The 314(a) process has proven to be an effective tool in many law enforcement investigations. According to the July 2017 FinCEN 314(a) Fact Sheet, the 314(a) program office has processed 3,257 requests to date, relating to 556 cases of terrorism or terrorist financing and 2,701 cases of money laundering. FinCEN’s Section 314(a) reaches out to more than 16,000 financial institutions to locate accounts and transactions of persons who may be involved in terrorism or money laundering. The process enables law enforcement to obtain critical evidence to help advance their investigations.
Imagine if there was a way to collaborate the efforts of regulators, law enforcement, and financial institutions to improve the process even more. Imagine, is that John Lennon I hear?
You may say I’m a dreamer, but I’m not the only one. There actually is such a process.
Section 314(b) provides financial institutions with the ability to share information with each other, under a safe harbor that offers protections from liability, in order to better identify and report potential money laundering or terrorist activities. In short, 314(b) complements 314(a) by allowing voluntary information sharing between financial institutions.
Unlike Section 314(a), which is a requirement, the Section 314(b) program is voluntary. However, most financial institutions have been reluctant to sign up for various reasons, including fear of violating privacy laws, the added burden and cost of implementation, another area for regulatory examiners to look into, or it is simply not required.
The truth is, the requirements to participate in 314(b) are not daunting at all. It isn’t hard to do. FinCEN regulations (31 CFR 1010.540) set forth the requirements that must be satisfied in order to benefit from 314(b) safe harbor protection. As outlined in the November 2016 314(b) Fact Sheet, the conditions include:
- Registration with FinCEN. Financial institutions or associations of financial institutions interested in participating in the 314(b) program must first register with FinCEN’s Secure Information Sharing System (SISS). Upon logging into SISS, users can then navigate to the “314(b)” tab and submit a 314(b) registration. All registrations are processed within two business days of receipt, and participants receive an acknowledgment via email.
- Verification before sharing information with other 314(b) participants. Prior to sharing information under 314(b), financial institutions must take reasonable steps, such as checking the FinCEN 314(b) participant list, to verify that the other financial institution is also a 314(b) registrant. To facilitate the identification of 314(b) program participants, SISS provides tools to search the 314(b) Participant List or to download the participant list in its entirety. FinCEN updates the list in real time. Financial institutions may establish policies and procedures that designate more than one person with the authority to participate in their 314(b) program.
- Safeguarding of shared information ensuring its use for anti-money laundering/counter-terrorist financing purposes only. Financial institutions and associations must establish and maintain procedures to safeguard the security and confidentiality of shared information and must only use shared information for the purpose of:
- Identifying and, where appropriate, reporting on activities that may involve terrorist financing or money laundering.
- Determining whether to establish or maintain an account or to engage in a transaction.
- Assisting in compliance with anti-money laundering requirements.
Although the steps to participate are minimal, there are countless benefits of voluntary information sharing. Furthermore, the benefits grow exponentially as the network of 314(b) participants grows. Specific examples of the benefits of 314(b) collaboration include:
- Gathering additional information on customers or transactions potentially related to money laundering or terrorist financing, including previously unknown accounts, activities, and/or associated entities or individuals.
- Shedding more light on overall financial trails, especially if they are complex and appear to be layered among numerous financial institutions, entities, and jurisdictions.
- Building a more comprehensive and accurate picture of a customer’s activities where potential money laundering or terrorist financing is suspected, allowing for more precise decision making in due diligence and transaction monitoring.
- Alerting other participating financial institutions to customers whose suspicious activities may not previously have been known to them.
- Facilitating the filing of more comprehensive SARs than would otherwise be filed in the absence of 314(b) information sharing. For examples of SAR narratives referencing 314(b), see Issue 23 of the SAR Activity Review https://www.fincen.gov/sites/default/files/shared/sar_tti_23.pdf.
- Identifying and aiding in the detection of money laundering and terrorist financing methods and schemes.
- 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.
When financial institutions file a SAR that has benefited from 314(b) information sharing, FinCEN encourages them to note this in the narrative in order for FinCEN to identify and communicate specific examples of the benefits of the 314(b) program. Please note, however, that while information may be shared related to possible terrorist financing or money laundering that resulted in, or may result in, the filing of a SAR, Section 314(b) does not authorize participating financial institutions to share a SAR or disclose the existence of a SAR.
Technology has opened the doors not only to new services but also to new methods of financial crime. In addition, criminals often use multiple financial institutions to mask illegal activity. Section 314(b) of the USA PATRIOT Act provides financial institutions with the ability to share information with one another, under a safe harbor that offers protections from liability, in order to better identify and report potential money laundering or terrorist activities. Section 314(b) information sharing is a voluntary program; however, FinCEN strongly encourages participation. Moreover, the requirements to participate in the 314(b) program are minimal. In fact, it’s easy if you try.