NEW Criminal Referral Form Arrives!

Safe Harbor / Non-disclosure / Ten Year Record Retention / Must Be Typed
An interagency task force has completed the creation of the Interagency Criminal Referral Form (CRF) and most institutions should have the new forms in-house within the next two months.

The new Interagency Criminal Referral Form will replace the various Criminal Referral Forms that are currently being used by federal banks, thrift and credit union regulatory agencies and by financial institutions. The new CRF is intended to ease compliance with financial institutions' criminal activity reporting requirements, to enhance law enforcement agencies' ability to investigate and prosecute cases reported, and to develop and maintain a new interagency database.

Developed by representatives from twelve federal agencies, the new Interagency Criminal Referral Form may initially pose a few minor problems. For instance, it must be typewritten. Many financial institution offices have made the move to word processing, and typewriters have been relegated to the back room. There is a possibility that the regulatory agencies may supply disks containing the form, in which case your PC will do nicely. However, until that time, the instructions are very clear. The CRF must be typed.

When To File
There are other very specific instructions with regard to filing the CRF. Some are familiar to us. A criminal referral must be filed in the case of:
Suspected insider abuse involving any amount-if an employee, officer, director, agent, or other institution affiliated party is suspected of having committed or aided in the commission of a crime.
Aggregate loss of $1000 or more where a suspect can be identified-where the financial institution believes that it was either an actual or potential victim of a criminal violation (such as kiting or fraud).
Aggregate loss of $5000 or more regardless of potential suspects-again either an actual or potential loss.
Money laundering or violations of the Bank Secrecy Act-and on this one, the form is very clear. "A form must be filed for all instances where money laundering is suspected, regardless of the identification of a potential suspect or the amount involved in the violation."

In other words, if you SUSPECT someone of laundering money, even if it is under $10,000, you must file a Criminal Referral Form. At the American Bankers Association (ABA) Security and Risk Management session on money laundering in Orlando in February, Rich Small, from the Federal Reserve Board of Governors, was even more declarative.

Suspicious Transactions
"If you determine that the transaction is 'Suspicious'," he said, "no matter what the amount-a Criminal Referral Form MUST be filed." He went on to explain that a CTR (Form 4789) does not have to be filed if the transaction is under $10,000, but if the situation involves a reportable violation that is on-going, the financial institution "shall immediately notify, by telephone, the appropriate law enforcement authority in addition to filing a timely Criminal Referral Form." This requirement is part of the instructions on the new CRF.

Rich also stated that the Board of Directors should be notified "promptly" when a Criminal Referral Form is filed.

Safe Harbor
An important part of the new CRF can be found on its front page. Commonly called the "Safe Harbor" part of the document, it is part of the Annunzio-Wylie Act, a piece of legislation which says if a financial institution discloses, in good faith, possible violations of law on the Criminal Referral Form, that it "shall not be liable to any person under any law or regulation of the United States or any constitution, law or regulation of any State thereof, for such disclosure..." Translated, you can't be sued by a customer for filing a CRF.

Non-disclosure
There is another important directive in that legislative information, however, that everyone in the financial institution should be aware of-including your tellers and customer service representatives. No employee may "communicate that a criminal referral has been made." In other words, it is against the law to tell someone that a criminal referral has been filed on them. This non-disclosure clause should be known to all banking employees.

It is the opinion of John Byrne, Sr. Counsel of the ABA, and Rick Small that the intent of this part of the legislation was so that investigations of money laundering and other violations would not be inhibited. In the case of defalcation or embezzlement, filing of the CRF is still mandatory.

Important Changes
Two important changes are in the form itself. One is in section 3, where the form asks "Have any of the institution's accounts related to this matter been closed?" In the case of money laundering, if the account has not yet been closed, the investigating law enforcement agency can then request that it remain open.

The other change has to do with supporting documentation. For some time law enforcement has been frustrated in some of its investigations because the financial institution's attorneys require a subpoena to produce records. The instructions on the new CRF are very clear. They read, "Send the unfolded, unstapled original form and a copy of related supporting documentation to..." It goes on to say that you must retain a copy of the form and all original documentation for ten (10) years from the date of the form.

Five Copies
You'll be making five copies of these forms. The original will go to FinCEN; one copy for the U.S. Attorney in your district; one copy to either the FBI or U.S. Secret Service (for credit card or computer fraud) or Internal Revenue Service (for money laundering or BSA violations); one copy to your regulator; and one copy in your file.

According to the originators of the form, (which include FDIC, Fed, OTS, OCC, NCUA, IRS, FBI, SS, etc.) it will take approximately 1/2 hour-30 minutes-per report. This will vary, of course, depending on the nature of the criminal activity being reported.

Rick Small told the group of bankers in Orlando that plans are in the works to supply disks for use in filing, and that the disks will be free of charge. Unfortunately, they are not yet available.In the meantime, you will be getting a supply of the new Interagency Criminal Referral Forms from your regulator-photocopies are not permitted for use as the original to FinCEN. Security Officers have realized for a long time that a standard form would be easier for law enforcement agencies to work with, and the advantage of the database at FinCEN should be of mutual assistance to the financial institutions and the investigators. Even though some of the "requirements" are going to be time consuming and complicated, bankers will welcome the clear instructions and parameters of the new Criminal Referral Form.

Copyright © 1993 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 3, No. 10, 3/93