The point of the confidentiality of Suspicious Activity Reports or SARs gets us back to the Financial Action Task Force or FATF and FATF Recommendation 21 in particular. According to Recommendation 21, which is called “Tipping-off and confidentiality,” financial institutions, their directors, officers, and employees should be prohibited by law from disclosing the fact that a suspicious transaction report or related information is being filed with the FIU.”
One of the main concerns related to sharing SARs is ensuring their confidentiality, which is critical to the effective functioning of the reporting regime. The effectiveness of an SAR report is connected to the extreme confidentiality required for such reporting. At no time is the person under investigation told about the pending report.
The Confidentiality of Suspicious Activity Reports and Tipping off
Likewise, any discussion with outside groups, such as media companies, is considered an unauthorized disclosure and is a federal criminal offense. When a financial institution or financial institution files an SAR, they must take significant steps to ensure the information provided is reviewed at multiple stages by financial investigators, company management, and attorneys before finalizing the SAR.
Maintaining a high level of confidentiality is vital. As a result, special privileges protect people who submit suspicious activity reports, whether as a part of a company or on their own. The individual or organization is not required to disclose their name and is immune to the discovery process. All reporters receive immunity for statements made in the SAR.
At the same time, tipping off or telling the subject of the SAR that an SAR has been filed is forbidden and prevents them from being alerted that a law enforcement investigation action will start or is underway. The concept of tipping-off differs from jurisdiction to jurisdiction and within different institutions. Tipping-off always includes the persons connected to an SAR.
In some jurisdictions, the fact an SAR is filed can be shared on a need-to-know base with colleagues within an institution, like superiors, or even with other financial institutions when a common transaction is part of the SAR. The 4th EU AML Directive allows entities to share information within the EU and with countries with comparable Anti Money Laundering or AML regimes like the US, Australia, or Japan.
In addition, the confidentiality of SARs is needed so that the subject of SAR and third parties are not tipped-off, as this can adversely affect intelligence gathering and investigation and can enable persons to abscond or dispose of assets. Confidentiality also protects the reputation of the person who is the subject of an SAR. Finally, confidentiality protects the safety and security of the person filing the report, and breaches of confidentiality can undermine the entire suspicious transaction reporting regime.
Suspicious Transaction Reports
The issue of Suspicious Transaction Reports OR STR confidentiality can get more complex if such sharing occurs across borders, where different national laws come into play. These may include, for example, national provisions relating to the discoverability and production of available records, including STRs filed in the host country and shared with group compliance in their judicial proceedings, access to databases of financial institutions by national authorities, etc.
Some jurisdictions have harsh tipping-off rules. These can include a requirement that institutions avoid approaching a client for additional information about suspicious activity or transaction, even if this could explain the seemingly unusual behavior. Tipping off always has serious consequences.
To ensure safety, check the local laws and regulations and the institution’s policies to ensure actions do not count as tipping off.
Final Thoughts
The Financial Crimes Enforcement Network or FinCEN is issuing this Advisory to remind financial institutions, and particularly the lawyers who advise them, of the importance of keeping SARs confidential. FinCEN is concerned that an increasing number of private parties seeking SARs from financial institutions for use in civil litigation and other matters are not authorized to know the existence of SARs that have been filed. Financial institutions, as well as their current and former directors, officers, employees, agents, and contractors, are not permitted to disclose SARs or any information that could lead to the discovery of a SAR.