On December 10, 2020, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Fact Sheet clarifying the circumstances under which financial institutions can share information under Section 314(b) of the USA Patriot Act (“Section 314(b)”), 31 C.F.R. § 1010.540. In a speech on the same day, FinCEN’s director, Kenneth Blanco, urged financial institutions to take advantage of the program.
Section 314(b) is a safe harbor provision that protects financial institutions from liability when disclosing customer information to other financial institutions in order to flag possible money laundering or terrorist activities. Financial institutions can use the program to gather information about customers with flagged activity, including accounts held away from the institution, activities, and associated entities or individuals. While widely utilized, the program has often been criticized for failing to clarify at what point a financial institution could share the requested information – either when the institution became aware of unusual activity or only after determining a suspicious act was illegal.
Blanco explained that the Fact Sheet was issued to address this ambiguity in the Section 314(b) program. The Fact Sheet explains that information sharing is permissible under the program if the financial institution suspects that the subject activity, customer, or account is tied in some way to terrorist acts or money laundering. In other words, the institution does not need to conclusively determine that an activity is suspicious to share information. Accordingly, financial institutions could share information relating to possible fraud, cybercrime, other predicate offenses, and even attempted transactions.
Notwithstanding the encouragement, the Fact Sheet reiterates that certain conditions must be satisfied before an institution can share information under Section 314(b). Financial institutions and associations must establish and maintain procedures to safeguard the security and confidentiality of the shared information. Further, information may only be shared under three circumstances: (1) to identify activities that may involve terrorist financing or money laundering; (2) to determine whether to establish or maintain an account, or to engage in a transaction; or (3) to assist compliance with anti-money laundering requirements. Finally, while financial institutions can work together to jointly file a new suspicious activity report (“SAR”) with FinCEN, they cannot share filed SARs under the program.
Financial institutions participating in the Section 314(b) program, and those that wish to join, should revisit their policies and procedures to ensure that information shared or received under the program is well-protected, incoming and outgoing information requests comply with Section 314(b) conditions. While the program is not mandatory, eligible and participating institutions may also want to identify opportunities for more active engagement in the Section 314(b) program.