|
|
Recently,
the federal banking regulators issued revised BSA examination procedures
that address a number of new regulatory requirements under the USA PATRIOT
Act. One such requirement involves section 314(a) which establishes procedures
for information sharing with the government. This article will provide
an overview of the section 314(a) requirements and a discussion of the
new examination procedures. In addition, this article will offer a number
of tips to help you comply with the regulation.
Section
314(a) Overview
On September 26, 2002,
a final regulation implementing section 314(a) of the USA PATRIOT Act
became effective. This section was incorporated into the Bank Secrecy
Act and is codified at 31
CFR 103.100. The purpose of section 314(a) is to facilitate information
sharing regarding terrorist or money laundering activity with the federal
government.
Pursuant to section
314(a), any federal law enforcement agency investigating terrorist activity
or money laundering may request FinCEN to act on its behalf and solicit
information from financial institutions. The request for information must
relate to suspected terrorist or money laundering activity and the agency
making the request must certify to FinCEN that credible evidence exists
to support their investigation. Once FinCEN has received proper written
certification, it may require a financial institution to search its records
to determine whether the information requested matches that of any accounts.
In its request for information, the requesting agency must provide specific
identifiers such as date of birth and address so that institutions can
differentiate among common or similar names. Requests for information
that contain multiple suspects may be referred to as a section 314(a)
list.
If you receive a request
for information, you must conduct a one-time search of your records to
identify any matches. Your search should cover all current accounts and
those maintained for the named suspect in the previous 12 months. In addition,
you must search any transactions conducted outside of the account (funds
transfers) during the preceding 6 months. The 314(a) request will specify
the records that must be searched and the time frame within which the
search must be conducted.
Keep in mind that
the section 314(a) requirements are mandatory—if you receive a request
for information, you must comply. Therefore, it is imperative that your
institution has policies and procedures in place to insure that requests
for information are handled properly.
Examination
Preparation
The examination guidance
recently released by the federal banking regulators provides useful information
regarding what to expect during the section 314(a) portion of your next
BSA/AML examination.
| Request
Letter Items
Prior to your
next BSA/AML exam, your regulator may issue a “Request Letter”
that asks for a number of items needed by the examiner to facilitate
the examination. Requested items may include:
- A copy of
your section 314(a) policy and procedures. Your procedures should
address the steps you take for receiving and responding to requests
and the methods you rely on to protect the confidentiality of
any requests.
- Documentation
of any positive matches with a section 314(a) request.
- Copies of
any vendor confidentiality agreements regarding section 314(a)
requests, if applicable.
- Copies of
any SARS filed related to section 314(a) requests. Also, an analysis
or documentation regarding SAR filings that were considered but
not actually filed.
|
| Policy
and Procedure Review
During the
actual examination, your examiner will review your compliance management
system for handling section 314(a) requests. In particular, examiners
will:
- Evaluate
policies and procedures for receiving and responding to FinCEN
requests. At a minimum, it is expected that your policies and
procedures address the following:
- Designation
of a contact person for receiving information requests.
- A process
to ensure the confidentiality of information requested.
- A process
for responding to FinCEN’s requests
- Procedures
for determining whether an SAR should be filed.
The above items
will most certainly be on your examiner’s checklist. Review
your procedures for complying with section 314(a) and verify that
each of the above items is adequately addressed. |
| Sample
Review
During your
BSA/AML exam, your examiner will review samples of section 314(a)
requests and positive matches to ensure your organization is in
compliance. The extent of this review may depend upon previous examination
reports, your audit results and the level of risk identified at
your institution. In reviewing select samples, the examiner will
attempt to verify that all required types of records and appropriate
accounts and transactions were searched.
In its sample
review of positive matches, the examiners will:
- Verify that
a response was provided to FinCEN within the designated time period.
- Review your
documentation regarding your decision whether to file an SAR.
|
| Conversations
with the top
All the supporting
documentation in world won’t save you if your management is
in the dark as to compliance expectations. In examining for 314
(a) compliance, your examiners will have conversations with management
regarding whether information was used only in the designated manner
and whether it was kept secure and confidential. Verify that your
management and board have a basic understanding of the section 314(a)
requirements and that they understand your compliance procedures.
An “I’m not really sure” will raise a red flag
for the examiner and may force a more extensive examination. |
| Third
party arrangements
Many institutions
work with third party service providers to assist with their section
314(a) searches. If this is the case for your organization, verify
that you have contracts or agreements on file that require the third
party provider to maintain confidentiality. Also be sure you have
procedures for securing information that is shared with your service
providers. When it comes to an examination, you’re on the
hook, not your service provider. |
| Compliance
documentation
During a BSA/AML
exam, your examiner will also look for documentation that evidences
your compliance with section 314(a). Be prepared to share:
- Copies of
any 314(a) requests
- Documentation
that evidences records were checked, along with the date of the
search and the search results (positve/negaive). This documentation
may take the form of a log or some other format.
- For positive
matches, copies of the form returned to FinCEN.
Failure
to provide this type of supporting documentation may indicate weak
internal controls. |
Compliance
Tips
The following tips
are intended to help your organization comply with the section 314(a)
requirements.
- Lists will
be batched.
In response to previous problems with the release of section 314(s)
requests, FinCEN will batch the requests and issue them every two weeks.
- One-time
search. A 314(a) request or list is not for ongoing searches.
It is a mechanism for searching accounts at a particular point in time
and the request should be removed from circulation once the required
search has been completed.
- Respond
in a timely fashion. Unless otherwise noted in the request,
you will have two weeks to complete your section 314(a) search and respond
to FinCEN with any matches. Note the date the time clock starts ticking
and make sure you are not late with your response.
- Negative
responses are not required. Only report positive matches, negative
matches only clog the system and may be an indicator that your organization
does not understand the 314( a) process. Positive responses should be
communicated to FinCEN and your communication should include a point-of-contact
for the requesting agency to follow up with directly.
- 314(a)
list is not an OFAC list. The OFAC list is a permanent watch
list and should be reviewed on a regular basis. Again, the 314(a) list
is for a one-time search.
- Do not
use 314(a) information for purposes of closing or refusing to open an
account.
FinCEN asks that you not use 314(a) information for purposes of closing
an account or refusing to open an account. The information contained
in a 314( a) request does not relate to convicted persons. The 314(a)
information involves suspicions of illegal activity and the lists are
not updated or corrected if new information is uncovered or the investigation
dropped.
- Keep 314(a)
information under your hat.
Do not share the 314(a) request with anyone other than FinCEN or the
agency requesting the information, if directed to do so.
- Verify
security procedures are in place.
Your information security procedures will be considered adequate if
they mirror those established to comply with the Gramm-Leach-Bliley
Act and corresponding privacy regulations.
Additional
Resources
Back
to Top
|
|
|
|
|
