CUNA Regulatory Comment Call


June 30, 2006

NCUA Filing Requirements for Suspicious Activity Reports

EXECUTIVE SUMMARY

  • The NCUA Board has published a proposed rule to provide greater detail and clarity concerning the reporting requirements, filing procedures and other important aspects of Suspicious Activity Reports (SARs). At the meeting where the Board decided to issue the proposal, the Board acknowledged that SAR filing and the Bank Secrecy Act (BSA) generate a lot of comments and questions from credit unions. This rule is intended to provide credit unions with basic information concerning SARs in a single location, the result being a quick reference tool.
  • The proposal covers:
    • The definition of reportable activity;
    • Important filing procedures;
    • Record retention requirements;
    • Prompt notification of the board of directors of SAR filings;
    • Confidentiality of SARs; and
    • Liability protection.
  • The proposed changes are the result of NCUA’s internal rolling review of the agency’s regulations. In this process, NCUA reviews one-third of its regulations every year.
  • Comments are due to NCUA by August 28, 2006. Please send your comments to CUNA by August 18, 2006. Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com or to Senior Regulatory Counsel Catherine Orr at corr@cuna.com; or mail them to Mary or Catherine in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, 6th Floor - South Building, Washington, DC 20004. You may also contact us at 800-356-9655, ext. 6743, if you would like a copy of the draft SAR form, or you may access it here.
  • DESCRIPTION OF THE PROPOSAL

  • The heading of the rule (Part 748) would be changed from “Security Program, Report of Crime and Catastrophic Act and Bank Secrecy Act Compliance” to “Security Program, Report of Suspected Crimes, Suspicious Transactions, Catastrophic Acts and Bank Secrecy Act Compliance” in order to more accurately describe the scope of the rule.
  • The rule would clarify that reportable activity includes suspected crimes and suspicious transactions related to money laundering or other illegal activity, such as terrorism financing or a violation of the Bank Secrecy Act (BSA). A SAR should be filed when the credit union detects or suspects: (1) insider abuse involving any amount of money; (2) transactions involving federal criminal violation or pattern of violations aggregating $5,000 or more where a suspect can be identified; (3) transactions involving federal criminal violation or pattern of violations aggregating $25,000 or more regardless of whether a suspect can be identified; or (4) transactions aggregating $5,000 or more that involve potential money laundering or BSA violations.
  • A credit union would not be obligated to file a SAR for a robbery or burglary (committed or attempted) or for lost, missing, counterfeit or stolen securities as long as the credit union makes a report to the appropriate law enforcement authorities.
  • Under the proposal, a credit union must file a SAR with FinCEN no later than 30 calendar days from the date the suspicious activity is initially detected. If there is no suspect identified at that time, a credit union may have an additional 30 calendar days to file. If the violation requires immediate attention (such as a money laundering scheme), in addition to filing a SAR the credit union must immediately notify the appropriate law enforcement or supervisory authority. The rule would incorporate reporting and filing instructions required by the SAR form and Treasury Department BSA regulations.
  • Failure to file a SAR as required may subject the credit union, its officials, and employees to administrative action, such as the assessment of civil monetary fines.
  • The current provision on record retention would be revised to highlight the importance of retaining all supporting documentation for a SAR. Supporting documentation is considered a part of the SAR even if the documentation was not actually filed with the submitted SAR. The supporting documentation must be made available to appropriate law enforcement and regulatory authorities upon request.
  • Since SARs are confidential, any credit union officials or employees must not produce the SAR or provide any information that would disclose that a SAR was prepared, even if subpoenaed. The official or employee must notify NCUA of such a request or subpoena.
  • A credit union must promptly notify its board of directors, or a committee designated by the board, of any SAR filed. If the suspect of the SAR is a director or member of the designated committee, the credit union must not notify the suspect, but must notify the other board or committee members.
  • A safe harbor provision would be added to provide that credit union officials and employees who file a SAR (either voluntarily or pursuant to NCUA’s rules) are protected from liability for any disclosure in the report and/or for failure to disclose the existence of the SAR.
  • QUESTIONS REGARDING THE PROPOSED SAR RULE REVISIONS

    1. Will having this information in SAR filing/reporting facilitate quick access to SAR reporting and filing requirements?

      Yes ______ No ______

      Please explain. (If not, how could that information be provided to credit unions in a more helpful manner/format?)
















    2. Do you feel it would be helpful for the definition of reportable activity to include clarification regarding whether or not fraud activity (such as check kiting) or cases where the suspected criminal activity falls below the established thresholds should be reported on the SAR?

      Yes ______ No ______

      Please explain.
















    3. The requirement to promptly notify the credit union’s board of directors is proposed to formalize a common practice and to maintain consistency with the other federal financial regulators. Do you believe having this requirement will prove useful for credit unions?

      Yes ______ No ______

      Please explain.
















    4. Do you agree with the proposed record retention requirements (which also track the Treasury Department BSA regulations and are also listed in the Instructions section on the SAR), in particular the information concerning supporting documentation.

      Yes ______ No ______

      If not, why not?
















    5. Is the “safe harbor” provision providing immunity for credit unions and their officials/employees from civil liability for filing a SAR sufficiently robust? (This provision is also similar to the safe harbor notice in the SAR Instructions.)

      Yes ______ No ______

      Please explain.
















    6. Other comments?
















    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
    Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
    Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com