Following the September 11th terrorist attacks, the USA PATRIOT Act (the Act) was passed by Congress to improve U.S. law enforcement’s ability to detect and deter terrorism. The legislation’s official name confirms that: Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. Many sections of the Act allow for BSA professionals to assist law enforcement with preventing money laundering and other financial crimes.
Section 314(b) of the Act allows two or more financial institutions to share information on a voluntary basis “for purposes of identifying and, where appropriate, reporting activities that the financial institution or association suspects may involve possible terrorist activity or money laundering.” Eligible financial institutions include those covered under the FinCEN requirements of having an anti-money laundering program: banks and credit unions, finance companies, insurance companies, money services businesses, securities firms, etc.
In order to participate, a financial institution must register on the FinCEN website (available here: https://www.fincen.gov/314b/Register). Registering covers the institution with a “safe harbor” clause protecting them from liability.
According to FinCEN, information sharing can help financial institutions enhance compliance with their anti-money laundering/counter-terrorist financing (AML/CTF) requirements, most notably with respect to:
- Gathering additional information on customers or transactions potentially related to money laundering or terrorist financing;
- Shedding more light on overall financial trails, especially if they are complex and appear to be layered among numerous financial institutions;
- Building a more comprehensive and accurate picture of a customer’s activities where potential money laundering or terrorist financing is suspected;
- Alerting other participating financial institutions to customers whose suspicious activities it may not have been previously aware;
- Facilitating the filing of more comprehensive SARs than would otherwise be filed in the absence of 314(b) information sharing;
- Identifying and aiding in the detection of money laundering and terrorist financing methods and schemes; and
- Facilitating efficient SAR reporting decisions - for example, when a financial institution obtains a more complete picture of activity through the voluntary information sharing process and determines that no SAR is required for transactions that may have initially appeared suspicious.
This seems fairly simple in theory: register and work with other AML professionals to assist law enforcement in stopping terrorism and money laundering. What financial institution wouldn’t want to participate? Apparently, many, making it one of the most underutilized tools that the Act has provided to financial institutions. FinCEN Resource Center Insights states that in 2016 there were 9,766 bank and non-bank institutions participating in 314(b), as compared to approximately 16,000 participating in the mandated 314(a) reporting.