The purpose of suspicious activity reports is to enable law enforcement to fully investigate serious crimes such as money laundering and terrorist funding and to provide them with valuable information the perpetration of the crimes. The information provided in SARs may also be of value to those involved in the suspicious transaction or to third parties, such as private litigants. These parties often know or suspect of a SAR's existence and issue a subpeona for the SAR and any supporting documents. How should you respond to such a subpoena?
Federal law is very clear on how to respond. Under 31 U.S.C. 5318(g), after a SAR has been reported, “the financial institution, director, officer, employee, or agent may not notify any person involved in the transaction that the transaction has been reported.” Although this provision would seem to allow the reporting of a SAR to someone not involved in the transactions, the Federal Regulations on SARs clearly state otherwise.
The Regulations for the OCC (12 CFR 21.11), FDIC (12 CFR 353.1), and Federal Reserve (12 CFR 208.62) say the exact same thing: any bank subpoenaed or requested to disclose a SAR or the information contained therein “shall decline to produce the [SAR] or to provide any information that would disclose that a [SAR] has been prepared or filed," citing the applicable regulations, applicable law (e.g., 31 U.S.C. 5318(g)), or both, and notify the appropriate regulatory agency. If a bank is regulated by the Federal Reserve and the OCC, to be on the safe side it should notify both agencies of the subpoena. There is a safe harbor in the regulations for disclosure to law enforcement or bank supervisory agencies. Nonetheless, it may still be prudent to contact the appropriate regulatory agency before disclosure.
It is important to remember that in declining production of the SAR, you cannot even disclose that a SAR exists. Although your bank keeps the SAR, it is not your property; it should be treated accordingly.
Banks should have a policy in place on handling SARs and should educate all employees who deal with SARs on proper SAR procedures. If you have any questions regarding SARs, including what should be reported or what documentation is required, contact a member of the Banking Law Group at Dickinson, Mackaman, Tyler & Hagen, P.C.
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