[Federal Register Volume 61, Number 33 (Friday, February 16, 1996)]
[Rules and Regulations]
[Pages 6100-6106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3110]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563
[No. 96-6]
RIN 1550-AA62
Operations--Suspicious Activity Reports and Other Reports and
Statements
AGENCY: Office of Thrift Supervision, Treasury.
[[Page 6101]]
ACTION: Final rule.
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SUMMARY: The Office of Thrift Supervision (OTS) is amending its
regulations that require savings associations and service corporations
to file criminal referral and suspicious transaction reports. This
final rule streamlines reporting requirements by providing that savings
associations and service corporations file a new Suspicious Activity
Report (SAR) with the OTS and the appropriate federal law enforcement
agencies by sending SARs to the Financial Crimes Enforcement Network of
the Department of the Treasury (FinCEN) to report a known or suspected
criminal offense or a transaction that an institution suspects involves
money laundering or violates the Bank Secrecy Act (BSA).
EFFECTIVE DATE: April 1, 1996.
FOR FURTHER INFORMATION CONTACT: Richard Stearns, Deputy Chief Counsel,
Enforcement Division, (202) 906-7966, or Gary Sutton, Counsel (Banking
and Finance), Regulations and Legislation Division, (202) 906-5761,
Chief Counsel's Office; or Francis Raue, Policy Analyst, Supervision
Policy, (202) 906-5750, Office of Thrift Supervision, 1700 G Street,
NW., Washington DC 20552.
SUPPLEMENTARY INFORMATION:
Background
The OTS, the Office of the Comptroller of the Currency (OCC), the
Board of Governors of the Federal Reserve System (FRB) and the Federal
Deposit Insurance Corporation (FDIC) (collectively, the Agencies)
issued for public comment substantially similar proposals to revise
their regulations on the reporting of known or suspected criminal
conduct and suspicious activities by the institutions under their
supervision.1 The Department of the Treasury, through FinCEN,
issued for public comment a substantially similar proposal to require
the reporting of suspicious activities.2
\1\ 60 FR 36366 (July 17, 1995) (OTS), 60 FR 34476 (July 3,
1995) (OCC), 60 FR 34481 (July 3, 1995) (FRB) and 60 FR 47719
(September 14, 1995)(FDIC).
\2\ 60 FR 46556 (September 7, 1995).
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The OTS's proposed regulation noted that the interagency Bank Fraud
Working Group, consisting of representatives from the Agencies, law
enforcement agencies, and FinCEN, has been working on the development
of a single form, the SAR, for the reporting of known or suspected
federal criminal law violations and transactions that an institution
suspects involve money laundering or violate the BSA. The new SAR
reporting system will: (1) Combine the current criminal referral rules
of the Agencies with the Department of the Treasury's suspicious
activity reporting requirements; (2) create a uniform reporting form,
the new SAR, for use by financial institutions in reporting known or
suspected criminal offenses and transactions that an institution
suspects involve money laundering or violate the BSA; (3) provide a
system whereby an institution need only refer to the SAR and its
instructions in order to complete and file the form in conformance with
the Agencies' and FinCEN's reporting regulations; (4) require the
filing of only one form with FinCEN; (5) eliminate the need to file
supporting documentation with a SAR; (6) enable a filer, through
computer software that the OTS will provide to all savings
associations, to prepare a SAR on a computer and file it by mailing a
computer disc or tape; (7) establish a database that will be accessible
to the Federal and state financial institutions regulators and law
enforcement agencies; (8) raise the thresholds for mandatory reporting
in two categories and create a threshold for the reporting of
transactions that an institution suspects involve money laundering or
violate the BSA in order to reduce the reporting burdens on banking
organizations; and (9) emphasize recent changes in the law that provide
a safe harbor from civil liability to financial institutions and their
employees when they report known or suspected criminal offenses or
suspicious activities, by filing a SAR or by reporting by other means,
and that provide criminal sanctions for the disclosure of such a report
to any party involved in the reported transaction.
Comments Received
The OTS received letters from eight commenters, including four
savings associations, two holding companies, one trade association and
one law firm. We have also considered comments received by the other
Agencies. The large majority of commenters expressed general support
for the proposal. None of the commenters opposed the proposed new
suspicious activity reporting rules, although, as discussed below, a
number of commenters made suggestions for improving the rule and
requests for clarification.
Description of the Final Rule and Responses to Comments Received
After consideration of the public comments received, the Agencies
are each promulgating a substantially identical final rule regarding
the filing of SARs. Under the OTS's final rule, savings associations
and service corporations need only follow the SAR instructions for
completing and filing the SAR to be in compliance with the OTS's and
FinCEN's reporting requirements.
This final rule adopts the proposal with a few additional changes
made in response to the comments received. The final rule makes several
changes that reduce unnecessary regulatory burden in addition to those
that were proposed. In particular, the final rule further reduces
burden by: (1) Adding a $5,000 threshold for reporting transactions
that an institution suspects involve money laundering or violate the
BSA; (2) eliminating the requirement that an institution report a
transaction that is ``suspicious for any reason'' by modifying the
description of the types of suspicious activity that must be reported;
(3) reducing the record retention period from ten years to five; and
(4) permitting an institution to maintain the business record
equivalent of a document rather than requiring that it maintain the
original.
Section-by-Section Discussion
Purpose and scope (Sec. 563.180(d)(1))
The proposal clarified the scope of the current rule. The OTS
received no comments on this paragraph, which is adopted as proposed.
Definitions (Sec. 563.180(d)(2))
The proposal added definitions for several terms used in the
operative provisions of the rule. The OTS received one comment on this
provision. The commenter argued that the use of the term ``institution-
affiliated party'' instead of ``affiliated person'' creates too broad a
coverage for the rule, and will result in the requirement that SARs
must be filed with respect to petty crimes by officers below the level
of vice president and non-officer employees. The OTS has considered
this comment and believes that the broader coverage is appropriate,
given the possibility that even petty crimes, if repetitive, may
require enforcement action. The definition of ``known or suspected
violation'' in the proposal has been incorporated into each of the
reporting requirement provisions in Sec. 563.180(d)(3) to conform the
rule to that of the other Agencies. This section is otherwise adopted
as proposed, with minor technical changes.
SARs required (Sec. 563.180(d)(3))
The proposal clarified and revised the provision in the current
rule that requires an institution to file reports, raised the dollar
thresholds that trigger filing requirements, modified the scope of
events that an institution must report,
[[Page 6102]]
and eliminated the requirement for multiple filings with several
Federal agencies.
Most of the comments received by the Agencies addressed this
provision. Many of the commenters encouraged the Agencies to change
proposed Sec. 563.180(d)(3)(iv)(C), which required institutions to
report all financial transactions that are suspicious ``for any
reason.'' The commenters stated that this language was too broad and
made meaningless the $5,000 reporting threshold of
Sec. 563.180(d)(3)(ii) (requiring institutions to report suspected
crimes committed by an identifiable suspect) and the $25,000 reporting
threshold of Sec. 563.180(d)(3)(iii) (requiring institutions to report
suspected crimes for which no suspect is identified). They asserted
that requiring institutions to report all financial transactions that
are suspicious for any reason required them to report transactions that
would otherwise fall under the appropriate threshold and therefore be
exempt from the reporting requirement. Several commenters also
encouraged the Agencies to adopt a threshold for reporting transactions
that are suspicious.
The OTS and the other Agencies agree with the concerns expressed by
these commenters. Section 563.180(d)(3)(iv) has been substantially
revised to add a $5,000 reporting threshold for transactions that are
suspicious and to clarify that this provision of the rule requires an
institution to report only transactions that it suspects involve money
laundering or violations of the BSA. Under the final rule, a savings
association or service corporation must file a SAR for any transaction
of $5,000 or more if it knows, suspects, or has reason to suspect that
the transaction: (A) involves money laundering; (B) is designed to
evade any regulations promulgated under the BSA; or (C) has no business
or apparent lawful purpose or is not the sort in which the particular
customer would normally be expected to engage, and the institution
knows of no reasonable explanation for the transaction after examining
the available facts, including the background and possible purpose of
the transaction. For purposes of Sec. 563.180(d)(3)(iv), the term
``transaction'' means a deposit, withdrawal, transfer between accounts,
exchange of currency, loan, extension of credit, or purchase or sale of
any stock, bond, certificate of deposit, or other monetary instrument
or investment security, or any other payment, transfer, or delivery by,
through or to a financial institution, by whatever means effected. The
text of this section recognizes that efforts to deter, substantially
reduce, and eventually eradicate money laundering are greatly assisted
when institutions report transactions that they suspect may involve
money laundering or violate the BSA. The requirements of this section
comply with the recommendations adopted by multi-country organizations
in which the United States is an active participant, including the
Financial Action Task Force of the G-7 nations and the Organization of
American States, and are consistent with the European Community's
directive on preventing money laundering through financial
institutions.
A few commenters encouraged the Agencies to raise the dollar
thresholds for known or suspected criminal conduct by non-insiders, and
several commenters urged the Agencies to establish a dollar threshold
for insiders. The OTS has considered these comments, but has concluded
that the thresholds, as proposed, properly balance the dual concerns of
prosecuting criminal activity involving savings associations and
service corporations and minimizing the burden on such institutions.
With respect to the suggestion that the OTS adopt a dollar threshold
for insider violations, the OTS notes that insider abuse has long been
a key concern and focus of enforcement efforts. With the development of
a new sophisticated and automated database, the OTS and law enforcement
agencies will have the benefit of a comprehensive and easily accessible
catalogue of known or suspected insider wrongdoing. When insiders are
involved, even small-scale offenses--for example, repetitive thefts of
small amounts of cash by an employee who frequently moves between
banking organizations--may undermine the integrity of such
organizations and warrant enforcement action or criminal prosecution.
Therefore, the OTS does not wish to limit the information it receives
regarding insider wrongdoing.
One commenter suggested an indexed threshold, based on the regional
differences in the various dollar thresholds below which the Federal,
state, and local prosecutors generally decline prosecution. Any
regional variations in the dollar amount of financial crimes generally
prosecuted involve issues pertaining to the exercise of prosecutorial
discretion that are not within the OTS's province to resolve. The OTS's
objective is to ensure that institutions place the relevant information
in the hands of the investigating and prosecuting authorities. In the
OTS's view, the dollar thresholds proposed and adopted in this final
rule best balance the interests of law enforcement authorities and
financial institutions. The OTS also believes that indexed thresholds
could generate additional regulatory burden for institutions by
creating a standard that is unclear and confusing.
One commenter noted that the OTS and OCC proposals keyed the
reporting thresholds to the amount of loss or potential loss to the
institution (which is the standard used in the OTS's current rule),
while the FRB keyed its reporting thresholds to events that ``involve
or aggregate'' more than the appropriate threshold. The commenter urged
all Agencies to use the proposed OTS and OCC standard. Upon further
consideration, the OTS believes that the standard used in the FRB's
proposal provides greater predictability in determining when to file a
SAR because the amount of loss or potential loss may differ from the
actual sum involved in the event and may be difficult to calculate in
many instances. The OTS believes that, were the Agencies to rely on the
amount of loss or potential loss, an institution might consider the
potential for recovery of funds to estimate loss. Instead, to avoid
potential uncertainty, the final rule conforms to the FRB's proposal
and requires an institution to file SARs whenever it detects a known or
suspected Federal criminal violation, or pattern of criminal
violations, committed or attempted against it or involving a
transaction conducted through it that involves or aggregates more than
the appropriate threshold.
One commenter expressed the concern that a banking organization
would need to establish probable cause before reporting crimes for
which an essential element of the proof of the crime was the intent of
the actor. This is not the case, however. Nothing in the rule requires
that savings associations assume the burden of proving illegal conduct;
rather, institutions are required only to report actual or suspected
crimes or suspicious activities for possible action by the appropriate
authorities.
One commenter requested clarification of whether the proposal
required an institution to file multiple SARs for a crime committed by
several individuals, multiple crimes by the same individual, or related
crimes committed by more than one individual. Financial institutions
should complete one SAR to describe a suspected or known criminal
offense committed by several individuals. The instructions to the SAR
permit institutions to report additional suspects by means of a
supplemental page. An institution
[[Page 6103]]
should file a separate SAR whenever an individual commits a suspected
or known crime. If the same individual commits multiple or related
crimes within the same reporting period, the institution may consider
reporting the crimes on one SAR if doing so will present clearly what
has occurred.
Savings associations and service corporations are encouraged to
file the SAR via magnetic media using the computer software to be
provided to them by the OTS. Savings associations and service
corporations that currently file currency transaction reports via
magnetic tape with FinCEN may also file SARs by magnetic tape. FinCEN
has advised the Agencies that it will be unable to accept filings via
telecopier.
Service corporations (Sec. 563.180(d)(4))
The proposal retained the current provision permitting a report
required of a service corporation to be filed by the service
corporation or by a savings association which wholly or partially owns
it. No comments addressed this provision and it is unchanged in the
final rule.
Time for reporting (Sec. 563.180(d)(5))
Proposed Sec. 563.180(d)(5) substantially modified the current
requirements with respect to the timing of the reporting of known or
suspected criminal offenses and transactions that an institution
suspects involve money laundering or violate the BSA. It required an
institution to file a SAR within 30 calendar days after detecting the
act triggering the reporting requirement, provided that if no suspect
is identified at such time, the institution may delay filing for an
additional 30 days after identification of a suspect, but filing may
not be delayed for more than 60 days after initial detection.
Several commenters requested that the Agencies clarify the
application of the filing deadline for SARs when no suspect is
identified at the initial detection of the suspicious activity, the
amount of the transaction is less than the applicable $25,000 mandatory
reporting threshold, and the institution later identifies a suspect.
For example, some commenters wondered if they would be in violation of
the rule if a suspect were identified after 60 days had passed.
These comments reflect a misunderstanding of how the filing
requirements operate. The time period for reporting commences only at
the point in time when an institution identifies a potential violation
that fits within the thresholds. Therefore, if an institution uncovers
a transaction involving less than $25,000 (but more than $5,000), but
does not identify a potential suspect until after the passage of 60
days, the 30-day period for filing a SAR would begin to run only when
the suspect is identified. To make this point clear, the final rule
inserts the word ``reportable'' and states that in no case shall
reporting be delayed more than 60 calendar days after the date of
initial detection of a reportable transaction, i.e., a transaction that
must be reported because the amount involved is greater than the
appropriate reporting threshold. OTS has also reorganized this
paragraph, to conform with the other Agencies' rules.
Section 563.180(d)(5) also requires an institution to notify law
enforcement authorities immediately in the event of an on-going
violation. The OTS wishes to clarify that immediate notification is
limited to situations involving ongoing violations, for example, when a
check kite or money laundering has been detected and may be continuing.
It is not feasible, however, for the OTS to contemplate all of the
possible circumstances in which it might be appropriate for a savings
association or service corporation to immediately advise state and
local law enforcement authorities. Savings associations and service
corporations should use their best judgment regarding when to alert
these authorities regarding on-going criminal offenses or suspicious
activities that involve money laundering or violate the BSA.
Reports to state and local authorities (Sec. 563.180(d)(6))
The proposal encouraged savings associations and service
corporations to file SARs with state and local law enforcement agencies
when appropriate. Some commenters expressed the concerns that banking
organizations and their institution-affiliated parties could be liable
under Federal and state laws, such as the Right to Financial Privacy
Act (12 U.S.C. 3401 et seq.)(RFPA), for filing SARs with respect to
conduct that is later found not to have been criminal, and that the
filing of SARs with state and local law enforcement agencies would
subject filers to claims under state law. Both of these concerns are
addressed by the scope of the safe harbor protection provided in 31
U.S.C. 5318(g) and, as discussed below, stated in new
Sec. 563.180(d)(13).
Exception (Sec. 563.180(d)(7))
Proposed Sec. 563.180(d)(8), which set forth one exception to the
SAR filing requirement, did not substantively change its predecessor
provision. The OTS received no comments on this section and adopts it
as proposed. The final rule, however, reverses the order of proposed
paragraphs (d)(7) and (d)(8) and changes the caption of proposed
paragraph (d)(8) from ``exemption'' to ``exception'', to conform with
the other Agencies' rules.
Retention of records (Sec. 563.180(d)(8))
The proposal required an institution to retain a copy of the SAR
and the original of any underlying documentation relating to the SAR
for ten years. Many commenters expressed the view that the 10-year
period for the retention of records was excessive, especially in light
of the BSA's five-year record retention requirement, and recommended
that the Agencies reduce the period to five years. The 10-year period
in the proposed regulation would have continued the OTS's existing
record retention requirement for criminal referral forms. However, in
recognition of the potential burden of document retention on financial
institutions, the OTS has reduced the record retention period to five
years.
Many commenters asserted that the provision that required
institutions to disclose supporting documentation to law enforcement
agencies upon their request was either unclear or posed potential RFPA
liability. Some therefore questioned whether law enforcement agencies
would still need to subpoena relevant documents from a savings
association or service corporation. The final regulation requires
organizations filing SARs to identify, maintain and treat the
documentation supporting the report as if it were actually filed with
the SAR. This means that subsequent requests from law enforcement
authorities for the supporting documentation relating to a particular
SAR do not require the service of a subpoena or other legal process
normally associated with the provision of information to law
enforcement agencies. This treatment of supporting documentation is not
a substantive change from the current rule's requirement that
supporting documentation be filed with each referral, since it only
changes the timing of when an agency will have access to the supporting
documentation, not the fact that the information is assembled and made
available for law enforcement purposes. The Agencies therefore believe
that the final rule's treatment does not give rise to RFPA liability.
Proposed Sec. 563.180(d)(7) required the maintenance of supporting
documentation in its original form. A number of comments noted that
electronic storage of documents has become the rule rather than the
exception, and that requiring the storage
[[Page 6104]]
of paper originals would impose undue burdens on financial
institutions. Moreover, some records are retained only in a computer
database. The proposed regulation reflected the concerns of the law
enforcement agencies that the best evidence be preserved. However, this
can include the electronic storage of original documentation related to
the filing of a SAR. The OTS recognizes that a savings association or
service corporation will not always have custody of the originals of
documents and that some documents will not exist at the organization in
paper form. In those cases, preservation of the best available
evidentiary documents, for example, computer discs or photocopies, will
be acceptable. This has been reflected in the final rule by allowing
institutions to retain business record equivalents of supporting
documentation.
Several commenters criticized as inconsistent and vague the
proposed requirements that an institution maintain ``related''
documentation and make ``supporting'' documentation available to the
law enforcement agencies upon request. One commenter questioned whether
the OTS intended a substantive difference in meaning between these
terms. As a substantive difference is not intended, the OTS has
referred to ``supporting'' documentation in the final rule in stating
both the maintenance and production requirements. The OTS believes that
the use of the word ``supporting'' is more precise and limits the scope
of the information which must be segregated and retained to information
that would be relevant in proving the crime and identifying the
individuals involved. The OTS expects that savings associations and
service corporations will use their best judgment in determining the
scope of the information to be retained. It is not feasible for the OTS
to catalogue the precise types of information covered by this
requirement, because the scope necessarily depends upon the facts of a
particular case.
Notification to the board of directors (Sec. 563.180(d)(9))
The proposal reduced the burden on boards of directors to review
criminal referrals by allowing the management of an institution to
notify either the board of directors or a committee of directors or
executive officers designated by the board to receive notice of the
filing of a SAR. The proposal prohibited a savings association or
service corporation from giving notice of a SAR filing to any director
or officer who is a suspect with regard to such filing. The proposal
also required management to notify all directors, except the suspect,
when an executive officer or director is a suspect.
Most commenters supported this provision of the proposal. One
commenter, however, questioned whether the provision that required
prompt notification of the board of directors required notice prior to
the next board meeting. This commenter said that a requirement to
provide notice between board meetings would be more burdensome than the
current rule, which requires notification not later than the next board
meeting.
The OTS did not intend this change to be more burdensome than the
current rule and does not construe the requirement for prompt
notification to mean that notice must necessarily be provided before
the next board meeting. The final rule is intended to be flexible. For
example, the OTS expects that, with respect to serious crimes, the
appointed committee may consider it appropriate to make more immediate
disclosure to the full board. The final rule does not dictate the
content of the board or committee notification, and, in some cases,
such as when relatively minor non-insider crimes are to be reported, it
may be completely appropriate to provide only a summary listing of SARs
filed.
Compliance (Sec. 563.180(d)(10))
The proposal included a new provision stating that the failure to
file a SAR in accordance with the regulation and instructions may
result in supervisory actions, including enforcement actions. The OTS
received no comments on this section and adopts it as proposed.
Obtaining SARs (Sec. 563.180(d)(11))
The proposal added Sec. 563.180(d)(11), which provides savings
associations and service corporations with information on how to obtain
SARs. The OTS received no comments on this section and adopts it as
proposed.
Confidentiality of SARs (Sec. 563.180(d)(12))
The proposal contained a new provision preserving the confidential
nature of SARs and the information contained in SARs. One commenter
correctly noted that the proposed regulation is unclear as to whether
the confidential treatment applies only to the information contained on
the SAR itself, or also extends to the ``supporting'' documentation.
The OTS takes the position that only the SAR and the information on the
SAR are confidential under 31 U.S.C. 5318(g). However, as stated below
in the discussion of new Sec. 563.180(d)(13), the safe harbor
provisions of 31 U.S.C. 5318(g) for disclosure of information to law
enforcement agencies apply to both SARs and the supporting
documentation.
The OTS was encouraged to adopt regulations that would make SARs
undiscoverable in civil litigation, in order to avoid situations in
which a savings association or service corporation could be ordered by
a court to produce a SAR in civil litigation and could be confronted
with the prospect of having to choose between being found in contempt
or violating the OTS's rules. In the opinion of the OTS, 31 U.S.C.
5318(g) precludes the disclosure of SARs in discovery.3 However,
the final rule requires an institution that receives a subpoena or
other request for a SAR to notify the OTS so that the OTS can take
appropriate action. This notification requirement is consistent with 12
CFR 510.5.
\3\ Section 5318(g)(2) prohibits financial institutions and
directors, officers, employees, or agents of financial institutions
from notifying any person involved in a suspicious transaction that
the transaction has been reported.
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Safe harbor (Sec. 563.180(d)(13))
Several commenters expressed concern that disclosure of SARs and
supporting documentation to law enforcement agencies could give rise to
potential RFPA liability. In particular, the commenters questioned the
permissibility of filing SARs with state agencies or in situations in
which the amount of a transaction falls below the appropriate minimum
threshold for the known or suspected criminal conduct, or when a
transaction involving money laundering or the BSA does not meet the
requisite standards or thresholds. Commenters questioned the
applicability of the safe harbor provisions of 31 U.S.C. 5318(g) to
mandatory and voluntary filings alike.4
\4\ Section 5318(g)(3) states that a financial institution will
not be held liable to any person under any law or regulation of the
United States or any constitution, law, or regulation of any state
for making a disclosure of any possible violation of law or
regulation.
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The Agencies are of the opinion that the broad safe harbor
protections of 31 U.S.C. 5318(g)(3) include the reporting of known or
suspected criminal offenses or suspicious activities with state and
local law enforcement authorities, as well as with the Agencies and
FinCEN, regardless of whether such reports are filed pursuant to the
mandatory requirements of the OTS's regulations or are voluntary. The
OTS takes the same position with regard to the disclosure of
[[Page 6105]]
supporting documentation. The final rule adds new Sec. 563.180(d)(13),
which states this position.
Comments on information sharing
Comments to other Agencies suggested that the final regulations
should somehow facilitate the sharing of information among banking
organizations in order to better detect new fraudulent schemes. It is
anticipated that the Treasury Department, through FinCEN, and the
Agencies, will keep reporting entities apprised of recent developments
and trends in banking-related crimes through periodic pronouncements,
meetings, and seminars.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
OTS hereby certifies that this final rule will not have a significant
economic impact on a substantial number of small entities. This final
rule primarily reorganizes the process for reporting crimes and
suspicious activities and has no material impact on savings
associations and service corporations, regardless of size. Accordingly,
a regulatory flexibility analysis is not required.
Executive Order 12866
The OTS has determined that this document is not a significant
regulatory action under Executive Order 12866.
Paperwork Reduction Act
The reporting and recordkeeping requirements contained in this
final rule were submitted to the Office of Management and Budget for
review at the proposed rule stage in accordance with the Paperwork
Reduction Act of 1995 (PRA) and were approved. Comments on the
collection of information should be sent to the Office of Management
and Budget (OMB), Paperwork Reduction Project (1550-0003), Washington,
DC 20503, with copies to the Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552.
The reporting and recordkeeping requirements in this final rule are
found in 12 CFR 563.180(d). The collection of information is necessary
for the proper performance of the OTS's functions and the information
has practical utility. The information is needed to inform appropriate
law enforcement agencies of known or suspected criminal or suspicious
activities that take place at or were perpetrated against financial
institutions.
The Unfunded Mandates Reform Act of 1995
The OTS has determined that this final rule will not result in
expenditure by State, local, or tribal governments or by the private
sector of more than $100 million. Accordingly, the Unfunded Mandates
Reform Act does not apply.
List of Subjects in 12 CFR Part 563
Accounting, Advertising, Crime, Currency, Flood insurance,
Investments, Reporting and recordkeeping requirements, Savings
associations, Securities, Surety bonds.
Authority and Issuance
For the reasons set out in the preamble, part 563 of chapter V of
title 12 of the Code of Federal Regulations is amended as set forth
below:
PART 563--OPERATIONS
1. The authority citation for part 563 is revised to read as
follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1828, 3806; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 4104b,
4106, 4128.
2. Section 563.180 is amended by revising the section heading and
paragraph (d) to read as follows:
Sec. 563.180 Suspicious Activity Reports and other reports and
statements.
* * * * *
(d) Suspicious Activity Reports--(1) Purpose and scope. This
paragraph (d) ensures that savings associations and service
corporations file a Suspicious Activity Report when they detect a known
or suspected violation of Federal law or a suspicious transaction
related to a money laundering activity or a violation of the Bank
Secrecy Act.
(2) Definitions. For the purposes of this paragraph (d):
(i) FinCEN means the Financial Crimes Enforcement Network of the
Department of the Treasury.
(ii) Institution-affiliated party means any institution-affiliated
party as that term is defined in sections 3(u) and 8(b)(9) of the
Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(9)).
(iii) SAR means a Suspicious Activity Report on the form prescribed
by the OTS.
(3) SARs required. A savings association or service corporation
shall file a SAR with the appropriate Federal law enforcement agencies
and the Department of the Treasury in accordance with the form's
instructions, by sending a completed SAR to FinCEN in the following
circumstances:
(i) Insider abuse involving any amount. Whenever the savings
association or service corporation detects any known or suspected
Federal criminal violation, or pattern of criminal violations,
committed or attempted against the savings association or service
corporation or involving a transaction or transactions conducted
through the savings association or service corporation, where the
savings association or service corporation believes that it was either
an actual or potential victim of a criminal violation, or series of
criminal violations, or that it was used to facilitate a criminal
transaction, and it has a substantial basis for identifying one of its
directors, officers, employees, agents or other institution-affiliated
parties as having committed or aided in the commission of a criminal
act, regardless of the amount involved in the violation.
(ii) Violations aggregating $5,000 or more where a suspect can be
identified. Whenever the savings association or service corporation
detects any known or suspected Federal criminal violation, or pattern
of criminal violations, committed or attempted against the savings
association or service corporation or involving a transaction or
transactions conducted through the savings association or service
corporation and involving or aggregating $5,000 or more in funds or
other assets, where the savings association or service corporation
believes that it was either an actual or potential victim of a criminal
violation or series of criminal violations, or that it was used to
facilitate a criminal transaction, and it has a substantial basis for
identifying a possible suspect or group of suspects. If it is
determined prior to filing this report that the identified suspect or
group of suspects has used an alias, then information regarding the
true identity of the suspect or group of suspects, as well as alias
identifiers, such as drivers' license or social security numbers,
addresses and telephone numbers, must be reported.
(iii) Violations aggregating $25,000 or more regardless of
potential suspects. Whenever the savings association or service
corporation detects any known or suspected Federal criminal violation,
or pattern of criminal violations, committed or attempted against the
savings association or service corporation or involving a transaction
or transactions conducted through the savings association or service
corporation and involving or aggregating $25,000 or more in funds or
other assets, where the savings association or service corporation
believes that it was either an actual or potential victim of a criminal
violation or series of criminal violations, or that it was used to
[[Page 6106]]
facilitate a criminal transaction, even though there is no substantial
basis for identifying a possible suspect or group of suspects.
(iv) Transactions aggregating $5,000 or more that involve potential
money laundering or violations of the Bank Secrecy Act. Any transaction
(which for purposes of this paragraph (d)(3)(iv) means a deposit,
withdrawal, transfer between accounts, exchange of currency, loan,
extension of credit, purchase or sale of any stock, bond, certificate
of deposit, or other monetary instrument or investment security, or any
other payment, transfer, or delivery by, through, or to a financial
institution, by whatever means effected) conducted or attempted by, at
or through the savings association or service corporation and involving
or aggregating $5,000 or more in funds or other assets, if the savings
association or service corporation knows, suspects, or has reason to
suspect that:
(A) The transaction involves funds derived from illegal activities
or is intended or conducted in order to hide or disguise funds or
assets derived from illegal activities (including, without limitation,
the ownership, nature, source, location, or control of such funds or
assets) as part of a plan to violate or evade any law or regulation or
to avoid any transaction reporting requirement under Federal law;
(B) The transaction is designed to evade any regulations
promulgated under the Bank Secrecy Act; or
(C) The transaction has no business or apparent lawful purpose or
is not the sort in which the particular customer would normally be
expected to engage, and the institution knows of no reasonable
explanation for the transaction after examining the available facts,
including the background and possible purpose of the transaction.
(4) Service corporations. When a service corporation is required to
file a SAR under paragraph (d)(3) of this section, either the service
corporation or a savings association that wholly or partially owns the
service corporation may file the SAR.
(5) Time for reporting. A savings association or service
corporation is required to file a SAR no later than 30 calendar days
after the date of initial detection of facts that may constitute a
basis for filing a SAR. If no suspect was identified on the date of
detection of the incident requiring the filing, a savings association
or service corporation may delay filing a SAR for an additional 30
calendar days to identify a suspect. In no case shall reporting be
delayed more than 60 calendar days after the date of initial detection
of a reportable transaction. In situations involving violations
requiring immediate attention, such as when a reportable violation is
ongoing, the savings association or service corporation shall
immediately notify, by telephone, an appropriate law enforcement
authority and the OTS in addition to filing a timely SAR.
(6) Reports to state and local authorities. A savings association
or service corporation is encouraged to file a copy of the SAR with
state and local law enforcement agencies where appropriate.
(7) Exception. A savings association or service corporation need
not file a SAR for a robbery or burglary committed or attempted that is
reported to appropriate law enforcement authorities.
(8) Retention of records. A savings association or service
corporation shall maintain a copy of any SAR filed and the original or
business record equivalent of any supporting documentation for a period
of five years from the date of the filing of the SAR. Supporting
documentation shall be identified and maintained by the savings
association or service corporation as such, and shall be deemed to have
been filed with the SAR. A savings association or service corporation
shall make all supporting documentation available to appropriate law
enforcement agencies upon request.
(9) Notification to board of directors--(i) Generally. Whenever a
savings association (or a service corporation in which the savings
association has an ownership interest) files a SAR pursuant to this
paragraph (d), the management of the savings association or service
corporation shall promptly notify its board of directors, or a
committee of directors or executive officers designated by the board of
directors to receive notice.
(ii) Suspect is a director or executive officer. If the savings
association or service corporation files a SAR pursuant to this
paragraph (d) and the suspect is a director or executive officer, the
savings association or service corporation may not notify the suspect,
pursuant to 31 U.S.C. 5318(g)(2), but shall notify all directors who
are not suspects.
(10) Compliance. Failure to file a SAR in accordance with this
section and the instructions may subject the savings association or
service corporation, its directors, officers, employees, agents, or
other institution-affiliated parties to supervisory action.
(11) Obtaining SARs. A savings association or service corporation
may obtain SARs and the instructions from the appropriate OTS Regional
Office listed in 12 CFR 516.1(b).
(12) Confidentiality of SARs. SARs are confidential. Any
institution or person subpoenaed or otherwise requested to disclose a
SAR or the information contained in a SAR shall decline to produce the
SAR or to provide any information that would disclose that a SAR has
been prepared or filed, citing this paragraph (d), applicable law
(e.g., 31 U.S.C. 5318(g)), or both, and shall notify the OTS.
(13) Safe harbor. The safe harbor provision of 31 U.S.C. 5318(g),
which exempts any financial institution that makes a disclosure of any
possible violation of law or regulation from liability under any law or
regulation of the United States, or any constitution, law or regulation
of any state or political subdivision, covers all reports of suspected
or known criminal violations and suspicious activities to law
enforcement and financial institution supervisory authorities,
including supporting documentation, regardless of whether such reports
are filed pursuant to this paragraph (d), or are filed on a voluntary
basis.
* * * * *
Dated: February 5, 1996.
By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 96-3110 Filed 2-15-96; 8:45 am]
BILLING CODE 6720-01-P
