Administrative Ruling Regarding the Participation of Associations of Financial Institutions in the 314(b) Program
October 9, 2012
October 9, 2012
The Financial Crimes Enforcement Network (FinCEN) issued an administrative ruling on the definition of “association of financial institutions,” regarding when an entity would be considered an association of financial institutions and allowed to participate in the voluntary information sharing program implemented under section 314(b) of the USA PATRIOT Act.
Section 314(b) provides a safe harbor from liability for the voluntary sharing of information by financial institutions or an association of financial institutions for the purposes of identifying terrorist activity or money laundering. FinCEN has defined the term “association of financial institutions” as “a group or organization the membership of which is comprised entirely of financial institutions as defined in paragraph (a)(1) of this section.” Paragraph (a)(1) refers back to the broad list of financial institutions listed in 31 U.S.C. § 5312(a)(2).
31 CFR § 1010.540(b)(5) states “[a] financial institution or association of financial institutions that shares information pursuant to paragraph (b) of this section shall be protected from liability for such sharing, or for failure to provide notice of such sharing…” Paragraph (b) of the regulation requires 1) that the institution is a financial institution or association of financial institutions; 2) that the institution provided notice to FinCEN of an intent to share information; 3) the institution takes reasonable steps to ensure its counter-party in the sharing of information has submitted the required notice to FinCEN; 4) the information shared is for the purposes of detecting possible terrorist activity or money laundering; and 5) the institution implement appropriate safeguards to ensure the protection of this confidential information.
An association of financial institutions is eligible to share information under section 314(b) and be covered by the safe harbor provisions of that section as long as it complies with the requirements of 31 CFR § 1010.540(b).The safe harbor contained in 31 CFR § 1010.540(b)(5) is limited to identification of money laundering and terrorist financing.
In FIN-2009-G002, FinCEN stated that institutions that share information about transactions involving the proceeds of a specified unlawful activity are protected by the 314(b) safe harbor. Consequently, FinCEN does not consider the sharing of information solely for the purpose of identifying a specified unlawful activity, including fraud, and not otherwise related to a transaction regarding the proceeds of such fraud, to be protected under the 314(b) safe harbor.
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