The Financial Crimes Enforcement Network (“FinCEN”) is a bureau of the U.S. Department of the Treasury whose mission is to safeguard the financial system from illicit use and to combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities. In prepared remarks to the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference, Kenneth Blanco, FinCEN Director, announced a new 314(b) Fact Sheet issued on December 10, 2020 that is intended to clarify in greater detail the circumstances where 314(b) applies, with the hope of enhancing participation and utility of the 314(b) program. Many financial institutions, such as banks and cryptocurrency exchanges (which act as money services businesses), may take advantage of Section 314(b).
Section 314(b) of the USA PATRIOT Act, enacted in the wake of the 9/11 attacks, provides financial institutions with the ability to share information with one another, under a safe harbor that offers protections from liability, in order to better identify and report activities that may involve money laundering or terrorist activities. Participation in information sharing pursuant to Section 314(b) is voluntary, but FinCEN strongly encourages financial institutions to participate because, as the Director explained, information sharing among financial institutions through 314(b) is critical to identifying, reporting, and preventing crime and bad acts.
The main themes of the new Fact Sheet are as follows:
Financial institutions may share under Section 314(b) information relating to activities that they suspect may involve possible terrorist financing or money laundering. This includes, but is not limited to, information about activities they suspect involve the proceeds of a specified unlawful activity (SUA). The new Fact Sheet clarifies that:
- Financial institutions do not need to have specific information that these activities directly relate to proceeds of an SUA, or to have identified specific proceeds of an SUA being laundered.
- Financial institutions do not need to have made a conclusive determination that the activity is suspicious.
- Financial institutions may share information about activities as described, even if such activities do not constitute a “transaction.” This includes, for example, an attempted transaction, or an attempt to induce others to engage in a transaction. This clarification is significant and addresses some uncertainty with sharing incidents involving possible fraud, cybercrime, and other predicate offenses when financial institutions suspect those offenses may involve terrorist acts or money laundering activities.
- In addition, the guidance notes that there is no limitation under Section 314(b) on the sharing of personally identifiable information, or the type or medium of information that can be shared (to include sharing information verbally).
A financial institution or association of financial institutions will only benefit from the safe harbor protection if it follows the conditions for participation in the program set forth in FinCEN regulations (31 CFR 1010.540). Financial institutions and associations interested in participating in the 314(b) program must first register with FinCEN’s Secure Information Sharing System (SISS). Prior to sharing information under Section 314(b), financial institutions and associations must take reasonable steps, such as checking the FinCEN 314(b) participant list, to verify that the other financial institution or association is also a 314(b) registrant. Financial institutions and associations must establish and maintain procedures to safeguard the security and confidentiality of shared information, and must only use shared information for the purpose of:
• Identifying and, where appropriate, reporting on activities that may involve terrorist financing or money laundering;
• Determining whether to establish or maintain an account, or to engage in a transaction; or
• Assisting in compliance with anti-money laundering requirements
The new Fact Sheet rescinded a previous piece of guidance FIN-2009-G002 and a previous published administrative ruling, FIN-2012-R006.