Pilot Program on Sharing of Suspicious Activity Reports and Related Information With Foreign Branches, Subsidiaries, and Affiliates
- Source: federalregister.gov
Treliant Takeaway:
Companies need to review and refresh their existing policies and controls to prevent money laundering, terrorist financing, and other illicit financial activity, as well as evaluating evaluate their suspicious transaction activity reporting obligations and associated controls for information sharing. Our team at Treliant, which includes compliance professionals, ex-regulators, and auditors has deep experience across Anti-Money Laundering and Economic Sanctions program development, FCPA, and assurance and remediation is well equipped to help our clients build strong and effective programs to respond to any government scrutiny.
Highlights:
On January 25, FinCEN issued a Notice of Proposed Rulemaking (NPRM) about the establishment of a limited-duration pilot program for sharing SARs that, subject to certain conditions and approval by FinCEN, would allow a financial institution to share SARs and information related to SARs with its foreign branches, subsidiaries and affiliates for the purpose of combating illicit finance risks. The pilot’s purpose is to assist financial institutions in further combating illicit finance risks and provide FinCEN feedback about the value of SARs sharing. The NPRM seeks public comment on, amongst other topics, expected costs and benefits, whether a longer-term program is warranted, the reasonableness of conditions imposed by FinCEN for SAR sharing, and potential challenges. Comments are due by March 28, 2022.
Summary of the salient aspects of the proposed pilot are noted below:
| Topic | Description |
| Who is eligible? | Financial institutions that are obligated to report suspicious activity are eligible to participate in the pilot program. Eligible institutions include banks, casinos and card clubs, money services businesses, brokers or dealers in securities, mutual funds, insurance companies, futures commission merchants and introducing brokers in commodities, loan or finance companies, and housing government-sponsored enterprises. |
| How should a financial institution apply to participate in the pilot? | Submit a written application to FinCEN including:
1. Institution’s Point of Contact for the program 2. Institution’s existing internal controls for safeguarding SARs and related information 3. Institution’s foreign subsidiaries and branches where SAR and related information will be shared 4. Intended usage of the shared SAR information by the foreign subsidiaries and branches and whether they will be providing reciprocal information 5. Estimated start date of the program |
| Timing and selection criteria for participation in the pilot | Within 90 days of application receipt, the financial institution will be informed of FinCEN’s decision to accept/deny.
FinCEN’s evaluation criteria include 1. Strength of applicant’s internal controls 2. Foreign subsidiaries and branches receiving information, along with their locations |
| Any additional participant requirements? | To participate in the Pilot, financial institutions are required to implement a defined set of internal controls and follow a defined set of record keeping and reporting requirements.
Internal controls to implemented include written confidentiality agreements with foreign affiliate personnel regarding SAR confidentiality, proper review procedures to address SAR requests from foreign subsidiaries and branches, and secure data transmission and storage of SAR information across institutions and their subsidiaries.
Reporting Requirements include immediate FinCEN alerting of unauthorized disclosures and quarterly reporting of the total numbers of SARs and related information shared along with the details of the location, identity and usage of shared information at the institution’s subsidiary, branch or affiliate. |
| Pilot Duration | The proposed program will terminate three years from the enactment of the AML Act – January 1, 2024. |
| NPRM Comments | Written comments on this proposed rule must be sent by March 28, 2022. |
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