[Federal Register Volume 74, Number 44 (Monday, March 9, 2009)]
[Proposed Rules]
[Pages 10148-10158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4697]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA99
[Docket Number: TREAS-FinCEN-2008-0022]


Financial Crimes Enforcement Network; Confidentiality of 
Suspicious Activity Reports

AGENCY: The Financial Crimes Enforcement Network (FinCEN), Department 
of the Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Financial Crimes Enforcement Network (``FinCEN''), a 
bureau of the Department of the Treasury (``Treasury''), is proposing 
to revise the regulations implementing the Bank Secrecy Act (``BSA'') 
regarding the confidentiality of a report of suspicious activity 
(``SAR'') to: Clarify the scope of the statutory prohibition against 
the disclosure by a financial institution of a SAR; address the 
statutory prohibition against the disclosure by the government of a 
SAR; clarify that the exclusive standard applicable to the disclosure 
of a SAR by the government is to fulfill official duties consistent 
with the purposes of the BSA; modify the safe harbor provision to 
include changes made by the Uniting and Strengthening America by 
Providing the Appropriate Tools Required to Intercept and Obstruct 
Terrorism Act of 2001 (``USA PATRIOT Act''); and make minor technical 
revisions for consistency and harmonization among the different rules. 
These amendments are consistent with similar proposals to be issued by 
some of the Federal bank regulatory agencies.\1\
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    \1\ The Federal bank regulatory agencies have parallel SAR 
requirements for their supervised entities: See 12 CFR 208.62 (the 
Board of Governors of the Federal Reserve System (``Fed'')); 12 CFR 
353.3 (the Federal Deposit Insurance Corporation (``FDIC'')); 12 CFR 
748.1 (the National Credit Union Administration (``NCUA'')); 12 CFR 
21.11 (the Office of the Comptroller of Currency (``OCC'')) and 12 
CFR 563.180 (the Office of Thrift Supervision (``OTS'')). Of these 
agencies the OCC and OTS are proposing corollary regulation changes 
contemporaneously.

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DATES: Comments must be received by June 8, 2009.

ADDRESSES: You may submit comments, identified by RIN 1506-AA99 or 
docket number TREAS-FinCen-2008-0022,\2\ by any of the following 
methods:
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    \2\ This single docket number is shared by three related 
documents (this notice of proposed rulemaking, and two related 
pieces of proposed guidance) published simultaneously by FinCEN in 
today's Federal Register. Accordingly, commenters may submit 
comments related to any of the proposals, or any combination of 
proposals, in a single comment letter.

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[[Page 10149]]

    <bullet> Federal e-rulemaking portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include RIN 
1506-AA99 or docket number TREAS-FinCen-2008-0022 in the body of the 
text.
    Inspection of comments: Comments may be inspected, between 10 a.m. 
and 4 p.m., in the FinCEN reading room in Vienna, VA. Persons wishing 
to inspect the comments submitted must request an appointment with the 
Disclosure Officer by telephoning (703) 905-5034 (Not a toll free 
call).

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, FinCEN (800) 949-2732 and select option 1.

SUPPLEMENTARY INFORMATION:

I. Background

    The BSA requires financial institutions to keep certain records and 
make certain reports that have been determined to be useful in 
criminal, tax, or regulatory investigations or proceedings, and for 
intelligence or counter intelligence activities to protect against 
international terrorism. In particular, the BSA and its implementing 
regulations require financial institutions to file a SAR when they 
detect a known or suspected violation of Federal law or regulation, or 
a suspicious activity related to money laundering, terrorist financing, 
or other criminal activity.\3\
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    \3\ The Annunzio-Wylie Anti-Money Laundering Act of 1992 (the 
Annunzio-Wylie Act), amended the BSA and authorized the Secretary of 
the Treasury to require financial institutions to report suspicious 
transactions relevant to a possible violation of law or regulation. 
See Public Law 102-550, Title XV, Sec.  1517(b), 106 Stat. 4055, 
4058-9 (1992); 31 U.S.C. 5318(g)(1).
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    SARs generally are unproven reports of possible violations of law 
or regulation, or of suspicious activities, that are used for law 
enforcement or regulatory purposes. The BSA 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.\4\ FinCEN implemented 
this provision in its SAR regulations for each industry through an 
explicit prohibition that closely mirrored the statutory language. 
Specifically, we clarified that disclosure could not be made to the 
person involved in the transaction, but that the SAR could be provided 
to FinCEN, law enforcement, and the institution's supervisor or 
examining authority. In certain SAR rules, we have expressly provided 
for the possibility of institutions jointly filing a SAR regarding 
suspicious activity that occurred at multiple institutions.\5\
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    \4\ See 31 U.S.C. 5318(g)(2).
    \5\ Bank Secrecy Act regulations expressly permitting the filing 
of a joint SAR when multiple financial transactions are involved in 
a common transaction or series of transactions involving suspicious 
activity can be found at 31 CFR 103.15(a)(3) (for mutual funds); 31 
CFR 103.16(b)(3)(ii) (for insurance companies); 31 CFR 103.17(a)(3) 
(for futures commission merchants and introducing brokers in 
commodities); 31 CFR 103.19(a)(3) (for broker-dealers in 
securities); and 31 CFR 103.20(a)(4) (for money services 
businesses).
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    The USA PATRIOT Act strengthened the confidentiality of SARs by 
adding to the BSA a new provision that prohibits officers or employees 
of the Federal government or any State, local, tribal, or territorial 
government within the United States with knowledge of a SAR from 
disclosing to any person involved in a suspicious transaction that the 
transaction was reported, other than as necessary to fulfill the 
official duties of such officer or employee.\6\
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    \6\ See USA PATRIOT Act, section 351(b). Public Law 107-56, 
Title III, Sec.  351, 115 Stat. 272, 321 (2001); 31 U.S.C. 
5318(g)(2).
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    To encourage the reporting of possible violations of law or 
regulation, and the filing of SARs, the BSA contains a safe harbor 
provision that shields financial institutions making such reports from 
civil liability. In 2001, the USA PATRIOT Act clarified that the safe 
harbor covers voluntary disclosure of possible violations of law and 
regulations to a government agency and expanded the scope of the limit 
on liability to cover any civil liability which may exist ``under any 
contract or other legally enforceable agreement (including any 
arbitration agreement).'' \7\
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    \7\ See USA PATRIOT Act, section 351(a). Public Law 107-56, 
Title III, Sec.  351, 115 Stat. 272, 321 (2001); 31 U.S.C. 
5318(g)(3).
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II. Overview of Proposal

    The proposed amendments to FinCEN's SAR rules include key changes 
that would (1) clarify the scope of the statutory prohibition against 
the disclosure by a financial institution of a SAR; (2) address the 
statutory prohibition against the disclosure by the government of a 
SAR; (3) clarify that the exclusive standard applicable to the 
disclosure of a SAR, or any information that would reveal the existence 
of a SAR by the government is ``to fulfill official duties consistent 
with Title II of the BSA,'' in order to ensure that SAR information is 
protected from inappropriate disclosures unrelated to the BSA purposes 
for which SARs are filed; (4) modify the safe harbor provision to 
include changes made by the USA PATRIOT Act; and (5) where possible, 
harmonize minor technical differences that exist between the 
confidentiality, safe harbor, and compliance provisions of our 
rulemakings for different industries.
    In separate but contemporaneous rulemakings, some of the Federal 
bank regulatory agencies are proposing to amend their SAR rules to 
incorporate comparable provisions, and to amend their information 
disclosure regulations \8\ to clarify that the exclusive standard 
governing the release of a SAR, or any information that would reveal 
the existence of a SAR is set forth in the confidentiality provisions 
of their respective SAR rules.
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    \8\ Generally, these regulations are known as ``Touhy 
regulations,'' after the Supreme Court's decision in United States 
ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). In that case, the 
Supreme Court held that an agency employee could not be held in 
contempt for refusing to disclose agency records or information when 
following the instructions of his or her supervisor regarding the 
disclosure. As such, an agency's Touhy regulations are the 
instructions agency employees must follow when those employees 
receive requests or demands to testify or otherwise disclose agency 
records or information.
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    Additionally, elsewhere in this part, FinCEN is simultaneously 
issuing for notice and comment proposed guidance regarding the sharing 
of SARs with affiliates. This proposed guidance interprets one of the 
provisions of this notice of proposed rulemaking and, accordingly, 
should be read in conjunction with this notice.

III. Section-by-Section Analysis

A. Confidentiality of SARs

    Out of recognition that ``reports with a high degree of 
usefulness'' were unlikely to be filed unless afforded strict 
confidentiality, Congress established what is often referred to as the 
``non-disclosure provision'' \9\ in the BSA. This provision prohibits 
financial institutions and officers or employees of the government with 
knowledge that a SAR was filed from notifying the person involved in 
the transaction that the transaction has been reported. Accordingly, 
under the section heading ``confidentiality of reports,'' FinCEN's 
rules currently prohibit financial institutions from disclosing that a 
SAR was filed to any person involved in the transaction. The SAR rules 
also provide that no institution may disclose a SAR in response to a 
subpoena or other request, except when that request comes from FinCEN 
or an appropriate supervisory or law enforcement agency. Over the 
years, FinCEN has received numerous questions regarding the scope of 
the prohibition against the disclosure of a SAR in its current rules. 
Accordingly, in this rulemaking, we are

[[Page 10150]]

proposing to clarify the scope of SAR confidentiality.
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    \9\ See 31 U.S.C. 5318(g)(2).
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    FinCEN believes it is important to clarify that the statutory 
prohibition on notifying the person involved in the transaction that 
the transaction has been reported must be interpreted more broadly to 
prohibit disclosures to any person. SAR rules issued by the Federal 
bank regulatory agencies already provide that ``SARs are 
confidential.'' As described further in the Section-by-Section Analysis 
below, this view of SAR confidentiality also has been repeatedly upheld 
in relevant case law.
    FinCEN also recognizes that in order to protect the confidentiality 
of a SAR, any information that would reveal the existence of a SAR must 
be afforded the same protection as the SAR itself. The confidentiality 
of SARs must be maintained for a number of compelling reasons. For 
example, the disclosure of a SAR could result in notification to 
persons involved in the transaction that is being reported and 
compromise any investigations being conducted in connection with the 
SAR. In addition, FinCEN recognizes that any disclosure of a SAR could 
reduce the willingness of all financial institutions to file SARs. If 
institutions believe that a SAR can be used for purposes unrelated to 
the law enforcement and regulatory purposes of the BSA, the disclosure 
of such information could adversely affect the timely, appropriate, and 
candid reporting of suspicious transactions. Institutions also may be 
reluctant to report suspicious transactions for fear that the 
disclosure of a SAR will interfere with the institution's relationship 
with its customer. Further, a SAR may provide insight into how an 
institution uncovers potential criminal conduct that can be used by 
others to circumvent detection. The disclosure of a SAR also could 
compromise personally identifiable information or commercially 
sensitive information, or damage the reputational interests of 
companies that may be named. Finally, the disclosure of a SAR increases 
the risk that an institution's employees or others involved in the 
preparation and filing of SARs could become targets for retaliation by 
persons whose criminal conduct has been reported.
    FinCEN believes that all of the reasons for maintaining the 
confidentiality of SARs are equally applicable to any information that 
would reveal the existence of a SAR. Therefore, FinCEN is proposing to 
modify the general introduction in our rules to state that ``[a] SAR, 
and any information that would reveal the existence of a SAR, are 
confidential.'' The introduction also indicates that neither a SAR, nor 
any information that would reveal the existence of a SAR, may be 
disclosed, except as authorized in the limited circumstances that 
follow.
    FinCEN is also proposing to modify this introductory section by 
clarifying that ``for purposes of [the confidentiality provision] only, 
a SAR shall include any suspicious activity report filed with FinCEN 
pursuant to any regulation in this part.'' By using the term ``SAR'' in 
each of the proposed confidentiality provisions, FinCEN is purposefully 
using a term broader than the existing references in those provisions 
to specific types of SARs. We note that our rules require institutions 
to comply with our filing requirements through the use of particular 
versions of the SAR form, e.g., a SAR-SF for those in the securities 
and futures sector, or a SAR-MSB for money services businesses. 
Nevertheless, it is critical that the confidentiality provisions of our 
SAR rules apply with respect to any type of SAR in the filing 
institution's possession, which since it may result from the joint 
filing or sharing of a SAR with another type of financial institution 
in accordance with the provisions of these proposed rules, could 
include a type of SAR form not used by the institution.

B. Disclosure by Financial Institutions

    FinCEN's current rules provide that any institution subpoenaed or 
otherwise requested to disclose a SAR or the information contained in a 
SAR must decline to produce the SAR or to provide any information that 
would disclose that a SAR has been prepared or filed, and must notify 
FinCEN of the request and its response to the request.
    The proposed rules more specifically address the prohibition on the 
disclosure of a SAR by a financial institution. The rules provide that 
the prohibition includes ``any information that would reveal the 
existence of a SAR'' instead of using the phrase ``any information that 
would disclose that a SAR has been prepared or filed.'' FinCEN believes 
that this phrase more clearly describes the type of information that is 
covered by the prohibition against the disclosure of a SAR. In 
addition, the proposed rules incorporate the specific reference in 31 
U.S.C. 5318(g)(2)(A)(i) to ``directors, officers, employees and 
agents,'' and clarify that the prohibition against disclosure extends 
to those individuals in a financial institution who may have access to 
a SAR or information that would reveal the existence of a SAR.
    Although 31 U.S.C. 5318(g)(2)(A)(i) states that a person involved 
in the transaction may not be notified that the transaction has been 
reported, the proposed rules continue to reflect case law that has 
consistently concluded, in accordance with applicable regulations, that 
financial institutions are broadly prohibited from disclosing a SAR, or 
information that would reveal the existence of a SAR, to any person. 
Accordingly, these cases have held that, in the context of discovery in 
connection with civil lawsuits, financial institutions are prohibited 
from disclosing a SAR or information that would reveal the existence of 
a SAR because section 5318(g) and its implementing regulations have 
created an unqualified discovery and evidentiary privilege for such 
information that cannot be waived by financial institutions.\10\ 
Consistent with case law and current regulation, the texts of the 
proposed rules do not limit the prohibition on disclosure only to the 
person involved in the transaction. Permitting disclosure to any 
outside party may make it likely that SAR information would be 
disclosed to a person involved in the transaction, which is prohibited 
by the statute.
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    \10\ See, e.g., Whitney Nat'l Bank v. Karam, 306 F. Supp. 2d 
678, 682 (S.D. Tex. 2004); Cotton v. Private Bank and Trust Co., 235 
F. Supp. 2d 809, 815 (N.D. Ill. 2002).
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    The proposed rules continue to provide that any financial 
institution, or any director, officer, employee, or agent of a 
financial institution, that is subpoenaed or otherwise requested to 
disclose a SAR or information that would reveal the existence of a SAR 
must decline to provide the information, citing this section of the 
rules and 31 U.S.C. 5318(g)(2)(A)(i), and must provide notification of 
the request and its response thereto to FinCEN and its primary Federal 
regulator if that regulator has a parallel SAR requirement.

C. Rules of Construction

    FinCEN is proposing rules of construction to address issues that 
have arisen over the years about the scope of the SAR disclosure 
prohibition and to implement statutory modifications to the BSA made by 
the USA PATRIOT Act. The proposed rules of construction primarily 
describe situations that are not covered by the prohibition against the 
disclosure of SAR information. The introduction to these rules makes 
clear that the rules of construction are each qualified by the 
statutory mandate that no person involved in any reported suspicious 
transaction can be notified that the transaction has been reported.
    The first proposed rule of construction builds upon the existing

[[Page 10151]]

provision to clarify that a financial institution, or any director, 
officer, employee, or agent of a financial institution, may disclose a 
SAR or information that would reveal the existence of a SAR to FinCEN 
or any Federal, state, or local law enforcement agency or any Federal 
or state regulatory agency that examines the financial institution for 
compliance with the BSA. For the rules governing broker-dealers, 
futures commission merchants, and introducing brokers in commodities, 
such disclosure is also permissible at the request of an appropriate 
self-regulatory organization that is examining the institution for 
compliance with the SAR reporting requirement. Although the 
permissibility of such disclosures may be readily apparent, the 
proposal contains this statement to clarify that the prohibition 
against disclosure cannot be used to withhold this information from 
governmental authorities or other examining authorities that are 
otherwise entitled by law to receive SARs and to examine for and 
investigate suspicious activity.
    The second proposed rule of construction provides that the phrase 
``a SAR or information that would reveal the existence of a SAR'' does 
not include the underlying facts, transactions, and documents upon 
which a SAR is based. This statement reflects case law which has 
recognized that, while a financial institution is prohibited from 
producing documents in discovery that evidence the existence of a SAR, 
factual documents created in the ordinary course of business (for 
example, business records and account information upon which a SAR is 
based), may be discoverable in civil litigation under the Federal Rules 
of Civil Procedure.\11\
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    \11\ See Cotton, 235 F. Supp. 2d at 815.
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    This proposed rule of construction includes illustrative examples 
of situations where the underlying facts, transactions, and documents 
upon which a SAR is based may be disclosed. The first example clarifies 
that this information \12\ may be disclosed to another financial 
institution, or any director, officer, employee, or agent of the 
financial institution, for the preparation of a joint SAR. Although 
FinCEN had not previously prohibited any institution from jointly 
filing with any other institution that was subject to the suspicious 
activity reporting requirement, this rule of construction clarifies the 
authority for all institutions with a SAR requirement to jointly file 
SARs with any other institution with a SAR requirement.\13\
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    \12\ Although the underlying facts, transactions, and documents 
upon which a SAR is based may include previously filed SARs or other 
information that would reveal the existence of a SAR, these 
materials would not be disclosable as underlying documents.
    \13\ On December 21, 2006, FinCEN and the Federal bank 
regulatory agencies announced that the format for the SAR form for 
depository institutions had been revised to support a new joint 
filing initiative to reduce the number of duplicate SARs filed for a 
single suspicious transaction. ``Suspicious Activity Report (SAR) 
Revised to Support Joint Filings and Reduce Duplicate SARs,'' Joint 
Release issued by FinCEN, the FRB, the OCC, the OTS, the FDIC, and 
NCUA (Dec. 21, 2006). On February 17, 2006, FinCEN and the Federal 
bank regulatory agencies published a joint Federal Register notice 
seeking comment on proposed revisions to the SAR form. See 71 FR 
8640. On April 26, 2007, FinCEN announced a delay in implementation 
of the revised SAR form until further notice. See 72 FR 23891. Until 
such time as a new SAR form is available that facilitates joint 
filing, institutions authorized to jointly file should follow 
FinCEN's guidance to use the words ``joint filing'' in the narrative 
of the SAR and ensure that both institutions maintain a copy of the 
SAR and any supporting documentation (See, e.g., http://www.fincen.gov/statutes_regs/guidance/html/guidance_faqs_sar_10042006.html).
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    The second example, applicable only to depository institutions, 
broker-dealers, futures commission merchants, and introducing brokers 
in commodities, codifies a rule of construction added to the BSA by 
section 351 of the USA PATRIOT Act which provides that such underlying 
information may be disclosed in certain written employment references 
and termination notices.\14\ These two examples are not intended to be 
an exhaustive list of all possible scenarios in which the disclosure of 
underlying information is permissible.
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    \14\ 31 U.S.C. 5318(g)(2)(B).
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    The third proposed rule of construction, applicable at this time 
only to depository institutions, broker-dealers, mutual funds, futures 
commission merchants, and introducing brokers in commodities, makes 
clear that the prohibition against the disclosure of a SAR or 
information that would reveal the existence of a SAR does not include 
the sharing by any of these financial institutions, or any director, 
officer, employee, or agent of these institutions, of a SAR or 
information that would reveal the existence of the SAR within the 
institution's corporate organizational structure, for purposes that are 
consistent with Title II of the BSA, as determined by regulation or in 
guidance. This proposed rule of construction recognizes that these 
financial institutions may find it necessary to share a SAR or 
information that would reveal the existence of a SAR to fulfill 
reporting obligations under the BSA, and to facilitate more effective 
enterprise-wide BSA monitoring, reporting, and general risk-management. 
The term ``share'' used in this rule of construction is an 
acknowledgement that sharing within a corporate organization for 
purposes consistent with Title II of the BSA is distinguishable from a 
prohibited disclosure.
    FinCEN and the Federal bank regulatory agencies have already issued 
joint guidance making clear that the U.S. branch or agency of a foreign 
bank may share a SAR with its head office, and that a U.S. bank or 
savings association may share a SAR with its controlling company 
(whether domestic or foreign). In consultation with the staffs of the 
SEC and CFTC, FinCEN also issued comparable guidance for broker-
dealers, futures commission merchants, and introducing brokers in 
commodities permitting them to share SARs with parent entities (whether 
domestic or foreign). These guidance documents recognized that the 
sharing of a SAR with a head office, controlling company, or parent 
entity facilitates both the compliance with the applicable requirements 
of the BSA and the discharge of oversight responsibilities with respect 
to enterprise-wide risk management and compliance with applicable laws 
and regulations.\15\
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    \15\ See ``Interagency Guidance on Sharing Suspicious Activity 
Reports with Head Offices and Controlling Companies'' (January 20, 
2006). http://www.fincen.gov/statutes_regs/guidance/pdf/sarsharingguidance01122006.pdf; and ``Guidance on Sharing of 
Suspicious Activity Reports by Securities Broker-Dealers, Futures 
Commission Merchants, and Introducing Brokers in Commodities'' 
(January 20, 2006). http://www.fincen.gov/statutes_regs/guidance/pdf/sarsharingguidance01202006.pdf.
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    In this same part of the Federal Register, FinCEN and certain 
Federal bank regulatory agencies today are issuing for notice and 
comment proposed guidance that further clarifies when a SAR can be 
shared with an institution's affiliates for purposes consistent with 
the BSA. FinCEN, in consultation with the SEC and CFTC, is also 
proposing for notice and comment similar guidance for the broker-
dealer, mutual fund, futures commission merchant, and introducing 
broker in commodities industries.

D. Disclosures by Government Authorities

    As previously noted, section 351 of the USA PATRIOT Act, 31 U.S.C. 
5318(g)(2)(A)(ii), amended the BSA, adding a new provision prohibiting 
officers and employees of the government from disclosing a SAR except 
``as necessary to fulfill [their] official duties.'' FinCEN is 
proposing a new section in the regulations that

[[Page 10152]]

extends this prohibition against disclosure to all federal, state, 
local, territorial, or tribal government authorities, and any director, 
officer, employee, or agent of those authorities. The proposed rules 
track the statutory language closely by clarifying that any officer or 
employee of the government may not disclose a SAR or information that 
would reveal the existence of the SAR, ``except as necessary to fulfill 
official duties consistent with Title II of the Bank Secrecy Act.''
    As stated in 5318(g)(2)(A)(i), which prohibits a financial 
institution's disclosure of a SAR, section 5318(g)(2)(A)(ii) also 
prohibits the government from disclosing a SAR to ``any person involved 
in the transaction.'' FinCEN is proposing to address sections 
5318(g)(2)(A)(i) and (A)(ii) in a consistent manner, because disclosure 
to any outside party may make it likely that a SAR or any information 
that would reveal the existence of a SAR, will be disclosed to a person 
involved in the transaction. Accordingly, the section of the rules that 
address the disclosure of a SAR or of such information by the 
government and its officers, employees, and agents is broad and does 
not prohibit disclosure only to ``any person involved in the 
transaction.''
    Section 5318(g)(2)(A)(ii) narrowly permits governmental disclosures 
``as necessary to fulfill the official duties,'' a phrase that is not 
defined in the BSA. FinCEN is proposing to construe this phrase in the 
context of the BSA, in light of the purpose for which SARs are filed. 
Accordingly, the proposed rules interpret ``official duties'' to mean 
``official duties consistent with the purposes of Title II of the 
BSA,'' namely, for ``criminal, tax, or regulatory investigations or 
proceedings, or in the conduct of intelligence or counterintelligence 
activities, including analysis, to protect against international 
terrorism.'' \16\ This standard would permit, for example, official 
disclosures responsive to a grand jury subpoena; a request from an 
appropriate Federal or State law enforcement or regulatory agency; a 
request from an appropriate Congressional committee or subcommittees; 
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.\17\ This proposed interpretation 
of section 5318(g)(2)(A)(ii) would ensure that a SAR or information 
that would reveal the existence of a SAR will not be disclosed for a 
reason that is unrelated to the purposes of the BSA. For example, this 
standard would not permit the disclosure of a SAR or information that 
would reveal the existence of a SAR to the media.
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    \16\ 31 U.S.C. 5311.
    \17\ 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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    The proposed rules also specifically provide that ``official duties 
consistent with Title II of the BSA'' shall not include the disclosure 
of a SAR or information that would reveal the existence of a SAR in 
response to a request for disclosure of non-public information or in 
response to a request for use in a private legal proceeding, including 
a request under 31 CFR 1.11. The BSA exists, in part, to protect the 
public's interest in an effective reporting system that benefits the 
nation by helping to assure that the U.S. financial system will not be 
used for criminal activity or to support terrorism. FinCEN believes 
that this purpose would be undermined by the disclosure of a SAR or 
information that would reveal the existence of a SAR to a private 
litigant for use in a civil lawsuit for the reasons described earlier, 
including the reason that such disclosures could negatively impact full 
and candid reporting by financial institutions.
    Finally, the proposed regulations would apply to any government 
authority, in addition to its officers, employees, and agents. FinCEN 
is proposing to include each government authority itself in the scope 
of coverage because requests for SARs are typically directed to the 
government authority, rather than to individuals within the government 
with authority to respond to the request. In addition, agents are 
included in the proposed paragraph because agents of a government 
authority may have access to a SAR or information that would reveal the 
existence of a SAR.

E. Disclosures by Self-Regulatory Organizations

    Although not part of any federal, state, local, territorial, or 
tribal government authority, self-regulatory organizations registered 
with or designated by the SEC or CFTC are permitted to access SARs 
through FinCEN's delegation of examination authority to the SEC or 
CFTC, for the purpose of examining broker-dealers, futures commission 
merchants, and introducing brokers in commodities for compliance with 
their SAR requirements. Although the BSA does not explicitly address 
the issue of disclosures of SARs by self-regulatory organizations, 
FinCEN believes it was Congress's clear intent that self-regulatory 
organizations with access to SARs should be subject to the same 
confidentiality provisions as all other users of SAR data. Accordingly, 
in the rules governing entities which may be examined for compliance 
with their SAR requirements by a self-regulatory organization, FinCEN 
is proposing a provision regarding disclosures by self-regulatory 
organizations that closely follows the provision regarding government 
disclosures. The language differs, however, to reflect the fact that 
self-regulatory organizations are not governmental entities. As with 
the provision for financial institutions and government authorities, 
the provision for self-regulatory organizations would apply equally to 
any director, officer, employee, or agent of the self-regulatory 
organization.

F. Limitation on Liability

    In 1992, the Annunzio-Wylie Act amended the BSA by providing a safe 
harbor for financial institutions and their employees from civil 
liability for the reporting of known or suspected criminal offenses or 
suspicious activity through the filing of a SAR.\18\ FinCEN 
incorporated the safe harbor provisions of the 1992 law into its SAR 
rules.\19\ In Section 351 of the USA PATRIOT Act, Congress amended 
section 5318(g)(3) to clarify that the scope of the safe harbor 
provision includes the voluntary disclosure of possible violations of 
law and regulations to a government agency, and to expand the scope of 
the limit on liability to include any liability which may exist ``under 
any contract or other legally enforceable agreement (including any 
arbitration agreement).'' FinCEN has more closely tracked the statutory 
language in the proposed rules, particularly by stating that the safe 
harbor applies to ``disclosures'' (and not ``reports'' as in some 
previous rulemakings) made by institutions.
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    \18\ See supra footnote 2.
    \19\ See, e.g., 31 CFR 103.18(e). The safe harbor regulations 
are also applicable to oral reports of violations. (In situations 
requiring immediate attention, a financial institution must 
immediately notify its regulator and appropriate law enforcement by 
telephone, in addition to filing a SAR.) See e.g., 12 CFR 21.11(d).
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    Additionally, to comport with the authorization to jointly file 
SARs in the second rule of construction, FinCEN is clarifying that the 
safe harbor also applies to ``a disclosure made jointly with another 
institution.'' This concept exists currently in those SAR rules

[[Page 10153]]

where joint filing had been explicitly referenced, but has been revised 
to track more closely the statutory language. It has also been inserted 
for the sake of consistency into those SAR rules where it had been 
absent previously, clarifying that all parties to a joint filing, and 
not simply the party that provides the form to FinCEN, fall within the 
scope of the safe harbor.
    For consistency, FinCEN also separated the provision for 
confidentiality of reports and limitation of liability into two 
separate provisions in those rules for industries which previously 
contained both provisions under the single heading ``confidentiality of 
reports; limitation of liability.''

G. Compliance

    Each of FinCEN's existing SAR rules contains a provision that 
clarifies that Treasury, through FinCEN or its delegatee,\20\ may audit 
a financial institution for compliance with the requirement. Some of 
the SAR rules list the appropriate delegatee(s) for the type of 
financial institution, and for certain financial institutions clarify 
that SARs must be provided to those delegatees within the context of an 
examination of compliance with the SAR requirement. The newly proposed 
rule of construction that authorizes the disclosure of a SAR to, among 
other official entities, a federal regulatory authority examining the 
institution for compliance with the BSA or any self-regulatory 
organization that examines the institution for compliance with the SAR 
requirement eliminates the need for what would be a duplicate provision 
in the compliance section. Accordingly, we have streamlined the section 
to provide only that (1) FinCEN or its delegatees may examine the 
institution for compliance with the SAR requirement; (2) that a failure 
to satisfy the requirements of the SAR rule may constitute a violation 
of the BSA or BSA regulations; and (3) for depository institutions with 
parallel Title 12 SAR requirements, that failure to comply with 
FinCEN's SAR requirement may also constitute a violation of the 
parallel Title 12 rules. Also, although some of FinCEN's current rules 
use the heading ``Examination and Enforcement'' while others use 
``Compliance'' for the same provision, for consistency we have used 
only the heading ``Compliance'' for the same parallel provision in each 
of the proposed rules.
---------------------------------------------------------------------------

    \20\ See 31 CFR 103.56.
---------------------------------------------------------------------------

H. Technical Corrections and Harmonization

    In addition to the changes described above in the Section-by-
Section analysis, FinCEN is proposing technical corrections to 
harmonize each of the seven SAR rules with rules being issued by some 
of the Federal bank regulatory agencies. FinCEN believes that such 
efforts will simplify compliance with SAR reporting requirements.

IV. Proposed Location in 31 CFR Chapter X

    As per the Federal Register Notice of November 7, 2008,\21\ FinCEN 
is separately proposing to remove Part 103 of Chapter I of Title 31, 
Code of Federal Regulations, and add Parts 1000 to 1099 under a new 31 
CFR Chapter X. As such and if finalized, the proposed changes herein 
would be reorganized according to the changes proposed in the Notice 
for Proposed Rulemaking for Chapter X. The planned reorganization will 
have no substantive effect on the proposed regulatory changes herein. 
The proposed regulatory changes of this specific NPRM would be 
renumbered according to the proposed Chapter X as follows:
---------------------------------------------------------------------------

    \21\ ``Transfer and Reorganization of Bank Secrecy Act 
Regulations,'' 73 FR 66414. See, http//www.fincen.gov/statutes_regs/frn/pdf/frnChapt_X_NPRM-Final.pdf.
---------------------------------------------------------------------------

    (a) 31 CFR 103.15, Reports by mutual funds of suspicious 
transactions, would be moved to 31 CFR 1024.320.
    (b) 31 CFR 103.16, Reports by insurance companies of suspicious 
transactions, would be moved to 31 CFR 1025.320.
    (c) 31 CFR 103.17, Reports by futures commission merchants and 
introducing brokers in commodities of suspicious transactions, would be 
moved to 31 CFR 1026.320.
    (d) 31 CFR 103.18, Reports by banks of suspicious transactions, 
would be moved to 31 CFR 1020.320.
    (e) 31 CFR 103.19, Reports by brokers or dealers in securities, 
would be moved to 31 CFR 1023.320.
    (f) 31 CFR 103.20, Reports by money services businesses in 
securities, would be moved to 31 CFR 1022.320.
    (g) 31 CFR 103.21, Reports by casinos of suspicious transactions, 
would be moved to 31 CFR 1021.320.

V. Request for Comments

    FinCEN welcomes comments on any aspect of these proposed amendments 
to the SAR rules. FinCEN has timed the release of the notice of 
proposed rulemaking to coincide with the following related items: (1) A 
notice of, and request for comment on, proposed guidance regarding the 
sharing of SARs with affiliates; (2) parallel amendments proposed by 
certain Federal bank regulatory agencies to their own respective SAR 
confidentiality regulations; and (3) proposed rules by certain Federal 
bank regulatory agencies to amend the information disclosure rules. 
Commenters are encouraged to consider each proposal when commenting on 
the others.
    While FinCEN welcomes comment on any part of the proposed rules, we 
specifically solicit comment on the following areas:
    <bullet> Should any of the proposed provisions which would apply 
only to a limited segment of SAR filers be applicable to additional 
types of financial institutions? For example, should sharing within an 
institution's corporate organizational structure for purposes 
consistent with Title II of the BSA be limited only to banks, broker-
dealers, futures commission merchants, and introducing brokers in 
commodities?
    <bullet> Are any of the terms or provisions that were used for 
consistency across financial institutions inappropriate for any one 
type of financial institution based on its specific characteristics?
    <bullet> Have any important provisions from the existing 
regulations been unintentionally or inappropriately eliminated or 
confused by the proposed new regulations?
    <bullet> Are any of the provisions or terms used in the rules or 
this preamble unclear in their meaning, application, or scope?
    <bullet> If finalized, how would these proposed rules impact 
compliance costs and practices?
    <bullet> What additional or alternative methods could be used to 
strengthen the confidentiality of SARs?
    <bullet> Should additional parts of the SAR rules be harmonized? If 
so, please describe the benefit of such revisions.

VI. Regulatory Matters

A. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (RFA) ( 5 U.S.C. 601 et 
seq.), FinCEN certifies that these proposed regulation revisions will 
not have a significant economic impact on a substantial number of small 
entities. The proposals in this notice of proposed rulemaking would 
affect only the disclosure provisions of the current rules relating to 
the reporting of suspicious activity by financial institutions, and 
would not change any requirement to file or maintain a report. In the 
context of disclosure, the proposals clarify, rather than add to,

[[Page 10154]]

existing regulatory provisions regarding the confidentiality of 
suspicious activity reports. FinCEN therefore expects little or no 
economic impact to result from these proposals. Accordingly, a 
regulatory flexibility analysis is not required.

B. Paperwork Reduction Act Notices

    We have reviewed the proposed rules 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 it does not contain any 
``collections of information'' as defined by the PRA.

C. Executive Order 12866

    It has been determined that this proposed rule is not a significant 
regulatory action for purposes of Executive Order 12866. Accordingly, a 
regulatory impact analysis is not required.

D. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency 
prepare a budgetary impact statement before promulgating any rule 
likely to result in 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 in any one year. The 
current inflation-adjusted expenditure threshold is $133 million. If a 
budgetary impact statement is required, Sec.  205 of the Unfunded 
Mandates Act also requires an agency to identify and consider a 
reasonable number of regulatory alternatives before promulgating a 
rule.
    FinCEN has determined that the proposed rules will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of $133 million or more in any one year. Accordingly, this 
proposal is not subject to section 202 of the Unfunded Mandates Act.

List of Subjects in 31 CFR Part 103

    Administrative practice and procedure, Authority delegations 
(government agencies), Crime, Currency, Investigations, Law 
enforcement, Reporting and recordkeeping requirements, Security 
measures.

Authority and Issuance

    For the reasons set forth in the preamble, 31 CFR Part 103 is 
proposed to be amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FOREIGN TRANSACTIONS

    1. The authority citation for part 103 continues to read as 
follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 
and 5316-5332; title III, sec. 314 Public Law 107-56, 115 Stat. 307.

    2. Section 103.15 is amended by:
    a. Revising paragraphs (d) and (e);
    b. Redesignating paragraphs (f) and (g) as paragraphs (g) and (h); 
and
    c. Adding new paragraph (f).


Sec.  103.15  Reports by mutual funds of suspicious transactions.

* * * * *
    (d) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (d). For purposes of 
this paragraph (d) only, a SAR shall include any suspicious activity 
report filed with FinCEN pursuant to any regulation in this part.
    (1) Prohibition on disclosures by mutual funds--(i) General rule. 
No mutual fund, and no director, officer, employee, or agent of any 
mutual fund, shall disclose a SAR or any information that would reveal 
the existence of a SAR. Any mutual fund, and any director, officer, 
employee, or agent of any mutual fund that is subpoenaed or otherwise 
requested to disclose a SAR or any information that would reveal the 
existence of a SAR, shall decline to produce the SAR or such 
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and 
shall notify FinCEN of any such request and the response thereto.
    (ii) Rules of Construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (d)(1) shall not be construed as 
prohibiting:
    (A) The disclosure by a mutual fund, or any director, officer, 
employee, or agent of a mutual fund of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
or any Federal regulatory authority that examines the mutual fund for 
compliance with its SAR reporting requirements; or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including disclosures to another financial institution, 
or any director, officer, employee, or agent of a financial 
institution, for the preparation of a joint SAR; or
    (B) The sharing by a mutual fund, or any director, officer, 
employee, or agent of the mutual fund, of a SAR, or any information 
that would reveal the existence of a SAR, within the mutual fund's 
corporate organizational structure for purposes consistent with Title 
II of the Bank Secrecy Act as determined by regulation or in guidance.
    (2) Prohibition on disclosures by government authorities. A 
Federal, state, local, territorial, or tribal government authority, or 
any director, officer, employee, or agent of any of the foregoing, 
shall not disclose a SAR, or any information that would reveal the 
existence of a SAR, except as necessary to fulfill official duties 
consistent with Title II of the Bank Secrecy Act. For purposes of this 
section, official duties shall not include the disclosure of a SAR, or 
any information that would reveal the existence of a SAR, in response 
to a request for disclosure of non-public information or in response to 
a request for use in a private legal proceeding, including a request 
under 31 CFR 1.11.
    (e) Limitation on liability. A mutual fund, and any director, 
officer, employee, or agent of any mutual fund, that makes a voluntary 
disclosure of any possible violation of law or regulation to a 
government agency or makes a disclosure pursuant to this section or any 
other authority, including a disclosure made jointly with another 
institution, shall be protected from liability for any such disclosure, 
or for failure to provide notice of such disclosure to any person 
identified in the disclosure, or both, to the full extent provided by 
31 U.S.C. 5318(g)(3).
    (f) Compliance. Mutual funds shall be examined by FinCEN or its 
delegatees for compliance with this section. Failure to satisfy the 
requirements of this section may be a violation of the Bank Secrecy Act 
and of this part.
* * * * *
    3. Section 103.16 is amended by:
    a. Revising paragraph (f);
    b. Redesignating paragraphs (g) through (i) as paragraphs (h) 
through (j);
    c. Adding new paragraph (g); and
    d. Revising newly designated paragraph (h).


Sec.  103.16  Reports by insurance companies of suspicious 
transactions.

* * * * *
    (f) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (f). For purposes of 
this paragraph (f) only, a SAR shall include any suspicious

[[Page 10155]]

activity report filed with FinCEN pursuant to any regulation in this 
part.
    (1) Prohibition on disclosures by insurance companies--(i) General 
rule. No insurance company, and no director, officer, employee, or 
agent of any insurance company, shall disclose a SAR or any information 
that would reveal the existence of a SAR. Any insurance company, and 
any director, officer, employee, or agent of any insurance company that 
is subpoenaed or otherwise requested to disclose a SAR or any 
information that would reveal the existence of a SAR, shall decline to 
produce the SAR or such information, citing this section and 31 U.S.C. 
5318(g)(2)(A)(i), and shall notify FinCEN of any such request and the 
response thereto.
    (ii) Rules of Construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (f)(1) shall not be construed as 
prohibiting the disclosure by an insurance company, or any director, 
officer, employee, or agent of an insurance company of:
    (A) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
or any Federal or state regulatory authority that examines the 
insurance company for compliance with the Bank Secrecy Act; or
    (B) The underlying facts, transactions, and documents upon which a 
SAR is based, including disclosures to another financial institution, 
or any director, officer, employee, or agent of a financial 
institution, for the preparation of a joint SAR.
    (2) Prohibition on disclosures by government authorities. A 
Federal, State, local, territorial, or tribal government authority, or 
any director, officer, employee, or agent of any of the foregoing, 
shall not disclose a SAR, or any information that would reveal the 
existence of a SAR, except as necessary to fulfill official duties 
consistent with Title II of the Bank Secrecy Act. For purposes of this 
section, official duties shall not include the disclosure of a SAR, or 
any information that would reveal the existence of a SAR, in response 
to a request for disclosure of non-public information or in response to 
a request for use in a private legal proceeding, including a request 
under 31 CFR 1.11.
    (g) Limitation on liability. An insurance company, and any 
director, officer, employee, or agent of any insurance company, that 
makes a voluntary disclosure of any possible violation of law or 
regulation to a government agency or makes a disclosure pursuant to 
this section or any other authority, including a disclosure made 
jointly with another institution, shall be protected from liability for 
any such disclosure, or for failure to provide notice of such 
disclosure to any person identified in the disclosure, or both, to the 
full extent provided by 31 U.S.C. 5318(g)(3).
    (h) Compliance. Insurance companies shall be examined by FinCEN or 
its delegatees for compliance with this section. Failure to satisfy the 
requirements of this section may be a violation of the Bank Secrecy Act 
and of this part.
* * * * *
    4. Section 103.17 is amended by revising paragraphs (e), (f), and 
(g) to read as follows:


Sec.  103.17  Reports by futures commission merchants and introducing 
brokers in commodities of suspicious transactions.

* * * * *
    (e) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (e). For purposes of 
this paragraph (e) only, a SAR shall include any suspicious activity 
report filed with FinCEN pursuant to any regulation in this part.
    (1) Prohibition on disclosures by futures commission merchants and 
introducing brokers in commodities--(i) General rule. No futures 
commission merchant (``FCM'') or introducing broker in commodities 
(``IB-C''), and no director, officer, employee, or agent of any FCM or 
IB-C, shall disclose a SAR or any information that would reveal the 
existence of a SAR. Any FCM or IB-C, and any director, officer, 
employee, or agent of any FCM or IB-C that is subpoenaed or otherwise 
requested to disclose a SAR or any information that would reveal the 
existence of a SAR, shall decline to produce the SAR or such 
information, citing this section and 31 U.S.C. 5318(g)(2)(A)(i), and 
shall notify FinCEN of any such request and the response thereto.
    (ii) Rules of Construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (e)(1) shall not be construed as 
prohibiting:
    (A) The disclosure by an FCM or IB-C, or any director, officer, 
employee, or agent of an FCM or IB-C of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
any Federal regulatory authority that examines the FCM or IB-C for 
compliance with the BSA, or any self-regulatory organization examining 
the FCM or IB-C for compliance with the requirements of this section; 
or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including, disclosures:
    (i) To another financial institution, or any director, officer, 
employee, or agent of a financial institution, for the preparation of a 
joint SAR; or
    (ii) In connection with certain employment references or 
termination notices, to the full extent authorized in 31 U.S.C. 
5318(g)(2)(B); or
    (B) The sharing by an FCM or IB-C, or any director, officer, 
employee, or agent of the FCM or IB-C, of a SAR, or any information 
that would reveal the existence of a SAR, within the FCM's or IB-C's 
corporate organizational structure for purposes consistent with Title 
II of the Bank Secrecy Act as determined by regulation or in guidance.
    (2) Prohibition on disclosures by government authorities. A 
Federal, state, local, territorial, or tribal government authority, or 
any director, officer, employee, or agent of any of the foregoing, 
shall not disclose a SAR, or any information that would reveal the 
existence of a SAR, except as necessary to fulfill official duties 
consistent with Title II of the Bank Secrecy Act. For purposes of this 
section, official duties shall not include the disclosure of a SAR, or 
any information that would reveal the existence of a SAR, in response 
to a request for disclosure of non-public information or in response to 
a request for use in a private legal proceeding, including a request 
under 31 CFR 1.11.
    (3) Prohibition on disclosures by Self-Regulatory Organizations. 
Any self-regulatory organization registered with or designated by the 
Commodity Futures Trading Commission, or any director, officer, 
employee, or agent of any of the foregoing, shall not disclose a SAR, 
or any information that would reveal the existence of a SAR except as 
necessary to fulfill official duties consistent with Title II of the 
Bank Secrecy Act. For purposes of this section, official duties shall 
not include the disclosure of a SAR, or any information that would 
reveal the existence of a SAR, in response to a request for disclosure 
of non-public information or in response to a request for use in a 
private legal proceeding.
    (f) Limitation on liability. An FCM or IB-C, and any director, 
officer, employee, or agent of any FCM or IB-C, that makes a voluntary 
disclosure of any possible violation of law or

[[Page 10156]]

regulation to a government agency or makes a disclosure pursuant to 
this section or any other authority, including a disclosure made 
jointly with another institution, shall be protected from liability for 
any such disclosure, or for failure to provide notice of such 
disclosure to any person identified in the disclosure, or both, to the 
full extent provided by 31 U.S.C. 5318(g)(3).
    (g) Compliance. FCMs or IB-Cs shall be examined by FinCEN or its 
delegatees for compliance with this section. Failure to satisfy the 
requirements of this section may be a violation of the Bank Secrecy Act 
and of this part.
* * * * *
    5. Section 103.18 is amended by revising paragraphs (e) and (f), 
and adding paragraph (g), to read as follows:


Sec.  103.18  Reports by banks of suspicious transactions.

* * * * *
    (e) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (e). For purposes of 
this paragraph (e) only, a SAR shall include any suspicious activity 
report filed with FinCEN pursuant to any regulation in this part.
    (1) Prohibition on disclosures by banks--(i) General rule. No bank, 
and no director, officer, employee, or agent of any bank, shall 
disclose a SAR or any information that would reveal the existence of a 
SAR. Any bank, and any director, officer, employee, or agent of any 
bank that is subpoenaed or otherwise requested to disclose a SAR or any 
information that would reveal the existence of a SAR, shall decline to 
produce the SAR or such information, citing this section and 31 U.S.C. 
5318(g)(2)(A)(i), and shall notify FinCEN and its primary Federal 
regulator of any such request and the response thereto.
    (ii) Rules of Construction.
    Provided that no person involved in any reported suspicious 
transaction is notified that the transaction has been reported, this 
paragraph (e)(1) shall not be construed as prohibiting:
    (A) The disclosure by a bank, or any director, officer, employee, 
or agent of a bank of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
or any Federal or state regulatory authority that examines the bank for 
compliance with the Bank Secrecy Act; or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including, disclosures:
    (i) To another financial institution, or any director, officer, 
employee, or agent of a financial institution, for the preparation of a 
joint SAR; or
    (ii) In connection with certain employment references or 
termination notices, to the full extent authorized in 31 U.S.C. 
5318(g)(2)(B); or
    (B) The sharing by a bank, or any director, officer, employee, or 
agent of the bank, of a SAR, or any information that would reveal the 
existence of a SAR, within the bank's corporate organizational 
structure for purposes consistent with Title II of the Bank Secrecy Act 
as determined by regulation or in guidance.
    (2) Prohibition on disclosures by government authorities. A 
Federal, state, local, territorial, or tribal government authority, or 
any director, officer, employee, or agent of any of the foregoing, 
shall not disclose a SAR, or any information that would reveal the 
existence of a SAR, except as necessary to fulfill official duties 
consistent with Title II of the Bank Secrecy Act. For purposes of this 
section, official duties shall not include the disclosure of a SAR, or 
any information that would reveal the existence of a SAR, in response 
to a request for disclosure of non-public information or in response to 
a request for use in a private legal proceeding, including a request 
under 31 CFR 1.11.
    (f) Limitation on liability. A bank, and any director, officer, 
employee, or agent of any bank, that makes a voluntary disclosure of 
any possible violation of law or regulation to a government agency or 
makes a disclosure pursuant to this section or any other authority, 
including a disclosure made jointly with another institution, shall be 
protected from liability for any such disclosure, or for failure to 
provide notice of such disclosure to any person identified in the 
disclosure, or both, to the full extent provided by 31 U.S.C. 
5318(g)(3).
    (g) Compliance. Banks shall be examined by FinCEN or its delegatees 
for compliance with this section. Failure to satisfy the requirements 
of this section may be a violation of the Bank Secrecy Act and of this 
part. Such failure may also violate provisions of Title 12 of the Code 
of Federal Regulations.
    6. Section 103.19 is amended by revising paragraphs (e), (f), and 
(g) to read as follows:


Sec.  103.19  Reports by brokers or dealers in securities of suspicious 
transactions.

* * * * *
    (e) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (e). For purposes of 
this paragraph (e) only, a SAR shall include any suspicious activity 
report filed with FinCEN pursuant to any regulation in this part.
    (1) Prohibition on disclosures by brokers or dealers in 
securities--(i) General rule. No broker-dealer, and no director, 
officer, employee, or agent of any broker-dealer, shall disclose a SAR 
or any information that would reveal the existence of a SAR. Any 
broker-dealer, and any director, officer, employee, or agent of any 
broker-dealer that is subpoenaed or otherwise requested to disclose a 
SAR or any information that would reveal the existence of a SAR, shall 
decline to produce the SAR or such information, citing this section and 
31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any such request 
and the response thereto.
    (ii) Rules of Construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (e)(1) shall not be construed as 
prohibiting:
    (A) The disclosure by a broker-dealer, or any director, officer, 
employee, or agent of a broker-dealer of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
any Federal regulatory authority that examines the broker-dealer for 
compliance with the BSA, or any self-regulatory organization examining 
the broker-dealer for compliance with the requirements of this section; 
or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including, disclosures:
    (i) To another financial institution, or any director, officer, 
employee, or agent of a financial institution, for the preparation of a 
joint SAR; or
    (ii) In connection with certain employment references or 
termination notices, to the full extent authorized in 31 U.S.C. 
5318(g)(2)(B); or
    (B) The sharing by a broker-dealer, or any director, officer, 
employee, or agent of the broker-dealer, of a SAR, or any information 
that would reveal the existence of a SAR, within the broker-dealer's 
corporate organizational structure for purposes consistent with Title 
II of the Bank Secrecy Act as determined by regulation or in guidance.
    (2) Prohibition on disclosures by government authorities. A 
Federal, State, local, territorial, or tribal

[[Page 10157]]

government authority, or any director, officer, employee, or agent of 
any of the foregoing, shall not disclose a SAR, or any information that 
would reveal the existence of a SAR, except as necessary to fulfill 
official duties consistent with Title II of the Bank Secrecy Act. For 
purposes of this section, official duties shall not include the 
disclosure of a SAR, or any information that would reveal the existence 
of a SAR, in response to a request for disclosure of non-public 
information or in response to a request for use in a private legal 
proceeding, including a request under 31 CFR 1.11.
    (3) Prohibition on disclosures by Self-Regulatory Organizations. 
Any self-regulatory organization registered with the Securities and 
Exchange Commission, or any director, officer, employee, or agent of 
any of the foregoing, shall not disclose a SAR, or any information that 
would reveal the existence of a SAR except as necessary to fulfill 
official duties consistent with Title II of the Bank Secrecy Act. For 
purposes of this section, official duties shall not include the 
disclosure of a SAR, or any information that would reveal the existence 
of a SAR, in response to a request for disclosure of non-public 
information or in response to a request for use in a private legal 
proceeding.
    (f) Limitation on liability. A broker-dealer, and any director, 
officer, employee, or agent of any broker-dealer, that makes a 
voluntary disclosure of any possible violation of law or regulation to 
a government agency or makes a disclosure pursuant to this section or 
any other authority, including a disclosure made jointly with another 
institution, shall be protected from liability for any such disclosure, 
or for failure to provide notice of such disclosure to any person 
identified in the disclosure, or both, to the full extent provided by 
31 U.S.C. 5318(g)(3).
    (g) Compliance. Broker-dealers shall be examined by FinCEN or its 
delegatees for compliance with this section. Failure to satisfy the 
requirements of this section may be a violation of the Bank Secrecy Act 
and of this part.
* * * * *
    7. Section 103.20 is amended by:
    a. Revising paragraph (d);
    b. Redesignating paragraphs (e) and (f) as paragraphs (f) and (g);
    c. Adding new paragraph (e); and
    d. Revising newly designated paragraph (f).


Sec.  103.20  Reports by money services businesses of suspicious 
transactions.

* * * * *
    (d) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (d). For purposes of 
this paragraph (d) only, a SAR shall include any suspicious activity 
report filed with FinCEN pursuant to any regulation in this part.
    (1) Prohibition on disclosures by money services businesses--(i) 
General rule. No money services business, and no director, officer, 
employee, or agent of any money services business, shall disclose a SAR 
or any information that would reveal the existence of a SAR. Any money 
services business, and any director, officer, employee, or agent of any 
money services business that is subpoenaed or otherwise requested to 
disclose a SAR or any information that would reveal the existence of a 
SAR, shall decline to produce the SAR or such information, citing this 
section and 31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any 
such request and the response thereto.
    (ii) Rules of Construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (d)(1) shall not be construed as 
prohibiting the disclosure by a money services business, or any 
director, officer, employee, or agent of a money services business of:
    (A) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
or any Federal or State regulatory authority that examines the money 
services business for compliance with the BSA; or
    (B) The underlying facts, transactions, and documents upon which a 
SAR is based, including disclosures to another financial institution, 
or any director, officer, employee, or agent of a financial 
institution, for the preparation of a joint SAR.
    (2) Prohibition on disclosures by government authorities. A 
Federal, State, local, territorial, or tribal government authority, or 
any director, officer, employee, or agent of any of the foregoing, 
shall not disclose a SAR, or any information that would reveal the 
existence of a SAR, except as necessary to fulfill official duties 
consistent with Title II of the Bank Secrecy Act. For purposes of this 
section, official duties shall not include the disclosure of a SAR, or 
any information that would reveal the existence of a SAR, in response 
to a request for disclosure of non-public information or in response to 
a request for use in a private legal proceeding, including a request 
under 31 CFR 1.11.
    (e) Limitation on liability. A money services business, and any 
director, officer, employee, or agent of any money services business, 
that makes a voluntary disclosure of any possible violation of law or 
regulation to a government agency or makes a disclosure pursuant to 
this section or any other authority, including a disclosure made 
jointly with another institution, shall be protected from liability for 
any such disclosure, or for failure to provide notice of such 
disclosure to any person identified in the disclosure, or both, to the 
full extent provided by 31 U.S.C. 5318(g)(3).
    (f) Compliance. Money services businesses shall be examined by 
FinCEN or its delegatees for compliance with this section. Failure to 
satisfy the requirements of this section may be a violation of the Bank 
Secrecy Act and of this part.
* * * * *
    8. Section 103.21 is amended by:
    a. Revising paragraph (e);
    b. Redesignating paragraphs (f) and (g) as paragraphs (g) and (h);
    c. Adding new paragraph (f); and
    d. Revising newly designated paragraph (g).


Sec.  103.21  Reports by casinos of suspicious transactions.

* * * * *
    (e) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential and shall not be 
disclosed except as authorized in this paragraph (e). For purposes of 
this paragraph (e) only, a SAR shall include any suspicious activity 
report filed with FinCEN pursuant to any regulation in this part.
    (1) Prohibition on disclosures by casinos--(i) General rule. No 
casino, and no director, officer, employee, or agent of any casino, 
shall disclose a SAR or any information that would reveal the existence 
of a SAR. Any casino, and any director, officer, employee, or agent of 
any casino that is subpoenaed or otherwise requested to disclose a SAR 
or any information that would reveal the existence of a SAR, shall 
decline to produce the SAR or such information, citing this section and 
31 U.S.C. 5318(g)(2)(A)(i), and shall notify FinCEN of any such request 
and the response thereto.
    (ii) Rules of Construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, this paragraph (e)(1) shall not be construed as 
prohibiting the disclosure by a casino, or any director, officer, 
employee, or agent of a casino of:

[[Page 10158]]

    (A) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or any Federal, state, or local law enforcement agency, 
or any Federal or state regulatory authority that examines the casino 
for compliance with the BSA; or
    (B) The underlying facts, transactions, and documents upon which a 
SAR is based, including disclosures to another financial institution, 
or any director, officer, employee, or agent of a financial 
institution, for the preparation of a joint SAR.
    (2) Prohibition on disclosures by government authorities. A 
Federal, State, local, territorial, or tribal government authority, or 
any director, officer, employee, or agent of any of the foregoing, 
shall not disclose a SAR, or any information that would reveal the 
existence of a SAR, except as necessary to fulfill official duties 
consistent with Title II of the Bank Secrecy Act (BSA). For purposes of 
this section, official duties shall not include the disclosure of a 
SAR, or any information that would reveal the existence of a SAR, in 
response to a request for disclosure of non-public information or in 
response to a request for use in a private legal proceeding, including 
a request under 31 CFR 1.11.
    (f) Limitation on liability. A casino, and any director, officer, 
employee, or agent of any casino, that makes a voluntary disclosure of 
any possible violation of law or regulation to a government agency or 
makes a disclosure pursuant to this section or any other authority, 
including a disclosure made jointly with another institution, shall be 
protected from liability for any such disclosure, or for failure to 
provide notice of such disclosure to any person identified in the 
disclosure, or both, to the full extent provided by 31 U.S.C. 
5318(g)(3).
    (g) Compliance. Casinos shall be examined by FinCEN or its 
delegatees for compliance with this section. Failure to satisfy the 
requirements of this section may be a violation of the Bank Secrecy Act 
and of this part.
* * * * *

    Dated: February 27, 2009.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
 [FR Doc. E9-4697 Filed 3-6-09; 8:45 am]
BILLING CODE 4810-02-P