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Notice I-11-04

January 19, 2011

FinCEN Issues Final Rules Relating to the Confidentiality of Suspicious Activity Reports, Updated Guidance Regarding the Sharing of Suspicious Activity Reports with Affiliates, and an Advisory on Maintaining Suspicious Activity Report Confidentiality

The Financial Crimes Enforcement Network (FinCEN) recently issued three new pieces of information regarding suspicious activity reports (SARs) applicable to FCM and IB Members. First, FinCEN issued new rules governing the confidentiality of SARs. Second, FinCEN issued new guidance which permits FCMs and IBs to share SARs with certain affiliates. NFA intends to amend the Interpretive Notice entitled "NFA Compliance Rule 2-29: FCM and IB Anti-Money Laundering Program (Interpretive Notice)," to reflect these changes shortly. However, because both the final rules and guidance became effective on January 3, 2011, firms should make appropriate changes to their Anti-Money Laundering Program (AML) programs now. FinCEN also issued an advisory regarding maintaining the confidentiality of SARs. A brief summary of these documents is set forth below.

SAR Confidentiality

The implementing regulations of the Bank Secrecy Act (BSA) currently prohibit FCMs and IBs from disclosing that a SAR was filed to the person involved in the transaction. FinCEN, however, has interpreted that language to apply not only to the SAR, but to any information that would reveal the existence of a SAR. FinCEN recently amended its regulations to clarify that the confidentially provisions apply not only to SARs but to any information that would reveal the existence of a SAR. In addition, the amendments make it clear that the disclosure prohibition is not limited to the person involved in the transaction that is the subject to the SAR, but rather applies to all persons except as specifically authorized by the regulation.

Sharing of SARs with Affiliates

In January 2006, FinCEN issued guidance that permitted FCMs and IBs to share a SAR with parent entities, both domestic and foreign, for the purpose of the parent entity fulfilling its obligation to review compliance by its subsidiaries in meeting the legal requirements to identify and report suspicious activity. Under FinCEN's recently issued guidance, FCMs and IBs may now share a SAR, or any information that might reveal the existence of a SAR, with an affiliate, provided that affiliate is subject to a SAR regulation issued by FinCEN or another regulatory agency1. However, the affiliate may not share the existence of the SAR, or any information that would reveal the existence of the SAR, with another affiliate, even if that affiliate is subject to a SAR rule. In addition, the FCM or IB, as part of its internal controls, must have policies and procedures in place which ensure that its affiliates protect the confidentiality of the SAR.

Advisory on Maintaining SAR Confidentiality

In its Advisory, FinCEN reminds financial institutions (which include FCMs and IBs) of the importance of maintaining the confidentiality of SARs. Among other things, the Advisory encourages financial institutions to consider including information on SAR confidentiality and the penalties associated with unauthorized disclosure in its ongoing training of employees. The Advisory also identifies additional risk based measures that may help ensure the confidentiality of SARs, including limiting access to a "need-to-know" basis, establishing restricted areas for reviewing SARs, maintaining a log of access to SARs, using cover sheets for SARs or supporting documentation that indicates the filing of a SAR, or using electronic notices that highlight confidentiality concerns before a person may access or disseminate the information. FCM and IB Members should review this Advisory for additional guidance on maintaining SAR confidentiality.

More information regarding these changes can be found by accessing the following links from FinCEN: http://fincen.gov/statutes_regs/guidance/pdf/fin-2010-g005.pdf and http://www.fincen.gov/news_room/nr/html/20101122.html. The Advisory may be accessed at http://www.fincen.gov/statutes_regs/guidance/html/FIN-2010-A014.html. You may also contact Sharon Pendleton, Director, Compliance (spendleton@nfa.futures.org or 312-781-1401) or Valerie Kretschmer, Senior Manager, Compliance (vkretschmer@nfa.futures.org or 312-781-1290).


1 Other regulatory agencies include the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Securities and Exchange Commission.

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