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| ## Comptroller of the Currency                                        |
|                                                                       |
| > Administrator of National Banks                                     |
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Washington, DC 20219

**Interpretive Letter #978**

**January 2004**

December 4, 2003 **12 C.F.R. 4.31**

Scott A. Schaaf, Esq.

Tuggle Duggins & Meschan, P.A.

P.O. Box 2888

Greensboro, North Carolina 27402

Subject: [Commerce Bank, N.A. v. Smith, No. 02-3226 (Bankr.
W.D.N.C.)]{.underline}

Dear Mr. Schaaf:

This responds to your letter seeking a Suspicious Activity Report
("SAR") under 12 C.F.R. § 4.31 *et seq.* for use in the above referenced
litigation.

I regret that I must deny your request. The public policy against
disclosure of a SAR is very strong. Under 31 U.S.C. § 5318(g)(2), a SAR
is confidential. Congress recently buttressed this policy by amending
the statute to provide that no officer or employee of the federal
government, or of any state, local, tribal or territorial government who
knows that a SAR was filed, may disclose to any person involved in the
transaction that the transaction has been reported, other than as
necessary to fulfill the employee's official duties. 31 U.S.C.
§ 5318(g)(2)(A)(ii), as amended by the USA Patriot Act of 2001, Pub. L.
No. 107-56, § 351(b), 115 Stat. 272, 320-21 (2001). Similarly,
regulations issued by the OCC and FinCen underline the confidentiality
of a SAR. 12 C.F.R. § 21.11(k); 31 C.F.R. § 103.18(e), respectively. The
state and federal courts have been virtually unanimous in emphasizing
the confidentiality of a SAR. *See* [Int'l Bank of Miami, N.A. v.
Shinitzky]{.underline}, 849 So. 2d 1188 (Fla. 2003); [Matkin v. Fidelity
Nat'l Bank]{.underline}, 2002 WL 32059740 (D.S.C. 2002); [Cotton v.
PrivateBank & Trust Co]{.underline}., 235 F. Supp. 2d 809 (N.D. Ill.
2002) (collecting cases). The courts have been equally insistent that
even the act of filing of a SAR is confidential. [Lee v. Bankers Trust
Co]{.underline}., 166 F. 3d 540, 544 (2d Cir. 1999) ("\[E\]ven in a suit
for damages based on disclosures allegedly made in an SAR, a financial
institution cannot reveal what disclosures it made in an SAR, or even
whether it filed an SAR at all").

The applicable statute and agency regulations are predicated on the
belief that, absent confidentiality, banks would be reluctant to file
SARs, or would hesitate to describe fully the suspected misconduct.
Moreover, the willingness of banks to make these filings will be
diminished if SARs are made freely available to private litigants. The
Congressional interest in not discouraging banks from filing SARs is
reflected in the safe harbor provision that protects banks from suit, 31
U.S.C. § 5318(g)(3)(A). *See* [Stoutt v. Banco Popular de Puerto
Rico]{.underline}, 320 F.3d 26, 30-31 (1^st^ Cir. 2003), a recent
decision that refused to read into the safe harbor provision a
requirement that the bank filing the SAR do so in good faith. The
failure of financial institutions to liberally report all evidence of
suspicious activities may diminish the SAR's importance in serving as a
weapon in the fight to prevent terrorists from accessing the banking
system. Finally, since a SAR contains unproven allegations, its
disclosure could unfairly impugn the integrity of any individual named
therein and might even subject the reporting party to retaliation. [U.S.
v. Holihan]{.underline}, 248 F. Supp.2d 179, 185 (W.D.N.Y. 2003).

Sincerely,

/s/ Ford Barrett

Ford Barrett

Assistant Director

Litigation Division

cc: Blas Arroyo, Esq.

Alston & Bird LLP

Bank of America Plaza

101 South Tryon Street, Suite 4000

Charlotte, N.C. 28280-4000