CUNA Regulatory Comment Call

April 27, 2009

Proposed Interpretive Guidance on Sharing Suspicious Activity Report by Depository Institutions with Certain U.S. Affiliates

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.commdunn@cuna.com and to Federal Compliance Counsel Nichole Seabron at nseabron@cuna.com; or mail them to Mary and Nichole in c/o CUNA’s Regulatory Affairs Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004. You may also contact us at 800-356-9655 ext 6739, if you would like a copy of the proposed rule, or you may access it here.

BACKGROUND

FinCEN, under authority granted by the Secretary of Treasury, administers the Bank Secrecy Act (BSA) and may require financial institutions to keep records and file reports that FinCEN determines to have a high degree of usefulness in criminal, tax or regulatory investigations or proceedings or for intelligence or counterintelligence activities to protect against international terrorism. FinCEN has issued rules that may require certain financial institutions to file Suspicious Activity Reports (SARs) and the SAR rules currently contain a provision implementing the statutory prohibition on SAR disclosure by a financial institution.

DISCUSSION OF PROPOSED GUIDANCE

Sharing within the Corporate Organizational Structure

FinCEN and the Federal Banking agencies, excluding NCUA, issued joint guidance in January 2006 that permitted a U.S. branch or agency of a foreign bank to share a SAR with its head office outside of the United States and allowed a U.S. bank or savings association to disclose a SAR to its controlling company, no matter where the entity or party was located. Nothing in the current proposed guidance for sharing with affiliates supersedes the January 2006 guidance.

The proposed guidance interprets a statement in the proposed SAR confidentiality proposed rules that a credit union may share a SAR or information revealing the existence of a SAR within its organizational structure for purposes consistent with Title II of the BSA (Reports of Currency and Foreign Transactions) provided the individual that is the subject of the SAR has not been of the filing.

According to FinCEN, the proposed regulations may be interpreted to permit a credit union to share a SAR or information revealing the existence of a SAR with an affiliate that is subject to SAR regulation issued by FinCEN or the Federal Banking agencies. For the purposes of the proposed guidance, “affiliate” has been defined as a company under common control with, or a subsidiary of, the depository institution. “Affiliate” does not include holding companies. Sharing with holding companies has already been addressed under the January 2006 guidance. Affiliates subject to the SAR rule are prohibited from disclosing a SAR or information revealing the existence of a SAR, including SARs that the affiliate has filed and SARs the affiliate has received that have been filed by others. The guidance clarifies that it is not permissible for an affiliate has received a SAR or information revealing the existence of a SAR from a depository institution to share that SAR or SAR-related information with another affiliate.

FinCEN has declined to permit sharing with affiliates that are not subject to SAR rules, whether domestic or foreign. Footnote 14 in the proposed guidance clarifies that the foreign branches of U.S. banks/credit unions are generally regarded as foreign banks for BSA purposes and would be considered affiliates that are not subject to SAR regulation. Accordingly, a U.S. bank/credit union that has filed a SAR may not share the SAR or information revealing the existence of a SAR with its foreign branches. FinCEN has not yet concluded that sharing a SAR or SAR-related information with affiliates that are not subject to SAR regulation would be consistent with the purposes of the BSA which are to promote efforts to detect and report money laundering and terrorist financing and ensure SAR confidentiality.

Depository institutions, as part of their internal controls, should have written confidentiality agreements in place to ensure affiliates protect the confidentiality of SARs or SAR information.

The proposed guidance is intended to remove unnecessary obstacles to detecting and reporting suspicious activity. The guidance should not be read to impose any new BSA requirements or to suggest that sharing with affiliates is mandatory.

QUESTIONS REGARDING THE GUIDANCE

FinCEN invites comments on all aspects of the guidance. However, they are soliciting comments on the following questions:

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Luke Martone • Senior Regulatory Counsel • (202) 508-6743 • lmartone@cuna.com