Legal Q&A: Procedures for Information Sharing

How your bank can prevent financial crimes

By Scott Birrenkott

Q: What Tools are Available to Banks to Help Deter Financial Crimes?

A: Part of Bank Secrecy Act (BSA) regulations establish procedures for information sharing to deter money laundering and terrorist activity.

As financial institutions continue to monitor Office of Foreign Assets Control (OFAC) lists regarding sanctions and other restrictions, don’t forget to monitor for information sharing requests through Section 314 of the USA PATRIOT Act. Pursuant to section 314(a) law enforcement agencies may request that the Financial Crimes Enforcement Network (FinCEN) solicit, on its behalf, certain information from financial institutions.

Upon receiving an information request, a financial institution must conduct a one-time search of its records to identify accounts or transactions of a named suspect. Generally, financial institutions must search records for current accounts, accounts maintained during the preceding 12 months, and transactions conducted outside of an account by or on behalf
of a named suspect during the preceding six months. If a financial institution identifies any account or transaction, it must report to FinCEN that it has a match. No details should be provided to FinCEN other than the fact that the financial institution has a match. A negative response is not required. Unless otherwise provided, the search and response must be conducted within 14 days.

Financial institutions should also consider that FinCEN issued an alert on March 7 to be vigilant against efforts to evade the expansive sanctions and other U.S.-imposed restrictions implemented in connection with the Russian Federation’s further invasion of Ukraine. The advisory warns of evasion attempts and that “sanctioned Russian and Belarusian actors may seek to evade sanctions through various means, including through non-sanctioned Russian and Belarusian financial institutions and financial institutions in third countries.”

FinCEN also provides several red flag indicators to watch for attempted evasions. Select red flag indicators include for transactions initiated from IP addresses located in Russia, Belarus, or other sanctioned jurisdictions, transactions connected to convertible virtual currency (CVC) addresses listed on OFAC lists of specially designated nationals and blocked persons, and customer use of a CVC exchanger or foreign-located money service businesses in a high-risk jurisdiction.