The Importance of the Voluntary 314(b) Information Sharing Program
Following the September 11th terrorist attacks, the USA PATRIOT Act (the Act) was passed by Congress to improve U.S. law enforcement’s ability to detect and deter terrorism. The legislation’s official name confirms that: Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. Many sections of the Act allow for BSA professionals to assist law enforcement with preventing money laundering and other financial crimes.
Section 314(b) of the Act allows two or more financial institutions to share information on a voluntary basis “for purposes of identifying and, where appropriate, reporting activities that the financial institution or association suspects may involve possible terrorist activity or money laundering.” Eligible financial institutions include those covered under the FinCEN requirements of having an anti-money laundering program: banks and credit unions, finance companies, insurance companies, money services businesses, securities firms, etc.
In order to participate, a financial institution must register on the FinCEN website (available here: https://www.fincen.gov/314b/Register). Registering covers the institution with a “safe harbor” clause protecting them from liability.
According to FinCEN, information sharing can help financial institutions enhance compliance with their anti-money laundering/counter-terrorist financing (AML/CTF) requirements, most notably with respect to:
- Gathering additional information on customers or transactions potentially related to money laundering or terrorist financing;
- Shedding more light on overall financial trails, especially if they are complex and appear to be layered among numerous financial institutions;
- Building a more comprehensive and accurate picture of a customer’s activities where potential money laundering or terrorist financing is suspected;
- Alerting other participating financial institutions to customers whose suspicious activities it may not have been previously aware;
- Facilitating the filing of more comprehensive SARs than would otherwise be filed in the absence of 314(b) information sharing;
- Identifying and aiding in the detection of money laundering and terrorist financing methods and schemes; and
- Facilitating efficient SAR reporting decisions – for example, when a financial institution obtains a more complete picture of activity through the voluntary information sharing process and determines that no SAR is required for transactions that may have initially appeared suspicious.
This seems fairly simple in theory: register and work with other AML professionals to assist law enforcement in stopping terrorism and money laundering. What financial institution wouldn’t want to participate? Apparently, many, making it one of the most underutilized tools that the Act has provided to financial institutions. FinCEN Resource Center Insights states that in 2016 there were 9,766 bank and non-bank institutions participating in 314(b), as compared to approximately 16,000 participating in the mandated 314(a) reporting.
But what is a financial institution’s true responsibility to participate if it is a voluntary program?
Each institution has its own reasons for not participating or registering; some of which include:
- Fear of violating privacy laws
- Examiner scrutiny on an additional policy and procedure for 314(b)
- A halt in suspicious activity workflow
- Delay in filing SARs –waiting on information
- Lack of response from other financial institutions
- Cost of doing something voluntary when workload is already heavy
In 2009, FinCEN issued guidance (FIN-2009-G002) to help eliminate the fear of violating privacy laws for participating institutions. It clarified that a financial institution voluntarily sharing information is protected under the safe harbor act when the institution suspects the involvement of specified unlawful activity. The guidance noted a “financial institution must comply with the requirements of the implementing regulation, including provision of notice to FinCEN, taking reasonable steps to verify that the other financial institution has submitted the requisite notice, and restrictions on the use and security of information shared.” Additionally, developing and following well-documented processes could alleviate the fear of examiner scrutiny.
By participating in 314(b), BSA professionals provide more robust and complete information in their SARs, making it easier and more efficient for law enforcement to focus on catching these financial criminals. This is especially beneficial for investigations with large dollar amounts that appear layered through different financial institutions.
A common example of that follows this format: “One bank notices suspicious deposits from their customer. Those funds appear to come from the same customer’s account at a different bank. Sometimes these SARs involved hundreds of thousands of dollars (if not millions) in suspicious deposits. Yet, the bank never issues a 314(b) request to the other bank to see if they know the source of funds. They usually close the account, and the bad actor moves to a new bank (or banks), and the cycle continues.”
Law enforcement representatives sitting on regional SAR Review Committees estimate that 50% of the subjects they investigate have multiple financial institutions filing SARs for the same subjects. Each institution has a part of the story, and if 314(b) had been utilized, they could tell the whole story in one SAR, cutting down on additional work for law enforcement and allowing them to solve the case quicker.
Even individual SARs would be much better quality if the source of funds was obtained from a sharing institution.
If your institution decides to register with FinCEN Information Sharing and Section 314(b), avoid the pitfalls and, after registering, remember to:
- Establish written policy & procedures for 314(b) information sharing;
- Have the Board of Directors approve the addition to the BSA Policy;
- Understand what information can be shared (see FinCEN 314(b) Fact Sheet);
- Designate one or more person(s) with the authority to participate in your institution;
- Verify all 314(b) registrants and authorized persons prior to initiating information sharing;
- Renew annually and update points of contact as needed; and
- Use your transaction monitoring system’s case management functions to document and track all incoming and outgoing requests.
It is time to reconsider where the responsibility lies and remind ourselves of the core mission of the Bank Secrecy Act. In his August 14, 2018 remarks at the 11th Annual Las Vegas Anti-Money Laundering Conference and Expo, FinCEN Director Kenneth A. Blanco stressed the importance of this tool and called for the need for information sharing across financial institutions through the voluntary 314(b) program.
Let’s continue to make a difference in our fight against terrorism and money laundering. Perhaps the greatest way to make an impact on our world is to work as a team, using all of the tools and resources available to us, whether they are voluntary or not.
-Terri Luttrell, CAMS-Audit
Terri Luttrell is a seasoned AML professional with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. She started her banking career in commercial lending, moving to deposit operations and the compliance/fraud arenas where she was Director and AML/OFAC Officer before joining Banker’s Toolbox in 2012. Banker’s Toolbox provides a leading software platform, BAM+, that strengthens and automates the BSA/AML compliance and fraud prevention efforts within financial institutions.