
detail and completeness in describing
suspicious activity in SARs that will be
of use to law enforcement. If a savings
association or service corporation
believes that a SAR can be used for
purposes unrelated to the law
enforcement and regulatory purposes of
the BSA, the disclosure of such
information could adversely affect the
timely, appropriate, and candid
reporting of suspicious transactions.
Savings associations and service
corporations also may be reluctant to
report suspicious transactions, or may
delay making such reports, for fear that
the disclosure of a SAR will interfere
with its relationship with its customer.
Further, a SAR may provide insight into
how a savings association or service
corporation uncovers potential criminal
conduct that can be used by others to
circumvent detection. The disclosure of
a SAR also could harm the personal
privacy interests of individuals and
reputational interests of companies that
may be named. Finally, the disclosure of
a SAR for uses unrelated to the law
enforcement and regulatory purposes for
which SARs are intended increases the
risk that savings associations’ or service
corporations’ employees or others who
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are involved in the preparation or filing
of a SAR could become targets for
retaliation by persons whose criminal
conduct has been reported.
These reasons for maintaining the
confidentiality of SARs also apply to
any information that would reveal the
existence of a SAR. Therefore, like
FinCEN, the OTS is proposing to modify
the general introduction in its rules to
state that confidential treatment must
also be afforded to ‘‘any information
that would reveal the existence of a
SAR.’’ The introduction also would
indicate that SAR information may not
be disclosed, except as authorized in the
narrow circumstances that follow.
Section 563.180(d): Prohibition on
Disclosure by Savings Associations
The OTS’s current rules provide that
any institution or person subpoenaed or
otherwise requested to disclose a SAR
or the information contained in a SAR
must (1) decline to produce the SAR or
to provide any information that would
disclose that a SAR has been prepared
or filed, and (2) notify the OTS.
The proposed rules more specifically
address the prohibition on the
disclosure of a SAR by a savings
association or service corporation. The
rules provide that the prohibition
includes ‘‘any information that would
reveal the existence of a SAR’’ instead
of using the phrase ‘‘any information
that would disclose that a SAR has been
prepared or filed.’’ The OTS, like
FinCEN and the OCC, believes that this
phrase more clearly describes the type
of information that is covered by the
prohibition on the disclosure of a SAR.
In addition, the proposed rules
incorporate the specific reference in 31
U.S.C. 5318(g)(2)(A)(i) to ‘‘directors,
officers, employees and agents,’’ in
order to clarify that the prohibition on
disclosure extends to those individuals
in a savings association or service
corporation who may have access to
SAR information.
Although 31 U.S.C. 5318(g)(2)(A)(i)
states that a ‘‘person involved in the
transaction may not be notified that the
transaction has been reported,’’ the
proposed rules continue to reflect case
law that has consistently concluded in
accordance with applicable regulations,
that financial institutions are broadly
prohibited from disclosing a SAR or
information that would reveal existence
of a SAR to any person. Accordingly,
these cases have held that, in the
context of discovery in connection with
civil lawsuits, financial institutions are
prohibited from disclosing a SAR or
information that would reveal the
existence of a SAR, because section
5318(g) and its implementing
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regulations have created an unqualified
discovery and evidentiary privilege for
such information that cannot be waived
by financial institutions.11 Consistent
with case law and current regulation,
the texts of the proposed rules do not
limit the prohibitions on disclosure only
to the person involved in the
transaction. Permitting disclosure 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
statute.
The proposed rules continue to
provide that any savings association, or
any director, officer, employee or agent
of a savings association, subpoenaed or
otherwise requested to disclose SAR
information must decline to provide the
information, citing this section of the
rules and 31 U.S.C. 5318(g)(2)(A)(i), and
must give notice of the request to the
OTS. In addition, the proposed rules
require the savings association or
service corporation to notify the OTS of
its response to the request, and require
the savings association or service
corporation, to provide the same
information to FinCEN. This new
notification requirement was added to
the proposed rules so that either or both
agencies can intervene to prevent the
disclosure of SAR information by a
savings association or service
corporation, if necessary.
Section 563.180(d)(12)(ii): Rules of
Construction
The OTS, like FinCEN and the OCC,
is proposing rules of construction to
address issues that have arisen over the
years about the scope of the SAR
disclosure prohibition, and to
implement statutory modifications to
the BSA made by the USA PATRIOT
Act. The proposed rules of construction
primarily describe situations that are
not covered by the prohibition on
disclosure of SAR information by a
savings association or service
corporation. The introduction to these
rules makes clear that the rules of
construction are each qualified by the
statutory mandate that no person
involved in any reported suspicious
transaction can be notified that the
transaction has been reported.
The first proposed rule of
construction states that a savings
association or service corporation, or
any director, officer, employee or agent
of a savings association or service
corporation may disclose SAR
11 See Whitney Nat’l Bank v. Karam, 306 F. Supp.
2d 678, 682 (S.D. Tex. 2004); Cotton v. Private Bank
and Trust Co., 235 F.Supp. 2d 809, 815 (N.D. Ill.
2002).
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information to FinCEN or any Federal,
state, or local law enforcement agency;
or any federal or state regulatory agency
that examines the financial institution
for compliance with the BSA. Although
the permissibility of such disclosures
may be readily apparent, the proposal
contains this statement to clarify that a
savings association or service
corporation cannot use the prohibition
on disclosure of SAR information to
withhold this information from
governmental authorities that are
otherwise entitled by law to receive
SARs and to examine for and investigate
suspicious activity.
The second proposed rule of
construction provides that SAR
information does not include the
underlying facts, transactions, and
documents upon which a SAR is based.
This statement reflects case law which
has recognized that, while a financial
institution is prohibited from producing
documents in discovery that evidence
the existence of a SAR, factual
documents created in the ordinary
course of business (for example,
business records and account
information, upon which a SAR is
based), may be discoverable in civil
litigation under the Federal Rules of
Civil Procedure.12
This proposed rule of construction
includes some illustrative examples of
situations where a savings association or
service corporation may disclose the
underlying facts, transactions, and
documents upon which a SAR is based.
The first example clarifies that a savings
association or service corporation may
disclose this information 13 to another
financial institution, or any director,
officer, employee or agent of the
financial institution, for the preparation
of a joint SAR.14 The second example
12 See Cotton v. Private Bank and Trust Co., 235
F. Supp. 2d 809, 815 (N.D. Ill. 2002).
13 The underlying facts, transactions, and
documents upon which a SAR is based do not
include previously filed SARs that were not jointly
filed.
14 On December 21, 2006, FinCEN and the Federal
bank regulatory agencies announced that the format
for the SAR form for depository institutions had
been revised to support a new joint filing initiative
to reduce the number of duplicate SARs filed for
a single suspicious transaction. ‘‘Suspicious
Activity Report (SAR) Revised to Support Joint
Filings and Reduce Duplicate SARs,’’ Joint Release
issued by FinCEN, the FRB, the OCC, the OTS, the
FDIC, and NCUA (Dec. 21, 2006). On February 17,
2006, FinCEN and the Federal bank regulatory
agencies published a joint Federal Register notice
seeking comment on proposed revisions to the SAR
form. See 71 FR 8640. On April 26, 2007, FinCEN
announced a delay in implementation of the revised
SAR form until further notice. See 72 FR 23891.
Although joint filing of SARs by depository
institutions is not permitted at this time, this
proposal would amend the agencies’ regulations to
enable depository institutions to make disclosures
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simply codifies a rule of construction
added to the BSA by section 351 of the
USA PATRIOT Act which provides that
such underlying information may be
disclosed in certain written employment
references and termination notices.15
The third proposed rule of
construction makes clear that the
prohibition on the disclosure of SAR
information by a savings association or
service corporation does not include the
sharing by a savings association or
service corporation, or any director,
officer, employee or agent of such a
financial institution, of SAR information
within the institution’s corporate
organizational structure, for purposes
consistent with Title II of the BSA, as
determined by regulation or in
published guidance. This proposed rule
recognizes that a savings association or
service corporation may find it
necessary to share SAR information to
fulfill its reporting obligations under the
BSA, and to facilitate more effective
enterprise-wide BSA monitoring and
reporting, consistent with Title II of the
BSA.
FinCEN and the Federal bank
regulatory agencies have already issued
joint guidance making clear that the
U.S. branch or agency of a foreign bank
may share a SAR with its head office,
and that a U.S. bank or savings
association may share a SAR with its
controlling company (whether domestic
or foreign). This guidance stated that the
sharing of a SAR with a head office or
controlling company both facilitates
compliance with the applicable
requirements of the BSA and enables
the head office or controlling company
to discharge its oversight
responsibilities with respect to
enterprise-wide risk management and
compliance with applicable laws and
regulations.16 Concurrent with this
proposed rulemaking, FinCEN is issuing
additional guidance for notice and
comment that further elaborates on
sharing of SAR information within a
corporate organization that FinCEN
considers to be ‘‘consistent with the
purposes of the BSA.’’ FinCEN has
indicated that the proposed guidance
would generally permit sharing of SAR
information by depository institutions
with their affiliates 17 that are subject to
necessary to effectuate joint SAR filings, in the
event that the revised SAR form becomes effective.
15 31 U.S.C. 5318(b)(2)(B).
16 ‘‘Interagency Guidance on Sharing Suspicious
Activity Reports with Head Offices and Controlling
Companies’’ (January 20, 2006).
17 Under the proposed guidance, an ‘‘affiliate’’ of
a depository institution means any company under
common control with, or controlled by, that
depository institution.
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a SAR.18 Consistent with the BSA and
the proposed rules of construction, the
proposed guidance also states that a
financial institution may not share SAR
information if the institution has reason
to believe that the SAR may be
disclosed to any person involved in the
suspicious activity that is the subject of
the SAR.
Section 563.180(d)(12): Prohibition on
Disclosure by the OTS
As previously noted, section 351 of
the USA PATRIOT Act, 31 U.S.C.
5318(g)(2)(A)(ii), amended the BSA, and
added a new provision prohibiting
officers and employees of the
government from disclosing a SAR
except ‘‘as necessary to fulfill the
official duties of such officer or
employee.’’ The OTS is proposing rules
to address this new section that are
comparable to those being proposed by
the OCC and FinCEN. The proposed
rules provide that the OTS will not, and
no officer, employee or agent of the
OTS, shall disclose SAR information,
‘‘except as necessary to fulfill official
duties consistent with Title II of the
Bank Secrecy Act.’’
As stated in section 5318(g)(2)(A)(i),
which prohibits a financial institution’s
disclosure of a SAR, section
5318(g)(2)(A)(ii) also prohibits the
government from disclosing a SAR to
‘‘any person involved in the
transaction.’’ The OTS, like the OCC
and FinCEN, is proposing to address
sections 5318(g)(2)(A)(i) and (A)(ii) in a
consistent manner, because disclosure
by a governmental authority of SAR
information to any outside party may
make it likely that the information will
be disclosed to a person involved in the
transaction. Accordingly, the section of
the rules that address the disclosure of
SAR information by the OTS and its
officers, employees and agents is broad,
and does not simply prohibit disclosure
to ‘‘any person involved in the
transaction.’’
Section 5318(g)(2)(A)(ii) narrowly
permits governmental disclosures as
necessary to ‘‘fulfill official duties,’’ a
phrase that is not defined in the BSA.
Consistent with the rules being
proposed by FinCEN and the OCC, the
OTS is proposing to construe this
phrase in the context of the BSA, in
light of the purpose for which SARs are
filed. Accordingly, the proposed rules
interpret ‘‘official duties’’ to mean
‘‘official duties consistent with the
purposes of Title II of the BSA,’’
namely, for ‘‘criminal, tax, or regulatory
investigations or proceedings, or in the
18 See, e.g., 12 CFR 21.11 (SAR rule applicable to
national banks).
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conduct of intelligence or
counterintelligence activities, including
analysis, to protect against international
terrorism.’’ 19 This standard would
permit, for example, disclosures
responsive to a grand jury subpoena; a
request from an appropriate federal or
State law enforcement or regulatory
agency; a request from an appropriate
Congressional committee or
subcommittee; 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.20
This proposed interpretation of section
5318(g)(2)(A)(ii) would ensure that SAR
information will not be disclosed for a
reason that is unrelated to the purposes
of the BSA. For example, this standard
would not permit disclosure of SAR
information to the media.
The proposed rules also specifically
provide 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
unpublished information under 12 CFR
510.3. This statement, which
corresponds to a similar provision in
FinCEN’s proposed rules, clearly
establishes that the OTS will not
disclose SAR information to a private
litigant for use in a private legal
proceeding, or pursuant to 12 CFR
510.3, because such a request cannot be
consistent with any of the purposes
enumerated in Title II of the BSA. The
BSA exists, in part, to protect the
public’s interest in an effective reporting
system that benefits the nation by
helping to ensure that the U.S. financial
system will not be used for criminal
activity or to support terrorism. The
OTS, like FinCEN, believes that this
purpose would be undermined by the
disclosure of SAR information to a
private litigant for use in a civil lawsuit
for the reasons described earlier,
including, that such disclosures will
chill full and candid reporting by
financial institutions, including savings
associations.
Finally, the proposed rules would
apply to the OTS, in addition to its
officers, employees, and agents.
Comparable to a provision being
proposed by FinCEN and the OCC, the
OTS is proposing to include the agency
itself in the scope of coverage, because
19 31 U.S.C. 5311 (setting forth the purposes of the
BSA).
20 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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requests for SAR information are
typically directed to the agency, rather
than to individuals within the OTS with
authority to respond to the request. In
addition, agents are included in the
proposed paragraph because agents of
the OTS may have access to SAR
information. Accordingly, this proposed
interpretation would more
comprehensively cover disclosures by
the OTS, agents of the OTS, and protect
the confidentiality of SAR information.
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Section 563.180(d)(13): Safe Harbor/
Limitation on Liability
In 1992, the Annunzio-Wylie Act
amended the BSA by providing a safe
harbor for financial institutions and
their employees from civil liability for
the reporting of known or suspected
criminal offenses or suspicious activity
through the filing of a SAR.21 FinCEN,
the OCC, and the OTS incorporated the
safe harbor provisions of the 1992 law
into their SAR rules.22 In Section 351 of
the USA PATRIOT Act, Congress
amended section 5318(g)(3) to clarify
the scope of the safe harbor provision to
include the voluntary disclosure of
possible violations of law and
regulations to a government agency, and
to expand the scope of the limit on
liability to include any liability which
may exist ‘‘under any contract or other
legally enforceable agreement (including
any arbitration agreement).’’ The OTS
has more closely tracked the statutory
language in the proposed rule,
particularly by stating that the safe
harbor applies to ‘‘disclosures’’ (and not
‘‘reports’’ as in some previous
rulemakings) made by institutions. The
OTS, like FinCEN and the OCC, has
incorporated the statutory expansion of
the safe harbor by placing a crossreference to section 5318(g)(3) in the
proposed rules.
Additionally, to comport with the
authorization to jointly file SARs, like
FinCEN, the OTS is clarifying that the
safe harbor also applies to ‘‘a disclosure
made jointly with another institution.’’
This concept exists currently in those
SAR rules where joint filing had been
explicitly referenced, but has been
revised to track more closely the
statutory language. It has also been
inserted for the sake of consistency into
those SAR rules where it had been
absent previously, clarifying that all
21 See
footnote 1.
31 CFR 103.18(e) (FinCEN), 12 CFR 21.11(l)
(OCC), 12 CFR 563.180(d)(13) (OTS). The safe
harbor regulations are also applicable to oral reports
of violations. In situations requiring immediate
attention, a financial institution must immediately
notify its regulator and appropriate law
enforcement by telephone, in addition to filing a
SAR. See, e.g., 12 CFR 563.180(d)(13).
22 See
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parties to a joint filing, and not simply
the party that provides the form to the
OTS or FinCEN, fall within the scope of
the safe harbor.
Conforming Amendments to 12 CFR
Part 510
The OTS is proposing to amend its
release of unpublished OTS information
rule set forth in 12 CFR part 510. Among
other things, the proposal clarifies that
the OTS’s disclosure of SAR
information will be governed
exclusively by the standards set forth in
the proposed amendments to the OTS’s
SAR rule set forth in 12 CFR 563.180.
The effect of these proposed
amendments is that the OTS: (i) Will not
release SAR information to private
litigants; and (ii) will only release SAR
information to other government
agencies, in response to a request or in
the exercise of its discretion, when
necessary to fulfill official duties
consistent with the purposes of Title II
of the BSA.
IV. Request for Comments
The OTS welcomes comments on any
aspect of these proposed amendments to
the SAR rules.
The OTS has timed the release of this
proposal to coincide with the issuance
of the proposed rule to amend the
information disclosure rules set forth in
12 CFR part 510, 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 invite
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
proposed regulations clearly stated? If
not, how could the regulations be more
clearly stated?
• Do the proposed regulations contain
language or jargon that is not clear? If
so, which language requires
clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulations
easier to understand? If so, what
changes to the format would make them
easier to understand?
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• What else could we do to make the
regulations easier to understand?
VI. OTS Regulatory Analysis
Regulatory Flexibility Act
Under section 605(b) of the
Regulatory Flexibility Act (RFA), 5
U.S.C. 605(b), the regulatory flexibility
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 this proposed rule
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
The OTS has reviewed the proposed
rule in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320, Appendix A.1) (PRA) and
has determined that it does 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 (2 U.S.C. 1532) (Unfunded
Mandates Act), requires that an agency
prepare a budgetary impact statement
before promulgating any rule likely to
result in 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 in any one year. The current
inflation-adjusted expenditure threshold
is $133 million. If a budgetary impact
statement is required, section 205 of the
Unfunded Mandates Act also requires
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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.
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*
*
*
*
*
(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,
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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
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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 https://
www.regulations.gov, under the ‘‘More
Search Options’’ tab click next to the
‘‘Advanced Docket Search’’ option
where indicated, select ‘‘Office of Thrift
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Agencies
[Federal Register Volume 74, Number 44 (Monday, March 9, 2009)]
[Proposed Rules]
[Pages 10139-10145]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-4701]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563
[Docket ID OTS-2008-0015]
RIN 1550-AC26
Confidentiality of Suspicious Activity Reports
AGENCY: The Office of Thrift Supervision, Treasury (OTS).
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The OTS is proposing to amend its regulations implementing the
Bank Secrecy Act (BSA) governing the confidentiality of a Suspicious
Activity Report (SAR) to: clarify the scope of the statutory
prohibition on the disclosure by a financial institution of a report of
a suspicious transaction, as it applies to savings associations and
service corporations; address the statutory prohibition on the
disclosure by the government of a report of a suspicious transaction,
as that prohibition applies to the OTS's standards governing the
disclosure of SARs; clarify the exclusive standard applicable to the
disclosure of a SAR, or any information that would reveal the existence
of a SAR, by the OTS is ``to fulfill official duties consistent with
the purposes of the BSA''; and modify the safe harbor provision in its
rules to include changes made by the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (USA PATRIOT) Act. These amendments are based upon a similar
proposal being contemporaneously issued by the Office of Comptroller of
the Currency (OCC) and the Financial Crimes Enforcement Network
(FinCEN).
DATES: Comments must be received by June 8, 2009.
ADDRESSES: You may submit comments, identified by OTS-2008-0015
(``docket number'') by any of the following methods:
Federal eRulemaking Portal:--``Regulations.gov'': Go to
https://www.regulations.gov, under the ``More Search Options'' tab click
next to the ``Advanced Docket Search'' option where indicated, select
``Office of Thrift Supervision'' from the agency drop-down menu, then
click ``Submit.'' In the
[[Page 10140]]
``Docket ID'' column, select ``OTS-2008-0015'' 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-2008-0015 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-2008-0015.
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-2008-0015.
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 https://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 https://
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-
0015]'' to view public comments for this rulemaking action.
Viewing Comments On-Site: You may inspect comments at the
OTS's 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: Louise Batdorf, Analyst, BSA and
Compliance Examinations (202-906-7087); Marvin Shaw, Senior Attorney,
Regulations and Legislation (202-906-6639); Margaret McPartlin, Senior
Attorney, Enforcement (202-906-6831); or Noelle Kurtin, Senior
Attorney, Enforcement (202-906-6739).
SUPPLEMENTARY INFORMATION:
I. Background
The BSA requires financial institutions, including savings
associations and service corporations regulated by the OTS, to keep
certain records and make certain reports that have been determined to
be useful in criminal, tax, or regulatory investigations or
proceedings, and for intelligence or counter intelligence activities to
protect against international terrorism. In particular, 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 transaction related to a money laundering activity or a
violation of the BSA, terrorist financing, or other criminal
activity.\1\
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\1\ The Annunzio-Wylie Anti-Money Laundering Act of 1992 (the
Annunzio-Wylie Act), amended the BSA and authorized the Secretary of
the Treasury to require financial institutions to report suspicious
transactions relevant to a possible violation of law or regulation.
See Public Law 102-550, Title XV, Sec. 1517(b), 106 Stat. 4055,
4058-9 (1992); 31 U.S.C. 5318(g)(1). The OCC, Board of Governors of
the Federal Reserve System (FRB), the Federal Deposit Insurance
Corporation (FDIC), the Office of Thrift Supervision (OTS), and the
National Credit Union Administration (NCUA), (collectively referred
to as the Federal bank regulatory agencies) subsequently issued
virtually identical implementing regulations on suspicious activity
reporting. See 12 CFR 21.11 (OCC); 12 CFR 208.62 (FRB); 12 CFR 353.3
(FDIC); 12 CFR 563.180 (OTS) and 12 CFR 748.1 (NCUA).
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SARs are used for law enforcement or regulatory purposes to combat
terrorism, terrorist financing, money laundering and other financial
crimes. For this reason, the BSA 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. To encourage the reporting of possible
violations of law and regulation, and the filing of SARs, the BSA also
contains a safe harbor provision which shields financial institutions
making such reports from civil liability. In 2001, the USA PATRIOT Act
clarified that the safe harbor covers voluntary disclosure of possible
violations of law and regulations to a government agency and expanded
the scope of the limit on liability to cover any civil liability which
may exist ``under any contract or other legally enforceable agreement
(including any arbitration agreement.)'' \2\
FinCEN \3\ has issued rules implementing SAR confidentiality
provisions for various types of financial institutions that closely
mirror the statutory language.\4\ In addition, the federal bank
regulatory agencies implemented these provisions through similar
regulations that provide that SARs are confidential and generally no
information about or contained in a SAR may be disclosed.\5\ The
regulations issued by FinCEN and the federal bank regulatory agencies
also describe the applicability of the safe harbor provision to both
voluntary reports of possible and known violations of law and
regulation and the required filing of SARs.
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\2\ See USA PATRIOT Act, section 351(a). Pub. L. 107-56, Title
III, Sec. 351, 115 Stat. 272, 321 (2001).
\3\ FinCEN is the agency designated by the Department of
Treasury to administer the BSA, and with which SARS must be filed.
See 31 U.S.C. 5318; 12 CFR 563.180(d).
\4\ See, e.g., 31 CFR 103.18(e) (SAR confidentiality rule for
banks); 31 CFR 103.19(e) (SAR confidentiality rule for brokers or
dealers in securities).
\5\ See 12 CFR 21.11(k) (OCC); 12 CFR 208.62(j) (FRB); 12 CFR
353.3(g) (FDIC); 12 CFR 563.180(d)(12) (OTS); and 12 CFR 748.1
(NCUA).
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The USA PATRIOT Act of 2001 strengthened the confidentiality of
SARs by adding to the BSA a new provision that prohibits officers or
employees of the Federal government or any State, local, tribal, or
territorial government within the United States from disclosing to any
person involved in a suspicious transaction that the transaction was
reported, other than as necessary to fulfill the official duties of
such officer or employee.\6\ The USA PATRIOT Act also expanded the safe
harbor provision shielding financial institutions from liability for
voluntary reporting of possible violations of law and regulations, and
the filing of SARs, to cover any civil liability which may exist
``under any contract or other legally enforceable agreement (including
any arbitration agreement).'' \7\
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\6\ See USA PATRIOT Act, section 351(b). Public Law 107-56,
Title III, Sec. 351, 115 Stat. 272, 321 (2001). 31 U.S.C.
5318(g)(2).
\7\ See USA PATRIOT Act, section 351(a). Public Law 107-56,
Title III, Sec. 351, 115 Stat. 272, 321 (2001).
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FinCEN is proposing to modify its SAR rule to interpret or further
interpret the provisions of the BSA that relate to the confidentiality
of SARs and the safe harbor for such reporting. The OTS is
[[Page 10141]]
proposing to amend its rule contemporaneously, based upon the proposal
being issued by FinCEN, to clarify the manner in which these provisions
apply to savings associations and service corporations and the OTS's
own standards governing the disclosure of a SAR and any information
that would reveal the existence of a SAR (referred to in this preamble
as ``SAR information'').
II. Overview of Proposal
The proposed amendments to the OTS's rule include key changes that
would (1) clarify the scope of the statutory prohibition on the
disclosure by a financial institution of a report of a suspicious
transaction, as it applies to savings associations and service
corporations; (2) address the statutory prohibition on the disclosure
by the government of a report of a suspicious transaction, which was
added to the BSA by section 351(b) of the USA PATRIOT Act of 2001, as
that prohibition applies to the OTS's standards governing the
disclosure of SAR information; and (3) clarify that the exclusive
standard applicable to the disclosure of SAR information by the OTS is
``to fulfill official duties consistent with the purposes of the BSA,''
in order to ensure that SAR information is protected from inappropriate
disclosures unrelated to the BSA purposes for which SARs are filed. In
addition, the proposed amendments would modify the safe harbor
provision in the OTS's SAR rules \8\ to include changes made by the USA
PATRIOT Act.
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\8\ 12 CFR 563.180(d)(13).
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In addition, as described in Section III, FinCEN is issuing for
notice and comment proposed guidance regarding the sharing of SARs with
affiliates. FinCEN's proposed guidance interprets a provision of the
proposed rulemaking, and, accordingly, should be read in conjunction
with this notice.
In a separate rulemaking, the OTS also is simultaneously proposing
to amend its information disclosure regulation set forth in 12 CFR
510.5, to clarify that the exclusive standard governing the release of
a SAR is set forth in 12 CFR 563.180. The OTS is issuing this proposed
amendment to 12 CFR part 510, at the same time, to make clear that the
OTS will disclose SAR information only when necessary to satisfy the
BSA purposes for which SARs are filed.
III. Section-by-Section Description of the Proposal
Section 563.180(d)(2)(iii): Definition of a SAR
The primary purpose of the OTS's SAR rule is to ensure that a
savings association or service corporation files a SAR when it detects
a known or suspected violation of a federal law or a suspicious
transaction related to a money laundering activity or a violation of
the BSA. See 12 CFR 563.180. Incidental to this purpose, the OTS's SAR
rule includes a section that addresses the confidentiality of SARs.
Under the current SAR rule, the term ``SAR'' means ``a Suspicious
Activity Report on the form prescribed by the OTS.'' The proposed rule
simply defines a ``SAR'' generically as ``a Suspicious Activity
Report.'' This change would extend the confidentiality provisions of
the OTS's SAR rule to all SARs, including those filed on forms
prescribed by FinCEN.\9\ As a consequence, a savings association or
service corporation that obtained a SAR, for example, from a non-bank
affiliate pursuant to the provisions of this proposed rule, would be
required to safeguard the confidentiality of the SAR, even if the SAR
had not been filed on a form prescribed by the OTS.
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\9\ See, e.g., 31 CFR 103.19 (FinCEN regulations requiring
brokers or dealers in securities to file reports of suspicious
transactions on a SAR-S-F).
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Section 563.180(d)(3): SARs Required
To clarify that a savings association or service corporation must
file a SAR on a form ``prescribed by the OTS,'' the OTS is proposing to
add this phrase to the introductory language of the section of the
OTS's SAR rule that describes the procedures for filing of a SAR.
Accordingly, the proposed rules require a savings association or
service corporation to file a SAR with the appropriate Federal law
enforcement agencies and the Department of the Treasury on the form
prescribed by the OTS in accordance with the form's instructions, by
sending a completed SAR to FinCEN.
Section 563.180(d)(12): Confidentiality of SARs
The OTS is proposing to amend its rules regarding SAR
confidentiality \10\ by modifying the introductory sentence, and
dividing the remainder of the current provision into two sections. The
first section would describe the prohibition on disclosure of SAR
information by savings associations and service corporations, and the
rules of construction applicable to this prohibition. The second
section would describe the prohibition on the OTS's disclosure of SAR
information.
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\10\ 12 CFR 563.180(d)(12).
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Currently, the OTS's rules prohibiting the disclosure of SARs
begins with the statement that SARs are confidential. Over the years,
the OTS has received numerous questions regarding the scope of the
prohibition on the disclosure of a SAR in the OTS's current rules.
Accordingly, the OTS is proposing to clarify the scope of SAR
confidentiality by more clearly describing the information that is
subject to the prohibition. Like FinCEN, the OTS believes that all of
the reasons for maintaining the confidentiality of SARs are equally
applicable to any information that would reveal the existence of a SAR.
The OTS believes that the confidentiality of a SAR cannot be
maintained unless any information that would reveal the existence of a
SAR (such as the draft of a SAR that has been filed) is protected from
disclosure. The confidentiality of SARs must be maintained for a number
of compelling reasons. For example, the disclosure of a SAR could
result in notification to persons involved in the transaction that is
being reported, and compromise any investigations being conducted in
connection with the SAR. In addition, even the occasional disclosure of
a SAR could chill the willingness of a savings association or service
corporation to file SARs, and to provide the degree of detail and
completeness in describing suspicious activity in SARs that will be of
use to law enforcement. If a savings association or service corporation
believes that a SAR can be used for purposes unrelated to the law
enforcement and regulatory purposes of the BSA, the disclosure of such
information could adversely affect the timely, appropriate, and candid
reporting of suspicious transactions. Savings associations and service
corporations also may be reluctant to report suspicious transactions,
or may delay making such reports, for fear that the disclosure of a SAR
will interfere with its relationship with its customer. Further, a SAR
may provide insight into how a savings association or service
corporation uncovers potential criminal conduct that can be used by
others to circumvent detection. The disclosure of a SAR also could harm
the personal privacy interests of individuals and reputational
interests of companies that may be named. Finally, the disclosure of a
SAR for uses unrelated to the law enforcement and regulatory purposes
for which SARs are intended increases the risk that savings
associations' or service corporations' employees or others who
[[Page 10142]]
are involved in the preparation or filing of a SAR could become targets
for retaliation by persons whose criminal conduct has been reported.
These reasons for maintaining the confidentiality of SARs also
apply to any information that would reveal the existence of a SAR.
Therefore, like FinCEN, the OTS is proposing to modify the general
introduction in its rules to state that confidential treatment must
also be afforded to ``any information that would reveal the existence
of a SAR.'' The introduction also would indicate that SAR information
may not be disclosed, except as authorized in the narrow circumstances
that follow.
Section 563.180(d): Prohibition on Disclosure by Savings Associations
The OTS's current rules provide that any institution or person
subpoenaed or otherwise requested to disclose a SAR or the information
contained in a SAR must (1) decline to produce the SAR or to provide
any information that would disclose that a SAR has been prepared or
filed, and (2) notify the OTS.
The proposed rules more specifically address the prohibition on the
disclosure of a SAR by a savings association or service corporation.
The rules provide that the prohibition includes ``any information that
would reveal the existence of a SAR'' instead of using the phrase ``any
information that would disclose that a SAR has been prepared or
filed.'' The OTS, like FinCEN and the OCC, believes that this phrase
more clearly describes the type of information that is covered by the
prohibition on the disclosure of a SAR. In addition, the proposed rules
incorporate the specific reference in 31 U.S.C. 5318(g)(2)(A)(i) to
``directors, officers, employees and agents,'' in order to clarify that
the prohibition on disclosure extends to those individuals in a savings
association or service corporation who may have access to SAR
information.
Although 31 U.S.C. 5318(g)(2)(A)(i) states that a ``person involved
in the transaction may not be notified that the transaction has been
reported,'' the proposed rules continue to reflect case law that has
consistently concluded in accordance with applicable regulations, that
financial institutions are broadly prohibited from disclosing a SAR or
information that would reveal existence of a SAR to any person.
Accordingly, these cases have held that, in the context of discovery in
connection with civil lawsuits, financial institutions are prohibited
from disclosing a SAR or information that would reveal the existence of
a SAR, because section 5318(g) and its implementing regulations have
created an unqualified discovery and evidentiary privilege for such
information that cannot be waived by financial institutions.\11\
Consistent with case law and current regulation, the texts of the
proposed rules do not limit the prohibitions on disclosure only to the
person involved in the transaction. Permitting disclosure 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 statute.
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\11\ See Whitney Nat'l Bank v. Karam, 306 F. Supp. 2d 678, 682
(S.D. Tex. 2004); Cotton v. Private Bank and Trust Co., 235 F.Supp.
2d 809, 815 (N.D. Ill. 2002).
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The proposed rules continue to provide that any savings
association, or any director, officer, employee or agent of a savings
association, subpoenaed or otherwise requested to disclose SAR
information must decline to provide the information, citing this
section of the rules and 31 U.S.C. 5318(g)(2)(A)(i), and must give
notice of the request to the OTS. In addition, the proposed rules
require the savings association or service corporation to notify the
OTS of its response to the request, and require the savings association
or service corporation, to provide the same information to FinCEN. This
new notification requirement was added to the proposed rules so that
either or both agencies can intervene to prevent the disclosure of SAR
information by a savings association or service corporation, if
necessary.
Section 563.180(d)(12)(ii): Rules of Construction
The OTS, like FinCEN and the OCC, is proposing rules of
construction to address issues that have arisen over the years about
the scope of the SAR disclosure prohibition, and to implement statutory
modifications to the BSA made by the USA PATRIOT Act. The proposed
rules of construction primarily describe situations that are not
covered by the prohibition on disclosure of SAR information by a
savings association or service corporation. The introduction to these
rules makes clear that the rules of construction are each qualified by
the statutory mandate that no person involved in any reported
suspicious transaction can be notified that the transaction has been
reported.
The first proposed rule of construction states that a savings
association or service corporation, or any director, officer, employee
or agent of a savings association or service corporation may disclose
SAR information to FinCEN or any Federal, state, or local law
enforcement agency; or any federal or state regulatory agency that
examines the financial institution for compliance with the BSA.
Although the permissibility of such disclosures may be readily
apparent, the proposal contains this statement to clarify that a
savings association or service corporation cannot use the prohibition
on disclosure of SAR information to withhold this information from
governmental authorities that are otherwise entitled by law to receive
SARs and to examine for and investigate suspicious activity.
The second proposed rule of construction provides that SAR
information does not include the underlying facts, transactions, and
documents upon which a SAR is based. This statement reflects case law
which has recognized that, while a financial institution is prohibited
from producing documents in discovery that evidence the existence of a
SAR, factual documents created in the ordinary course of business (for
example, business records and account information, upon which a SAR is
based), may be discoverable in civil litigation under the Federal Rules
of Civil Procedure.\12\
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\12\ See Cotton v. Private Bank and Trust Co., 235 F. Supp. 2d
809, 815 (N.D. Ill. 2002).
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This proposed rule of construction includes some illustrative
examples of situations where a savings association or service
corporation may disclose the underlying facts, transactions, and
documents upon which a SAR is based. The first example clarifies that a
savings association or service corporation may disclose this
information \13\ to another financial institution, or any director,
officer, employee or agent of the financial institution, for the
preparation of a joint SAR.\14\ The second example
[[Page 10143]]
simply codifies a rule of construction added to the BSA by section 351
of the USA PATRIOT Act which provides that such underlying information
may be disclosed in certain written employment references and
termination notices.\15\
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\13\ The underlying facts, transactions, and documents upon
which a SAR is based do not include previously filed SARs that were
not jointly filed.
\14\ On December 21, 2006, FinCEN and the Federal bank
regulatory agencies announced that the format for the SAR form for
depository institutions had been revised to support a new joint
filing initiative to reduce the number of duplicate SARs filed for a
single suspicious transaction. ``Suspicious Activity Report (SAR)
Revised to Support Joint Filings and Reduce Duplicate SARs,'' Joint
Release issued by FinCEN, the FRB, the OCC, the OTS, the FDIC, and
NCUA (Dec. 21, 2006). On February 17, 2006, FinCEN and the Federal
bank regulatory agencies published a joint Federal Register notice
seeking comment on proposed revisions to the SAR form. See 71 FR
8640. On April 26, 2007, FinCEN announced a delay in implementation
of the revised SAR form until further notice. See 72 FR 23891.
Although joint filing of SARs by depository institutions is not
permitted at this time, this proposal would amend the agencies'
regulations to enable depository institutions to make disclosures
necessary to effectuate joint SAR filings, in the event that the
revised SAR form becomes effective.
\15\ 31 U.S.C. 5318(b)(2)(B).
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The third proposed rule of construction makes clear that the
prohibition on the disclosure of SAR information by a savings
association or service corporation does not include the sharing by a
savings association or service corporation, or any director, officer,
employee or agent of such a financial institution, of SAR information
within the institution's corporate organizational structure, for
purposes consistent with Title II of the BSA, as determined by
regulation or in published guidance. This proposed rule recognizes that
a savings association or service corporation may find it necessary to
share SAR information to fulfill its reporting obligations under the
BSA, and to facilitate more effective enterprise-wide BSA monitoring
and reporting, consistent with Title II of the BSA.
FinCEN and the Federal bank regulatory agencies have already issued
joint guidance making clear that the U.S. branch or agency of a foreign
bank may share a SAR with its head office, and that a U.S. bank or
savings association may share a SAR with its controlling company
(whether domestic or foreign). This guidance stated that the sharing of
a SAR with a head office or controlling company both facilitates
compliance with the applicable requirements of the BSA and enables the
head office or controlling company to discharge its oversight
responsibilities with respect to enterprise-wide risk management and
compliance with applicable laws and regulations.\16\ Concurrent with
this proposed rulemaking, FinCEN is issuing additional guidance for
notice and comment that further elaborates on sharing of SAR
information within a corporate organization that FinCEN considers to be
``consistent with the purposes of the BSA.'' FinCEN has indicated that
the proposed guidance would generally permit sharing of SAR information
by depository institutions with their affiliates \17\ that are subject
to a SAR.\18\ Consistent with the BSA and the proposed rules of
construction, the proposed guidance also states that a financial
institution may not share SAR information if the institution has reason
to believe that the SAR may be disclosed to any person involved in the
suspicious activity that is the subject of the SAR.
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\16\ ``Interagency Guidance on Sharing Suspicious Activity
Reports with Head Offices and Controlling Companies'' (January 20,
2006).
\17\ Under the proposed guidance, an ``affiliate'' of a
depository institution means any company under common control with,
or controlled by, that depository institution.
\18\ See, e.g., 12 CFR 21.11 (SAR rule applicable to national
banks).
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Section 563.180(d)(12): Prohibition on Disclosure by the OTS
As previously noted, section 351 of the USA PATRIOT Act, 31 U.S.C.
5318(g)(2)(A)(ii), amended the BSA, and added a new provision
prohibiting officers and employees of the government from disclosing a
SAR except ``as necessary to fulfill the official duties of such
officer or employee.'' The OTS is proposing rules to address this new
section that are comparable to those being proposed by the OCC and
FinCEN. The proposed rules provide that the OTS will not, and no
officer, employee or agent of the OTS, shall disclose SAR information,
``except as necessary to fulfill official duties consistent with Title
II of the Bank Secrecy Act.''
As stated in section 5318(g)(2)(A)(i), which prohibits a financial
institution's disclosure of a SAR, section 5318(g)(2)(A)(ii) also
prohibits the government from disclosing a SAR to ``any person involved
in the transaction.'' The OTS, like the OCC and FinCEN, is proposing to
address sections 5318(g)(2)(A)(i) and (A)(ii) in a consistent manner,
because disclosure by a governmental authority of SAR information to
any outside party may make it likely that the information will be
disclosed to a person involved in the transaction. Accordingly, the
section of the rules that address the disclosure of SAR information by
the OTS and its officers, employees and agents is broad, and does not
simply prohibit disclosure to ``any person involved in the
transaction.''
Section 5318(g)(2)(A)(ii) narrowly permits governmental disclosures
as necessary to ``fulfill official duties,'' a phrase that is not
defined in the BSA. Consistent with the rules being proposed by FinCEN
and the OCC, the OTS is proposing to construe this phrase in the
context of the BSA, in light of the purpose for which SARs are filed.
Accordingly, the proposed rules interpret ``official duties'' to mean
``official duties consistent with the purposes of Title II of the
BSA,'' namely, for ``criminal, tax, or regulatory investigations or
proceedings, or in the conduct of intelligence or counterintelligence
activities, including analysis, to protect against international
terrorism.'' \19\ This standard would permit, for example, disclosures
responsive to a grand jury subpoena; a request from an appropriate
federal or State law enforcement or regulatory agency; a request from
an appropriate Congressional committee or subcommittee; 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.\20\ This proposed interpretation
of section 5318(g)(2)(A)(ii) would ensure that SAR information will not
be disclosed for a reason that is unrelated to the purposes of the BSA.
For example, this standard would not permit disclosure of SAR
information to the media.
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\19\ 31 U.S.C. 5311 (setting forth the purposes of the BSA).
\20\ 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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The proposed rules also specifically provide 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 unpublished information under
12 CFR 510.3. This statement, which corresponds to a similar provision
in FinCEN's proposed rules, clearly establishes that the OTS will not
disclose SAR information to a private litigant for use in a private
legal proceeding, or pursuant to 12 CFR 510.3, because such a request
cannot be consistent with any of the purposes enumerated in Title II of
the BSA. The BSA exists, in part, to protect the public's interest in
an effective reporting system that benefits the nation by helping to
ensure that the U.S. financial system will not be used for criminal
activity or to support terrorism. The OTS, like FinCEN, believes that
this purpose would be undermined by the disclosure of SAR information
to a private litigant for use in a civil lawsuit for the reasons
described earlier, including, that such disclosures will chill full and
candid reporting by financial institutions, including savings
associations.
Finally, the proposed rules would apply to the OTS, in addition to
its officers, employees, and agents. Comparable to a provision being
proposed by FinCEN and the OCC, the OTS is proposing to include the
agency itself in the scope of coverage, because
[[Page 10144]]
requests for SAR information are typically directed to the agency,
rather than to individuals within the OTS with authority to respond to
the request. In addition, agents are included in the proposed paragraph
because agents of the OTS may have access to SAR information.
Accordingly, this proposed interpretation would more comprehensively
cover disclosures by the OTS, agents of the OTS, and protect the
confidentiality of SAR information.
Section 563.180(d)(13): Safe Harbor/Limitation on Liability
In 1992, the Annunzio-Wylie Act amended the BSA by providing a safe
harbor for financial institutions and their employees from civil
liability for the reporting of known or suspected criminal offenses or
suspicious activity through the filing of a SAR.\21\ FinCEN, the OCC,
and the OTS incorporated the safe harbor provisions of the 1992 law
into their SAR rules.\22\ In Section 351 of the USA PATRIOT Act,
Congress amended section 5318(g)(3) to clarify the scope of the safe
harbor provision to include the voluntary disclosure of possible
violations of law and regulations to a government agency, and to expand
the scope of the limit on liability to include any liability which may
exist ``under any contract or other legally enforceable agreement
(including any arbitration agreement).'' The OTS has more closely
tracked the statutory language in the proposed rule, particularly by
stating that the safe harbor applies to ``disclosures'' (and not
``reports'' as in some previous rulemakings) made by institutions. The
OTS, like FinCEN and the OCC, has incorporated the statutory expansion
of the safe harbor by placing a cross-reference to section 5318(g)(3)
in the proposed rules.
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\21\ See footnote 1.
\22\ See 31 CFR 103.18(e) (FinCEN), 12 CFR 21.11(l) (OCC), 12
CFR 563.180(d)(13) (OTS). The safe harbor regulations are also
applicable to oral reports of violations. In situations requiring
immediate attention, a financial institution must immediately notify
its regulator and appropriate law enforcement by telephone, in
addition to filing a SAR. See, e.g., 12 CFR 563.180(d)(13).
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Additionally, to comport with the authorization to jointly file
SARs, like FinCEN, the OTS is clarifying that the safe harbor also
applies to ``a disclosure made jointly with another institution.'' This
concept exists currently in those SAR rules where joint filing had been
explicitly referenced, but has been revised to track more closely the
statutory language. It has also been inserted for the sake of
consistency into those SAR rules where it had been absent previously,
clarifying that all parties to a joint filing, and not simply the party
that provides the form to the OTS or FinCEN, fall within the scope of
the safe harbor.
Conforming Amendments to 12 CFR Part 510
The OTS is proposing to amend its release of unpublished OTS
information rule set forth in 12 CFR part 510. Among other things, the
proposal clarifies that the OTS's disclosure of SAR information will be
governed exclusively by the standards set forth in the proposed
amendments to the OTS's SAR rule set forth in 12 CFR 563.180. The
effect of these proposed amendments is that the OTS: (i) Will not
release SAR information to private litigants; and (ii) will only
release SAR information to other government agencies, in response to a
request or in the exercise of its discretion, when necessary to fulfill
official duties consistent with the purposes of Title II of the BSA.
IV. Request for Comments
The OTS welcomes comments on any aspect of these proposed
amendments to the SAR rules.
The OTS has timed the release of this proposal to coincide with the
issuance of the proposed rule to amend the information disclosure rules
set forth in 12 CFR part 510, 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 invite 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 proposed regulations clearly
stated? If not, how could the regulations be more clearly stated?
Do the proposed regulations contain language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) 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?
VI. OTS Regulatory Analysis
Regulatory Flexibility Act
Under section 605(b) of the Regulatory Flexibility Act (RFA), 5
U.S.C. 605(b), the regulatory flexibility 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 this proposed rule 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
The OTS has reviewed the proposed rule in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320, Appendix
A.1) (PRA) and has determined that it does 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 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in 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 in any one year. The
current inflation-adjusted expenditure threshold is $133 million. If a
budgetary impact statement is required, section 205 of the Unfunded
Mandates Act also requires
[[Page 10145]]
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:
Sec. 563.180 Suspicious Activity Reports and Other Reports and
Statements.
* * * * *
(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, 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 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