Filing SARs

How Safe Is The Harbor?
Two recent court decisions have caused tremors in the banking community. In ongoing litigation, two federal judges have ruled in favor of plaintiffs suing banks for wrongful disclosure of account information to the federal government. Both judges ruled that the banks in question had not made a good faith determination as to whether a suspicious activity had occurred.

On March 31, 1998, the FFIEC agencies issued a joint announcement concerning the filing of Suspicious Activity Reports and the protection of the safe harbor provided in the 1992 Annunzio-Wylie Anti-Money Laundering Act. The release points out that the cases involve fact situations that occurred before the new SAR procedure was established. The agencies believe that the cases do not undermine the safe harbor for reports made in compliance and meeting the good faith standard.

The agencies remind institutions that the cases do not affect the institutions' obligations to file SARs. They recommend that the internal procedures and compliance work of the banks is essential both to ensure compliance and to protect the bank. As information is identified to support or explain the SAR (remember, this information is kept in the bank unless and until an investigating agency requests it) the agencies recommend that the information be marked to indicate that it is being maintained to support the SAR filing.

The best defense will be to have an effective compliance procedure for identifying and reporting suspicious transactions. As a part of this program, the bank should provide instructions for all staff on proper responses to requests for information from federal agencies and/or federal agents.

Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 7, 5/98