Anti-Money Laundering Compliance: Treasury Department Expands Information Sharing Program

February 10, 2010

On February 10, 2010, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, issued new regulations to allow foreign law enforcement agencies, as well as state and local law enforcement agencies, to obtain certain information from banks and other “financial institutions,” as that term is defined by the Bank Secrecy Act (BSA), concerning significant money laundering or terrorist financing investigations.

The regulations were issued under the authority of Section 314(a) of the USA PATRIOT Act of 2001. Previously, only federal law enforcement agencies could seek information under the “314(a) program.”

FinCEN’s expansion of the 314(a) program to include access for foreign law enforcement agencies is a result of the United States’ treaty obligation under the Agreement on Mutual Legal Assistance between the United States and the European Union (U.S.-EU MLAT) and several bilateral agreements. Article 4 of the U.S.-EU MLAT obligates a signatory to search for information possessed by financial institutions within its territory that may be important to a criminal investigation in a requesting signatory’s country.

By expanding the 314(a) program to include access for foreign law enforcement agencies, the United States meets its treaty obligations and becomes eligible to exercise reciprocal rights to access information in EU nations.

Importantly, each foreign agency request for information will be reviewed by a U.S. law enforcement official to ensure that the matter is, in the case of money laundering, significant and that the foreign agency has been unable to locate the information through traditional means. State and local law enforcement agencies will be required to satisfy those same conditions before they can receive information under the expanded 314(a) program. Upon receiving the request for information, the financial institution must search its records to determine whether it maintains accounts for, or has engaged in transactions with, specified individuals, entities or organizations.

The new regulations also provide that FinCEN may request directly, on its own behalf and on behalf of other components of the Treasury Department, the same type of information from financial institutions. FinCEN, which previously only made such requests on behalf of federal law enforcement agencies, intends to use information obtained from self-initiated requests to conduct anti-money laundering (AML) analyses in order to uncover patterns of suspicious conduct.

Banks, credit unions, brokers and dealers in securities, money services businesses, and any other entity defined by the BSA as a “financial institution” should be prepared to receive requests for information pursuant to the now-expanded 314(a) program. These businesses should use this opportunity to ensure that they have a compliant AML program designed to detect and prevent money laundering, including the designation of a BSA officer with responsibility to, among other things, respond to 314(a) requests.

McGuireWoods’ Government, Regulatory and Criminal Investigations Department has attorneys with extensive experience with AML compliance and investigation matters, as well as the defense of white collar criminal investigations. The most valuable weapons a corporation and its officers and directors have against potential AML issues are preparedness, responsiveness, and the deployment of a robust compliance program designed to detect and prevent money laundering.

McGuireWoods is prepared to assist with everything from defending investigations to conducting money laundering risk assessments, audits and internal investigations, and designing and helping to implement overall and AML-specific corporate compliance programs and training.