[Federal Register Volume 62, Number 211 (Friday, October 31, 1997)]
[Rules and Regulations]
[Pages 58907-58909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28835]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Departmental Offices
31 CFR Part 1
Privacy Act of 1974; Implementation
AGENCY: Departmental Offices, Treasury.
ACTION: Final Rule.
-----------------------------------------------------------------------
SUMMARY: In accordance with the requirements of the Privacy Act of
1974, as amended, 5 U.S.C. 552a, the Department of the Treasury gives
notice of an amendment to 31 CFR 1.36 to exempt a new system of
records, the Suspicious Activity Reporting System (the SAR System),
Treasury/DO.212, from certain provisions of the Privacy Act.
EFFECTIVE DATE: October 31, 1997.
FOR FURTHER INFORMATION CONTACT: Stephen R. Kroll, Legal Counsel,
Financial Crimes Enforcement Network, 2070 Chain Bridge Road, Suite
200, Vienna, VA 22182, (703) 905-3590.
SUPPLEMENTARY INFORMATION: The Department of the Treasury published in
the Federal Register, at 62 FR 14376, March 26, 1997, a proposed rule
exempting the Suspicious Activity Reporting System (the SAR System),
Treasury/DO.212, from certain provisions of the Privacy Act pursuant to
5 U.S.C. 552a(j)(2) and (k)(2). A notice of this proposed new system of
records was also published in the Federal Register, at 62 FR 14532,
March 26, 1997.
Under 5 U.S.C. 552a(j)(2), the head of an agency may promulgate
rules to exempt a system of records from certain provisions of 5 U.S.C.
552a if the system of records is ``maintained by an agency or component
thereof which performs as its principal function any activity
pertaining to the enforcement of criminal laws, including police
efforts to prevent, control, or reduce crime or to apprehend criminals,
and the activities of prosecutors, courts, correctional, probation,
pardon or parole authorities, and which consists of (A) information
compiled for the purpose of identifying individual criminal offenders
and alleged offenders and consisting only of identifying data and
notations of arrests, the nature and disposition of criminal charges,
sentencing, confinement, release, and parole and probation status; (B)
information compiled for the purpose of a criminal investigation,
including reports of informants and investigators, and associated with
an identifiable individual; or (C) reports identifiable to an
individual compiled at any stage of the process of enforcement of the
criminal laws from arrest or indictment through release from
supervision.''
Under 5 U.S.C. 552a(k)(2), the head of an agency may promulgate
rules to exempt a system of records from certain provisions of 5 U.S.C.
552a if the system of records is ``investigatory material compiled for
law enforcement purposes, other than material within the scope of
subsection (j)(2) of this section.''
The notice, proposing that the SAR System of records be exempted
from sections (c)(3), (c)(4), (d)(1), (d)(2), (d)(3), (d)(4), (e)(1),
(e)(2), (e)(3), (e)(4)(G), (e)(4)(H), (e)(4)(I), (e)(5), (e)(8), (f)
and (g) of the Privacy Act, requested that public comments be sent to
FinCEN no later than April 25, 1997. FinCEN received one comment. The
commenter, a banking trade association, noted that the proposed
exemption ``is appropriate.'' Accordingly, the Department of the
Treasury is hereby giving notice that its proposed rule, exempting the
SAR System from the above referenced provisions of the Privacy Act
pursuant to 5 U.S.C. 552a(j)(2) and (k)(2) and the authority of 31 CFR
1.23(c), is being adopted as a final rule without change, except for
minor corrections in paragraphs (k)(3) and (k)(4), pertaining to cross
references within paragraph (k) of the rule. The reasons for exempting
the system of records from the above referenced provisions of the
Privacy Act are set forth in the rule.
The Department of the Treasury has determined that this proposed
rule is not a ``significant regulatory action'' under Executive Order
12866.
Pursuant to the requirements of the Regulatory Flexibility Act, 5
U.S.C. 601-612, for the reasons set forth in the
[[Page 58908]]
preamble to the notice of proposed rulemaking, it is hereby certified
that this final rule will not have a significant economic impact on a
substantial number of small entities.
In accordance with the provisions of the Paperwork Reduction Act of
1995, 44 U.S.C. 3507(d), the Department of the Treasury has determined
that this rule will not impose new recordkeeping, application,
reporting, or other types of information collection requirements.
List of Subjects in 31 CFR Part 1
Privacy.
Part 1 of Title 31 of the Code of Federal Regulations is amended as
follows:
PART 1--[AMENDED]
1. The authority citation for Part 1 continues to read as follows:
Authority: 5 U.S.C. 301 and 31 U.S.C. 321. Subpart A also issued
under 5 U.S.C. 552 as amended. Subpart C also issued under 5 U.S.C.
552a.
2. Section 1.36 of subpart C is amended by revising the heading
``Office of the Assistant Secretary for Law Enforcement'' to read
``Assistant Secretary (Enforcement)'' and under Financial Crimes
Enforcement Network by redesignating paragraph (g) as (l) and by adding
paragraphs (g) through (k) to read as follows:
Sec. 1.36 Systems exempt in whole or in part from the provisions of 5
U.S.C. 552a and this part.
* * * * *
ASSISTANT SECRETARY (ENFORCEMENT)
Financial Crimes Enforcement Network
* * * * *
(g)In general. The Assistant Secretary (Enforcement) exempts the
system of records entitled ``Suspicious Activity Reporting System''
(Treasury/DO .212) from certain provisions of the Privacy Act of 1974,
as amended, 5 U.S.C. 552a.
(h) Authority. 5 U.S.C. 552a(j) and (k); 31 CFR 1.23(c).
(i) General exemptions under 5 U.S.C. 552a(j)(2). Pursuant to 5
U.S.C. 552a(j)(2), the Assistant Secretary (Enforcement) hereby exempts
the Suspicious Activity Reporting System (SAR System) of records,
maintained by FinCEN, an office reporting to the Assistant Secretary
(Enforcement), from the following provisions of the Privacy Act of
1974:
5 U.S.C. 552a(c)(3) and (4);
5 U.S.C. 552a(d)(1), (2), (3), and (4);
5 U.S.C. 552a(e)(1), (2), and (3);
5 U.S.C. 552a(e)(4)(G), (H), and (I):
5 U.S.C. 552a(e)(5) and (8);
5 U.S.C. 552a(f); and
5 U.S.C. 552a(g).
(j) Specific exemptions under 5 U.S.C. 552a(k)(2). To the extent
that the exemption under 5 U.S.C. 552a(j)(2) does not apply to the SAR
System of records, the Assistant Secretary (Enforcement) hereby exempts
the SAR System of records from the following provisions of 5 U.S.C.
552a pursuant to 5 U.S.C. 552a(k)(2):
5 U.S.C. 552a(c)(3);
5 U.S.C. 552a(d)(1), (2), (3), and (4)
5 U.S.C. 552a(e)(1)
5 U.S.C. 552a(e)(4)(G), (H), and (I); and
5 U.S.C. 552a(f).
(k) Reasons for exemptions under 5 U.S.C. 552a(j)(2) and (k)(2).
(1) 5 U.S.C. 552a(e)(4)(G) and (f)(1) enable individuals to inquire
whether a system of records contains records pertaining to them.
Application of these provisions to the SAR System would allow
individuals to learn whether they have been identified as suspects or
possible subjects of investigation. Access by individuals to such
knowledge would seriously hinder the law enforcement purposes that the
SAR System is created to serve, because individuals involved in
activities that are violations of law could:
(i) Take steps to avoid detection;
(ii) Inform associates that an investigation is in progress;
(iii) Learn the nature of the investigation;
(iv) Learn whether they are only suspects or identified as
violators of law;
(v) Begin, continue, or resume illegal conduct upon learning that
they are not identified in the system of records, or
(vi) Destroy evidence needed to prove the violation.
(2) 5 U.S.C. 552a(d)(1), (e)(4)(H) and (f)(2), (f)(3) and (f)(5)
grant individuals access to records containing information about them.
The application of these provisions to the SAR System would compromise
the ability of the component agencies of the SAR System to use the
information effectively for purposes of law enforcement.
(i) Permitting access to records contained in the SAR System would
provide individuals with information concerning the nature of any
current investigations and would enable them to avoid detection or
apprehension, because they could;
(A) Discover the facts that would form the basis of an arrest;
(B) Destroy or alter evidence of criminal conduct that would form
the basis of their arrest, and
(C) Delay or change the commission of a crime that was about to be
discovered by investigators.
(ii) Permitting access to either on-going or closed investigative
files would also reveal investigative techniques and procedures, the
knowledge of which could enable individuals planning crimes to
structure their operations so as to avoid detection or apprehension.
(3) 5 U.S.C. 552a(d)(2), (d)(3) and (d)(4), (e)(4)(H) and (f)(4)
permit an individual to request amendment of a record pertaining to him
or her and require the agency either to amend the record or note the
disputed portion of the record and, if the agency refuses to amend the
record, to provide a copy of the individual's statement of disagreement
with the agency's refusal, to persons or other agencies to whom the
record is thereafter disclosed. Because these provisions depend on the
individual's having access to his or her records, and since these rules
exempt the SAR System from the provisions of 5 U.S.C. 552a relating to
access to records, for the reasons set out in paragraph (k)(2), these
provisions do not apply to the SAR System.
(4) 5 U.S.C. 552a(c)(4) requires an agency to inform any person or
other agency about any correction or notation of dispute that the
agency made in accordance with 5 U.S.C. 552a(d) to any record that the
agency disclosed to the person or agency, if an accounting of the
disclosure was made. Because this provision depends on an individual's
having access to and an opportunity to request amendment of records
pertaining to him or her, and because these rules exempt the SAR System
from the provisions of 5 U.S.C. 552a relating to access to and
amendment of records, for the reasons set forth in paragraphs (k)(2)
and (3), this provision does not apply to the SAR System.
(5) 5 U.S.C. 552a(c)(3) requires an agency to make the accounting
of any disclosures of records required by 5 U.S.C. 552a(c)(1) available
to the individual named in the record upon his or her request. The
accounting must state the date, nature, and purpose of each disclosure
of the record and the name and address of the recipient.
(i) The application of this provision would impair the effective
use of information collected in the SAR System. Making an accounting of
disclosures available to the subjects of an investigation would alert
them to the fact that another agency is conducting an investigation
into their criminal activities and could reveal the geographic location
of the other agency's investigation, the nature and purpose of that
investigation, and the dates on which that investigation was active.
Violators possessing such knowledge would be able to take measures to
avoid detection or apprehension by altering their operations, by
transferring their criminal activities to other geographical
[[Page 58909]]
areas, or by destroying or concealing evidence that would form the
basis for arrest.
(ii) Moreover, providing an accounting to the subjects of
investigations would alert them to the fact that FinCEN has information
regarding possible criminal activities and could inform them of the
general nature of that information. Access to such information could
reveal the operation of the information-gathering and analysis systems
of FinCEN, the Federal Supervisory Agencies and other SAR System Users
and permit violators to take steps to avoid detection or apprehension.
(6) 5 U.S. C. 552a(e)(4)(I) requires an agency to publish a general
notice listing the categories of sources for information contained in a
system of records. The application of this provision to the SAR System
could compromise FinCEN's and the Federal Supervisory Agencies' ability
to provide useful information to law enforcement agencies, because
revealing sources for the information could:
(i) Disclose investigative techniques and procedures,
(ii) Result in threats or reprisals against informers by the
subjects of investigations, and
(iii) Cause informers to refuse to give full information to
criminal investigators for fear of having their identities as sources
disclosed.
(7) 5 U.S.C. 552a(e)(1) requires an agency to maintain in its
records only such information about an individual as is relevant and
necessary to accomplish a purpose of the agency required to be
accomplished by statute or executive order. The application of this
provision to the SAR System could impair the effectiveness of law
enforcement because in many cases, especially in the early stages of
investigation, it may be impossible immediately to determine whether
information collected is relevant and necessary, and information that
initially appears irrelevant and unnecessary, upon further evaluation
or upon collation with information developed subsequently, often may
prove helpful to an investigation.
(8) 5 U.S.C. 552a(e)(2) requires an agency to collect information
to the greatest extent practicable directly from the subject individual
when the information may result in adverse determinations about an
individual's rights, benefits, and privileges under Federal programs.
The application of this provision to the SAR System would impair
FinCEN's ability to collect, analyze and disseminate to System Users
investigative or enforcement information. The SAR System is designed to
house information about known or suspected criminal activities or
suspicious transactions that has been collected and reported by
financial institutions, or their examiners or other enforcement or
supervisory officials. It is not feasible to rely upon the subject of
an investigation to supply information. An attempt to obtain
information from the subject of any investigation would alert that
individual to the existence of an investigation, providing an
opportunity to conceal criminal activity and avoid apprehension.
Further, with respect to the initial SAR, 31 U.S.C. Sec. 5318(g)(2)
specifically prohibits financial institutions making such reports from
notifying any participant in the transaction that a report has been
made.
(9) 5 U.S.C. 552a(e)(3) requires an agency to inform each
individual whom it asks to supply information, on the form that it uses
to collect the information or on a separate form that the individual
can retain, the agency's authority for soliciting the information;
whether disclosure of information is voluntary or mandatory; the
principal purposes for which the agency will use the information; the
routine uses that may be made of the information; and the effects on
the individual of not providing all or part of the information. The
application of these provisions to the SAR System would compromise the
ability of the component agencies of the SAR System to use the
information effectively for purposes of law enforcement.
(10) 5 U.S.C. 552a(e)(5) requires an agency to maintain all records
it uses in making any determination about any individual with such
accuracy, relevance, timeliness, and completeness as is reasonably
necessary to assure fairness to the individual in the determination.
Application of this provision to the SAR System would hinder the
collection and dissemination of information. Because Suspicious
Activity Reports are filed by financial institutions with respect to
known or suspected violations of law or suspicious activities, it is
not possible at the time of collection for the agencies that use the
SAR System to determine that the information in such records is
accurate, relevant, timely and complete.
(11) 5 U.S.C. 552a(e)(8) requires an agency to make reasonable
efforts to serve notice on an individual when the agency makes any
record on the individual available to any person under compulsory legal
process, when such process becomes a matter of public record.
Application of these requirements to the SAR System would prematurely
reveal the existence of an ongoing investigation to the subject of
investigation where there is need to keep the existence of the
investigation secret. It would render ineffective 31 U.S.C.
Sec. 5318(g)(2), which prohibits financial institutions and their
officers, employees and agents from disclosing to any person involved
in a transaction that a SAR has been filed.
(12) 5 U.S.C. 552a(g) provides an individual with civil remedies
when an agency wrongfully refuses to amend a record or to review a
request for amendment, when an agency wrongfully refuses to grant
access to a record, when any determination relating to an individual is
based on records that are not accurate, relevant, timely and complete,
and when an agency fails to comply with any other provision of 5 U.S.C.
552a so as to adversely affect the individual. Because the SAR System
is exempt from these provisions it follows that civil remedies for
failure to comply with these provisions are not appropriate.
* * * * *
Dated: September 26, 1997.
Alex Rodriguez,
Deputy Assistant Secretary (Administration)
[FR Doc. 97-28835 Filed 10-30-97; 8:45 am]
Billing Code: 4820-03-F
