Suspicious Activity Reports (SARs) are confidential documents, prepared after careful analysis, to alert the government to transactions that might indicate money laundering or financial support for terrorist groups.
Serious concerns have arisen about unauthorized disclosure of SARs. In response, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently amended the SAR rules to, among other things, clarify the scope of the statutory prohibition against disclosure by a financial institution or a government agency of a SAR, including any information that would reveal the existence of a SAR.
Simultaneously, FinCEN issued an advisory to government agencies and financial institutions that reiterated the importance of protecting SAR confidentiality and emphasized the civil and criminal penalties for SAR disclosure violations. The advisory suggests measures that a financial institution or government agency may take to help ensure SAR confidentiality.
Additionally, FinCEN published guidance that, among other things, augments guidance it issued in 2006 permitting broker-dealers and mutual funds to share SAR information with a corporate parent or with an investment adviser that controls the fund, whether domestic or foreign. Under the new guidance, broker-dealers and mutual funds may also share SAR information with a domestic affiliate, if that affiliate is subject to a SAR rule. SAR information may not, however, be shared with foreign affiliates. Moreover, as a general matter, an affiliate that receives SAR information from a broker-dealer or mutual fund cannot, in turn, share that information with any of its own affiliates, even if they are subject to a SAR rule. The guidance also provides that broker-dealers and mutual funds should have policies and procedures to ensure that their affiliates preserve SAR confidentiality.
SAR rule amendments, advisory, and guidance became effective on January 3, 2011.