[Federal Register Volume 75, Number 232 (Friday, December 3, 2010)]
[Rules and Regulations]
[Pages 75583-75586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29871]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 510

[Docket ID OTS-2010-0016]
RIN 1550-AC28


Standards Governing the Release of a Suspicious Activity Report

AGENCY: Office of Thrift Supervision, Treasury.

[[Page 75584]]


ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is revising its 
regulations governing the release of unpublished OTS information. The 
primary change clarifies that the OTS's decision to release a 
Suspicious Activity Report (SAR) is governed by the standards set forth 
in amendments to the OTS's SAR regulation that are part of a separate, 
but simultaneous, rulemaking.

DATES: The final rule is effective January 3, 2011.

FOR FURTHER INFORMATION CONTACT: Marvin Shaw, Senior Attorney, 
Regulations and Legislation (202-906-6639); Dirk Roberts, Deputy Chief 
Counsel, Litigation (202-906-7631), Office of Thrift Supervision, 1700 
G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Introduction

    On March 9, 2009, the Office of Thrift Supervision (OTS) issued a 
notice of proposed rulemaking to revise its regulations governing the 
release of unpublished OTS information.\1\ The proposal was intended to 
clarify that OTS's decision to release a Suspicious Activity Report 
(SAR) would be governed by the standards set forth in proposed 
amendments to OTS's SARS regulation at 12 CFR 563.180, Suspicious 
Activity Reports and other reports and statements, that were part of a 
separate, but simultaneous rulemaking.
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    \1\ 74 FR 10145, 12 CFR 510.5, Release of unpublished OTS 
information.
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    OTS received no comments to the proposed amendments to section 
510.5, although the agency did receive comments to the proposed 
amendments to section 563.180. Those comments are addressed in the part 
563 final rule published elsewhere in today's Federal Register.

II. Final Rule

A. Overview

    OTS is amending its regulations set forth in 12 CFR part 510, 
governing the release of unpublished OTS information. First, the 
amendments conform section 510.5 to amendments to the OTS's SAR 
confidentiality rule, 12 CFR 563.180 that are being adopted as part of 
a separate, but simultaneous, rulemaking that the OTS is conducting. 
Under the standards that the OTS is incorporating into section 510.5, 
the OTS will only release a SAR, or any information that reveals the 
existence of a SAR (referred to in this preamble as ``SAR 
information''), when ``necessary to fulfill official duties consistent 
with Title II of the Bank Secrecy Act (BSA).''
    The effect of these amendments is that the OTS will not release SAR 
information in response to a request from a private litigant arising 
out of a civil lawsuit or administrative proceeding to which the OTS is 
not a party. The Director also will not disclose SAR information to any 
other person or entity, and the OTS will not release SAR information in 
response to a request by another government agency, except to fulfill 
official duties in light of the purposes of the BSA.
    This final rule amends part 510 to make it consistent with the 
amendments to OTS's SAR regulation that implements section 351 of the 
USA PATRIOT Act, thus ensuring that the appropriate standard is applied 
to OTS's disclosure of SAR information. Section 510.5 sets forth OTS's 
standards and procedures for the release of ``unpublished OTS 
information,'' and sets forth the restrictions on the dissemination of 
such information. Generally, ``unpublished OTS information'' is 
confidential and privileged information that is the property of the 
OTS, and that the OTS is not required to release under the Freedom of 
Information Act (5 U.S.C. 552 et seq.) or that the OTS has not yet 
published or made available pursuant to 12 U.S.C. 1818(u), the statute 
requiring publication of certain enforcement orders.
    Section 510.5 describes procedures for requesting unpublished OTS 
information from the OTS, such as, where to submit a request, the form 
of the request, information that must be included in any request 
involving an adversarial matter, and various bases for the OTS's denial 
of such a request.\2\ Section 510.5 authorizes the OTS to make 
unpublished OTS information available to a supervised entity and to 
other persons, at the sole discretion of the Director or his or her 
delegate.\3\ Section 510.5(d)(5) also indicates that the OTS may 
condition release of information that it discloses under this section.
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    \2\ See 12 CFR 510.5.
    \3\ See 12 CFR 510.5(d).
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    Although a SAR may be considered ``unpublished OTS information,'' 
it is the OTS's position that the release of a SAR must be governed by 
standards set forth in the BSA. The BSA and its implementing 
regulations require a financial institution to file a SAR when it 
detects a known or suspected violation of Federal law or a suspicious 
activity related to money laundering, terrorist financing, or other 
criminal activity.\4\ The BSA also provides that a financial 
institution, and its officers, directors, employees, and agents are 
prohibited from notifying any person involved in a suspicious 
transaction that the transaction was reported.\5\ Most importantly, in 
2001, section 351 of the USA PATRIOT Act added a new provision to the 
BSA prohibiting officers or employees of the Federal government or any 
State, local, tribal, or territorial government within the United 
States from disclosing to any person \6\ involved in a suspicious 
transaction that the transaction was reported, other than as necessary 
to fulfill the official duties of such officer or employee.\7\ 
Accordingly, it is this provision that now governs the ability of the 
OTS to disclose SAR information to any person.
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    \4\ 31 U.S.C. 5318(g)(1).
    \5\ 31 U.S.C. 5318(g)(2)(A)(i).
    \6\ The phrase ``any person involved in the transaction'' has 
been construed to apply to ``any person'' because the disclosure of 
SAR information to any outside party may make it likely that SAR 
information would be disclosed to a person involved in the 
transaction, which is absolutely prohibited by the BSA. See Cotton 
v. Private Bank and Trust Co., 235 F. Supp. 2d 809, 815 (N.D. Ill. 
2002).
    \7\ See USA PATRIOT Act, section 351(b). Pub. L 107-56, Title 
III, Sec.  351, 115 Stat. 272, 321(2001).
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    The OTS is revisiting the treatment of SAR information in section 
510.5 in light of the 2001 amendments to the BSA, added by section 351 
of the USA PATRIOT Act that specifically addresses governmental 
disclosures of SARs. Under the amendments to section 510.5, the OTS 
will decide whether to release SAR information based upon the standard 
in the OTS's amendments to its SAR rules, 12 CFR 563.180, implementing 
section 351, thereby replacing the factors previously set out in 
section 510.5(d). The standard in the amendments to the OTS's SAR rule 
provides that ``Neither OTS (nor any officer, employee or agent of OTS, 
shall disclose a SAR, or any information that will reveal the existence 
of a SAR except as necessary to fulfill official duties consistent with 
Title II of the BSA.'' In addition, the standard provides that 
``official duties'' shall not include the disclosure of SAR information 
in response to a request for use in a private legal proceeding or in 
response to a request for disclosure of non-public information under 12 
CFR 510.5.\8\ The

[[Page 75585]]

SAR rules interpret ``official duties'' to mean ``official duties 
consistent with the purposes of Title II of the BSA,'' namely, for 
``criminal, tax, regulatory investigations or proceedings, or in the 
conduct of intelligence or counterintelligence activities, including 
analysis, to protect against international terrorism.'' \9\ This 
standard will permit disclosures responsive to a grand jury subpoena; a 
request from an appropriate Federal or State law enforcement or 
regulatory agency; and prosecutorial disclosures mandated by statute or 
the Constitution, in connection with the statement of a government 
witness to be called at trial, the impeachment of a government witness, 
or as material exculpatory of a criminal defendant.\10\
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    \8\ For purposes of this provision ``official duties'' means 
official disclosures necessary to accomplish a governmental purpose 
consistent with Title II of the BSA entrusted to the agency, the 
officer or employee. For example, prosecutorial disclosures mandated 
by statute or the Constitution, such as a statement of a government 
witness to be called at trial, impeachment of a government witness, 
or material exculpatory of a criminal defendant. See, e.g., Giglio 
v. United States, 405 U.S. 150, 153-54 (1972); Brady v. State of 
Maryland, 373 U.S. 83, 86-87 (1963); Jencks v. United States, 353 
U.S. 657, 668 (1957).
    \9\ 31 U.S.C. 5311 (setting forth the purposes of the BSA).
    \10\ See, e.g., Giglio v. United States, 405 U.S. 150, 153-54 
(1972); Brady v. State of Maryland, 373 U.S. 83, 86-87 (1963); 
Jencks v. United States, 353 U.S. 657, 668 (1957).
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B. Section-by-Section Description of the Rule

    Section 510.5(a) and (b) Scope and Purpose.
    The existing section 510(b) includes several standards for the 
release of unpublished OTS information. A person seeking such 
information, generally must submit a request in writing to the OTS that 
addresses the factors set forth in section 510.5(b). Section 510.5(d) 
describes how the OTS will make its determination to release the 
information. That provision also provides that OTS will deny a request 
if it deems the information to be (A) not highly relevant, (B) 
privileged, (C) available from other sources, or (D) information that 
should not be disclosed for reasons that warrant restriction under the 
Federal Rules of Civil Procedure.\11\
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    \11\ See 12 CFR 510.5(d)(4).
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    This final rule adds a new paragraph (iv) to the scope section of 
12 CFR 510.5, which states that this section does not apply to OTS's 
decision to disclose records or testimony involving a SAR filed 
pursuant to regulations implementing 12 U.S.C. 5318(g) or any 
information that will reveal the existence of a SAR. Accordingly, the 
OTS's decision to disclose records or testimony involving SAR 
information is governed solely by the standard in 12 CFR 563.180. 
Paragraph (iv) makes clear that the standard in 12 CFR 563.180 applies 
in place of the standards for denial set forth in 12 CFR 510.5(d)(4). 
Accordingly, the OTS will not release SAR information in response to 
any request received pursuant to section 510.5, including from a 
federal, state, or foreign government, and the Director will not 
disclose SAR information to any person, except to fulfill the OTS's 
official duties in light of the purposes of the BSA. Consistent with 
the OTS's longstanding commitment to protect the confidentiality of 
SARs, the SAR rule also states that ``official duties'' does not 
include the disclosure of SAR information in response to a request for 
use in a private legal proceeding or in response to a request for 
disclosure of non-public information under 12 CFR 510.5.
    Section 510.5(d) Consideration of requests.
    Section 510.5 generally describes how the OTS makes its 
determination to release or to withhold unpublished OTS information in 
response to requests received under section 510.5(b) and (d).\12\ 
Section 510.5(d)(4) specifically lists four examples of reasons for 
which the OTS will deny the release of unpublished OTS information.
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    \12\ As described earlier, Sec.  510.5 does not apply to SAR 
information.
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    The OTS is adding ``when not prohibited by law'' as a fifth reason 
for denial of requests made under section 510.5(d)(4). This addition 
makes the language in section 510.5(d), consistent with the standard 
applicable to disclosures to government entities, which includes the 
condition that such disclosures only be made ``when not prohibited by 
law.''

III. Regulatory Analysis

Regulatory Flexibility Act

    Under section 605(b) of the Regulatory Flexibility Act (RFA), 5 
U.S.C. 605(b), the regulatory flexibility analysis otherwise required 
under section 604 of the RFA is not required if the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities and publishes its certification 
and a short, explanatory statement in the Federal Register along with 
its rule.
    The OTS has determined that the rule does not impose any economic 
costs as they simply clarify the scope of the statutory prohibition 
against the disclosure by financial institutions and by the government 
of SAR information. Therefore, pursuant to section 605(b) of the RFA, 
the OTS hereby certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. Accordingly, 
a regulatory flexibility analysis is not needed.

Executive Order 12866

    The OTS has determined that this rule is not a significant 
regulatory action under Executive Order 12866. We have concluded that 
the changes that made by the amendments will not have an annual effect 
on the economy of $100 million or more. The OTS further concludes that 
this rule does not meet any of the other standards for a significant 
regulatory action set forth in Executive Order 12866.

Paperwork Reduction Act

    We have reviewed the amendments in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320, Appendix A.1) (PRA) 
and have determined that they do not contain any ``collections of 
information'' as defined by the PRA.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (UMRA) requires that an agency prepare a budgetary impact 
statement before promulgating a rule that includes a Federal mandate 
that may result in the expenditure by state, local, and tribal 
governments, in the aggregate, or by the private sector of $100 million 
or more (adjusted annually for inflation) in any one year. If a 
budgetary impact statement is required, section 205 of the UMRA also 
requires an agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. The OTS has 
determined that its rule will not result in expenditures by state, 
local, and tribal governments, or by the private sector, of $133 
million or more. Accordingly, OTS has not prepared a budgetary impact 
statement or specifically addressed the regulatory alternatives 
considered.

List of Subjects in 12 CFR Part 510

    Administrative practice and procedure, Freedom of information, 
Individuals with disabilities, Minority businesses, Organization and 
functions (Government agencies), Reporting and recordkeeping 
requirements, Women.

Authority and Issuance

0
For the reasons set forth in the preamble, part 510 of title 12 of the 
Code of Federal Regulations is amended as follows:

PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS

0
1. The authority citation for part 510 continues to read as follows:


[[Page 75586]]


    Authority:  12 U.S.C. 1462a, 1463, 1464; Pub.L. 101-410, 104 
Stat 890; Pub.L. 104-134, 110 Stat 1321-358.

0
2. Amend Sec.  510.5 by:
0
a. Removing, at the end of paragraph (a)(3)(ii), the word ``and'';
0
b. Removing, at the end of paragraph (a)(3)(iii), the period and adding 
``; and'' in its place;
0
c. Adding paragraph (a)(3)(iv) to read as set forth below;
0
d. Removing, at the end of paragraph (d)(4)(i)(C), the word ``or'';
0
e. Removing, at the end of paragraph (d)(4)(i)(D) the period and adding 
``; and'' in its place; and
0
f. Adding paragraph (d)(4)(i)(E) as set forth below.


Sec.  510.5  Release of unpublished OTS information.

    (a) * * *
    (3) * * *
    (iv) Requests for a Suspicious Activity Report (SAR), or any 
information that would reveal the existence of a SAR.
* * * * *
    (d) * * *
    (4) * * *
    (i) * * *
    (E) Information that should not be disclosed, because such 
disclosure is prohibited by law.
* * * * *

    Dated: June 1, 2010.

    By the Office of Thrift Supervision.
John E. Bowman,
Acting Director.
[FR Doc. 2010-29871 Filed 12-2-10; 8:45 am]
BILLING CODE 6720-01-P