The director of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) said the agency wants to encourage more financial institutions to share information among their peers regarding suspicious transactions.
FinCEN head Kenneth Blanco told the membership of the American Bankers Association and American Bar Association at a virtual conference Thursday that the agency issued updated guidance on interpreting Section 314(b) of the PATRIOT Act, which allows financial institutions to share information regarding suspicious activity related to money laundering and/or terrorist financing.
“Frankly, many have been calling for clarity in this area for a long time—I have been one of those most vocal about this needed change,” Blanco said in his remarks. FinCEN’s updated guidance released Thursday was designed “with the hope of enhancing participation and utility of the 314(b) program,” he said.
The guidance attempts to widen the type of information that can be shared under the PATRIOT Act’s safe harbor provision, which can be used by financial institutions as a legal shield against lawsuits filed by customers upset their personal information was shared as part of an investigation into money laundering and/or terrorist financing.
The guidance said financial institutions seeking to share information on suspicious transactions “need not have specific information indicating that the activity in regards to which it proposes to share information directly relates to proceeds of an SUA (specified unlawful activity) or to transactions involving the proceeds of money laundering, nor must a financial institution or association have reached a conclusive determination that the activity is suspicious.”
Instead, it can share information if it has a “reasonable basis” to believe a transaction is connected to money laundering and/or terrorist financing, “even if the financial institution or association cannot identify specific proceeds of an SUA being laundered.”
The update from FinCEN also withdraws previous guidance issued in 2009 and 2016, as well as a 2012 administrative ruling, all of which interpreted the parameters of the safe harbor more narrowly.
Financial institution participation in Section 314(b), launched in 2002, is voluntary. A September 2017 audit of the program by the Office of Inspector General (OIG) found of the 22,000 financial institutions covered by Section 314(a), only about 5,500 of them—1 in 4—shared information on suspicious transactions with peer financial institutions as allowed by the law.
The OIG report found financial institutions “were concerned about participating” in the information sharing program, despite FinCEN guidance laying out the parameters of the safe harbor. The report did not elaborate on the concerns of financial institutions, but instead encouraged FinCEN to “address areas of concern regarding the Section 314(b) program and include these in guidance and outreach to encourage greater participation in the program.”
“When it comes to protecting our communities and preventing crimes and bad acts, we are all partners in the fight,” Blanco said. “FinCEN is committed to seeking ways to make that fight more effective and efficient for us all. I hope you view today’s announcement as making good on that commitment.”