Financial Regulatory Authority Proposes Regulation for Test Program on Sharing Suspicious Activity Reports with Foreign Branches, Associates, and Subsidiaries
Financial institutions in the United States have been presented with a new opportunity to modernize their anti-money laundering (AML) and counter-terrorist financing (CTF) programs. The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has proposed a pilot program that allows US financial institutions to share Suspicious Activity Reports (SARs) with their foreign branches, affiliates, and subsidiaries.
The pilot program, outlined in the Anti-Money Laundering Act of 2020, is designed to enhance global risk management, AML/CFT technology transformation strategies, and the definition of a comprehensive global risk management framework. Participating institutions must comply with the statutory requirements outlined in 31 U.S.C. 5318(g)(8), (g)(10), and (g)(11)(A).
US institutions with designated foreign branches, affiliates, or subsidiaries can apply for the pilot program, with certain exceptions for institutions in China, Russia, and jurisdictions with security concerns. Eligible participants must conduct all compliance activities associated with the program in the US and are not allowed to offshore their compliance duties.
Program participants must submit quarterly reports to FinCEN to facilitate control over the security of SAR information and to monitor the effectiveness of the program. These reports will be used by FinCEN to monitor the progress of the program participants and to aggregate and report the information to law enforcement, the intelligence community, and Congress. These reports will inform decisions to extend the program and propose possible new legislation.
Each program participant must implement controls, procedures, and record-keeping to track and maintain the security of SARs and SAR information. They must also submit the purpose and intended use of SAR information and whether they will share reciprocal information.
The pilot program may lead to the emergence of best practices in data security and cross-border suspicious activity investigations. However, participants must notify FinCEN of all requests or demands for SARs or SAR information from foreign law enforcement, foreign regulators, or any other outside foreign party.
The program will terminate on January 1, 2024, unless the Secretary of the Treasury extends the program for an additional two years. The Notice of Proposed Rulemaking (NPRM) for the SAR sharing program can be found at 87 FR 3719.
Our website's financial crime consultants provide services such as assessment of current AML/CFT and Sanctions program, definition of AML and CTF technology transformation strategy, and global risk management framework. They can assist financial institutions in navigating the complexities of the SAR sharing program and ensuring compliance with all associated regulations.
This pilot program is a significant step towards modernizing the US AML and CTF programs and enhancing global cooperation in the fight against financial crime.
