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FinCEN Launches Pilot to Enable International SAR Intelligence Sharing

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The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has proposed new measures to allow banks to share suspicious activity reports (SARs) more easily with foreign branches, subsidiaries and affiliates. 

In a Notice of Proposed Rulemaking (NPRM) FinCEN has asked for public comment on plans to create a two year pilot program enabling banks to share SARs outside the US. The program aims to improve firms’ ability to counter money laundering and illicit finance risks, subject to approval and conditions set by FinCEN.

FinCEN says the sharing of information will be limited by the requirements of federal and state law enforcement, take into account the concerns of the intelligence community, and is subject to standards and requirements regarding data security and confidentiality. 

“We urge stakeholders to provide input to assist us in developing a program that will help combat illicit finance risks and promote enterprise-wide risk management, while ensuring adequate safeguards are in place to protect SAR confidentiality,” said FinCEN Acting Director Himamauli Das.


Under previous guidance, banks with US operations were allowed to share SARs only with their foreign head offices, controlling companies or affiliates that also filed SARs — this did not include foreign bank branches or affiliates. 

FinCEN expects around 100 banks to sign up for the program – but some may consider the cost and capacity issues related to its requirements to be too arduous, or be apprehensive about sharing information across regions. 

Participants need to complete an application and file quarterly reports – including information on possible legal and compliance issues with their own anti-money-laundering programs. FinCEN may also require additional internal controls to ensure banks are meeting data security and confidentiality requirements.

There would also be geopolitical restrictions. Banks could not share information with branches in China, Russia, or any country subject to US sanctions, any identified as a primary money laundering concern pursuant to Section 311 of the US Patriot Act, or designated a state sponsor of terrorism.

FinCEN’s new program was mandated in accordance with Section 6212 of the Anti-Money Laundering Act 2020, which came into force in January 2021. Comments on the NPRM should be submitted by March 28, 2022. 


Regulatory Innovation: A Key Trend for 2022

FinCEN’s announcement reflects the increasingly borderless nature of financial crime, and regulators’ efforts to innovate in order to help firms effectively manage the risks they face. Cybercrime, and ransomware in particular, is a growing international threat. Its borderless nature, and the pace at which hostile actors – including many in North Korea – can operate, means that rapid information sharing and the ability to develop a holistic picture of a person or entity’s activity is critical.

The Monetary Authority of Singapore (MAS), Hong Kong Monetary Authority (HKMA), and Australian Transaction Reports and Analysis Centre (AUSTRAC) have all introduced innovative new approaches. This announcement from FinCEN is the latest sign that others are following suit.

In November 2021, HKMA launched an Anti-Money Laundering (AML) Regtech Lab (AMLab) to encourage the use of regulatory technology as part of its Fintech 2025 strategy. It followed a January report 2021 – AML/CFT Regtech: Case Studies and Insights – which showed the country’s progress in the field of regtech. The report showed 60% of banks had introduced tools such as robotic process automation, natural language processing, and no-code workflow automation to optimize AML/CFT work, between 2019-2021.

The AMLab series aims to provide a collaborative platform for ongoing peer group sharing in Hong Kong, strengthening the ‘gatekeeper’ role of banks in the AML ecosystem, protecting banks and customers from threats and losses from fraud and financial crime, and encouraging further collaboration. 

Meanwhile, MAS is set to introduce an information sharing platform to fight money laundering. MAS’s Collaborative Sharing of ML/TF Information and Cases (COSMIC) platform will enable firms to digitally warn each other about unusual activity in customers’ accounts – a gap currently exploited by criminals to make illegal transactions through a web of different entities with accounts in different FIs.

Firms will be able to share information securely through the platform – due to be introduced in early 2023 – when ‘material risk thresholds’ are breached, ‘red flagging’ transactions to enable easier tracking and faster responses to criminal behavior.

AUSTRAC also recently praised Australian banks for improved collaboration and improvement of their compliance programs, to more effectively tackle money laundering, organized crime, tax evasion, and welfare fraud.

Firms with operations in the US looking to take part in the program should explore and assess the information sharing protocols necessary to supply SAR information securely. This may include deciding when requests are necessary, how the information is handled, and how it is stored. National regulations on data handling will need to be complied with, alongside the terms stipulated by FinCEN.

 

Find out more about the state of financial crime in 2022 by pre-registering for this year’s report.

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has proposed new measures to allow banks to share suspicious activity reports (SARs) more easily with foreign branches, subsidiaries and affiliates.  In a Notice of Proposed Rulemaking (NPRM) FinCEN has asked for public comment on plans to create a two year pilot program enabling banks to share SARs outside the US. The program aims to improve firms’ ability to counter money laundering and illicit finance risks, subject to approval and conditions set by FinCEN. FinCEN says the sharing of information will be limited by the requirements of federal and state law enforcement, take into account the concerns of the intelligence community, and is subject to standards and requirements regarding data security and confidentiality.  “We urge stakeholders to provide input to assist us in developing a program that will help combat illicit finance risks and promote enterprise-wide risk management, while ensuring adequate safeguards are in place to protect SAR confidentiality,” said FinCEN Acting Director Himamauli Das. Under previous guidance, banks with US operations were allowed to share SARs only with their foreign head offices, controlling companies or affiliates that also filed SARs — this did not include foreign bank branches or affiliates.  FinCEN expects around 100 banks to sign up for the program – but some may consider the cost and capacity issues related to its requirements to be too arduous, or be apprehensive about sharing information across regions.  Participants need to complete an application and file quarterly reports – including information on possible legal and compliance issues with their own anti-money-laundering programs. FinCEN may also require additional internal controls to ensure banks are meeting data security and confidentiality requirements. There would also be geopolitical restrictions. Banks could not share information with branches in China, Russia, or any country subject to US sanctions, any identified as a primary money laundering concern pursuant to Section 311 of the US Patriot Act, or designated a state sponsor of terrorism. FinCEN’s new program was mandated in accordance with Section 6212 of the Anti-Money Laundering Act 2020, which came into force in January 2021. Comments on the NPRM should be submitted by March 28, 2022. 

Regulatory Innovation: A Key Trend for 2022

FinCEN’s announcement reflects the increasingly borderless nature of financial crime, and regulators’ efforts to innovate in order to help firms effectively manage the risks they face. Cybercrime, and ransomware in particular, is a growing international threat. Its borderless nature, and the pace at which hostile actors – including many in North Korea – can operate, means that rapid information sharing and the ability to develop a holistic picture of a person or entity’s activity is critical. The Monetary Authority of Singapore (MAS), Hong Kong Monetary Authority (HKMA), and Australian Transaction Reports and Analysis Centre (AUSTRAC) have all introduced innovative new approaches. This announcement from FinCEN is the latest sign that others are following suit. In November 2021, HKMA launched an Anti-Money Laundering (AML) Regtech Lab (AMLab) to encourage the use of regulatory technology as part of its Fintech 2025 strategy. It followed a January report 2021 - AML/CFT Regtech: Case Studies and Insights - which showed the country’s progress in the field of regtech. The report showed 60% of banks had introduced tools such as robotic process automation, natural language processing, and no-code workflow automation to optimize AML/CFT work, between 2019-2021. The AMLab series aims to provide a collaborative platform for ongoing peer group sharing in Hong Kong, strengthening the ‘gatekeeper’ role of banks in the AML ecosystem, protecting banks and customers from threats and losses from fraud and financial crime, and encouraging further collaboration.  Meanwhile, MAS is set to introduce an information sharing platform to fight money laundering. MAS’s Collaborative Sharing of ML/TF Information and Cases (COSMIC) platform will enable firms to digitally warn each other about unusual activity in customers’ accounts – a gap currently exploited by criminals to make illegal transactions through a web of different entities with accounts in different FIs. Firms will be able to share information securely through the platform – due to be introduced in early 2023 – when ‘material risk thresholds’ are breached, ‘red flagging’ transactions to enable easier tracking and faster responses to criminal behavior. AUSTRAC also recently praised Australian banks for improved collaboration and improvement of their compliance programs, to more effectively tackle money laundering, organized crime, tax evasion, and welfare fraud. Firms with operations in the US looking to take part in the program should explore and assess the information sharing protocols necessary to supply SAR information securely. This may include deciding when requests are necessary, how the information is handled, and how it is stored. National regulations on data handling will need to be complied with, alongside the terms stipulated by FinCEN.   Find out more about the state of financial crime in 2022 by pre-registering for this year’s report.

Originally published January 28, 2022, updated May 6, 2022

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