Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity

DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AA26, 1506–AA27 Financial Crimes Enforcement Network; Special Information Sharing Procedures To Deter Money Laundering and Terrorist Activity AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: FinCEN, a bureau of the Treasury Department, is proposing regulations to implement provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 that encourage information sharing among financial institutions and federal government law enforcement agencies to identify, prevent, and deter money laundering and terrorist activity. DATES: Written comments on all aspects of the proposed rule must be received on or before April 3, 2002. ADDRESSES: Written comments should be submitted to: Special Information Sharing—Section 314 Comments, PO Box 1618, Vienna, VA 22183–1618. Comments may also be submitted by electronic mail to the following Internet address: regcomments@fincen.treas.gov with the caption in the body of the text, ‘‘Attention: Proposed Rule—Special Information Sharing—Section 314.’’ For additional instructions on the submission of comments, see SUPPLEMENTARY INFORMATION under the heading ‘‘Submission of Comments.’’ Comments may be inspected at FinCEN between 10 a.m. and 4 p.m., in the FinCEN Reading Room in Washington, DC. Persons wishing to inspect the comments submitted must request an appointment by telephoning (202) 354– 6400 (not a toll-free call). FOR FURTHER INFORMATION CONTACT:
Judith R. Starr, Chief Counsel (FinCEN), (703) 905–3590; William Langford, Senior Counsel for Financial Crimes, Office of the Assistant General Counsel (Enforcement), (202) 622–1932; or Gary W. Sutton, Senior Banking Counsel, Office of the Assistant General Counsel (Banking & Finance), (202) 622–1976 (not toll-free numbers). Financial institutions with questions about their coverage or compliance obligations under this rule should contact their appropriate federal regulator. SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President signed into law the USA PATRIOT Act of 2001 (Public Law 107–56) (the Act). Of the Act’s many goals, the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering is of paramount importance.
Section 314 of the Act furthers this goal
by providing for the sharing of information between the government and financial institutions, and among financial institutions themselves. As with many other provisions of the Act, Congress has charged Treasury with developing regulations to implement these information-sharing provisions.
Section 314(a) of the Act requires
regulations encouraging cooperation between financial institutions and the federal government through the exchange of information regarding individuals, entities, and organizations engaged in or reasonably suspected of engaging in terrorist acts or money laundering activities. Section 314(b), on the other hand, permits financial institutions, upon providing notice to Treasury, to share information with one another in order to better identify and report to the federal government concerning activities that may involve money laundering or terrorist activities. First, utilizing the existing and future communication resources of the Financial Crimes Enforcement Network (FinCEN), this proposed rule seeks to create a communication network linking federal law enforcement with the financial industry so that vital information relating to suspected terrorists and money launderers can be exchanged quickly and without compromising pending investigations. FinCEN, a bureau of Treasury, already maintains a government-wide data access service to assist federal, state, and local law enforcement agencies in the detection, prevention, and prosecution of terrorism, organized crime, money laundering, and other financial crimes. Under the proposed rule, federal law enforcement will have the ability to locate accounts of, and transactions conducted by, suspected terrorists or money launderers by providing their names and identifying information to FinCEN, which will then communicate that information to financial institutions so that a check of accounts and transactions can be made. If matches are found, law enforcement can then follow up with the financial institution directly. The rule is intended to formalize and streamline the information sharing and reporting process that the federal government undertook following the attacks of September 11, 2001, by permitting FinCEN to serve as a conduit for information sharing between federal law enforcement agencies and financial institutions. FinCEN is uniquely positioned to serve as the communication gateway under section 314(a). Indeed, it already provides considerable information relating to financial crimes to the financial community in a variety of ways. It issues Suspicious Activity Report (SAR) Bulletins, which digest information drawn from SARs to illustrate indicia of suspicious activity, and SAR Activity Reviews, which present trends, tips and issues in suspicious activity reporting. FinCEN issues advisories to alert the financial community to specific activities and areas that merit enhanced scrutiny, including countries with lax anti-money laundering controls. In addition, FinCEN provides industry guidance on its website. The financial services industry also makes substantial use of FinCEN’s regulatory helpline. Second, Congress authorized the sharing of information among financial institutions relating to suspected terrorists and money launderers only after providing notice to Treasury, for the purpose of
identifying and reporting to the federal government such activities. The notice provision outlined below—a yearly certification to FinCEN that information will be shared and protected from inappropriate disclosure—combined with the requirement that any money laundering or terrorist activities uncovered be reported to FinCEN or other law enforcement, will allow for the sharing of information while protecting the privacy interests of customers of financial institutions. Given the importance of this information sharing provision, Treasury is issuing simultaneously an interim rule implementing section 314(b), which is published elsewhere in this issue of the Federal Register. The regulatory text of the interim rule and this proposed rule are identical with respect to section 314(b). Nothing in this proposed rule affects the existing authority of federal agencies to obtain information directly from financial institutions, as authorized by law or regulation, pursuant to their own established and approved procedures. Moreover, nothing in the proposed rule affects a financial institution’s obligation to file a SAR, or its duty to contact directly a federal agency concerning individuals or entities suspected of engaging in terrorist acts or money laundering activities.