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Unlawful disclosure of SARs: Don’t let this happen to you

By Naomi Glass, BSA/AML Compliance Manager

On October 17, 2018, the Department of Justice’s U.S. Attorney’s office issued a press release so stunning it caused the mouths of BSA/AML compliance officers around the country to drop. The headline: “Senior FinCEN Employee Arrested and Charged with Unlawfully Disclosing SARs.”

Immediately, major news outlets around the country began publishing this breaking story, and I honestly couldn’t believe what I was reading before my very own eyes. That is because BSA/AML compliance professionals like myself know that the unlawful disclosure of a Suspicious Activity Report (SAR) is the industry’s ultimate “cardinal sin.” Not only can doing so be highly detrimental to the government’s tireless efforts to put bad guys behind bars, it can also land the person with the big mouth behind bars.

According to the complaint filed in Manhattan federal court, Natalie May Edwards of Quinton, Virginia, a senior advisor at the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), leaked SAR records and other sensitive government information connected to Special Counsel Robert Mueller’s probe of Russian influence in the U.S. elections. Edwards, who had access to each of the pertinent SARs, saved them to a flash drive provided to her by FinCEN. She transmitted the SARs by taking photographs of them and texting the photos to a reporter at Buzzfeed, an online news organization, over an encrypted application. Over the course of a year, the contents of the unlawfully disclosed SARs were published in 12 news articles.

Consequences of unlawful disclosure of SARs

There are severe criminal ramifications associated with the unlawful disclosure of a SAR. Unlawful SAR disclosure is generally prohibited by Bank Secrecy Act (BSA) regulations; it’s considered a violation of federal law and could result in civil penalties of up to $100,000 for each violation and criminal penalties of up to $250,000 and/or imprisonment not to exceed five years. Edwards, who was charged with one count of unauthorized disclosures of SARs and one count of conspiracy to make unauthorized disclosures of SARs could be sentenced to 10 years in prison.

Preventing unlawful disclosures of SARs

To ensure that a credit union does not unlawfully disclose SAR information, it is important to maintain a firm understanding on who is authorized to receive this type of sensitive information and who is not.

First and foremost, a credit union employee is never allowed to disclose to a member that a SAR was filed on them or even share such information about members with other financial institutions. A credit union employee also cannot confirm or deny the existence of a SAR if asked by a person making a transaction or other persons. The only individuals at a credit union who should know about SAR filings are those with the “need to know.” This might include BSA/AML personnel, the credit union’s SAR decision committee, or those who report the filing of SARs to the board of directors.

SAR information can also be disclosed to FinCEN; the NCUA; any federal, state or local law enforcement agency; or any state regulatory authority administering a state law that required the credit union to comply with the BSA. The credit union also needs to be aware that if it receives a subpoena not by FinCEN or an appropriate law enforcement or federal banking agency, the credit union must decline to provide any information regarding a SAR or even confirm the existence of the SAR. Finally, if a credit union receives an improper request to disclose a SAR, the credit union must notify FinCEN and the NCUA.

Since we are about to begin a new calendar year, now would be a wonderful time to re-review with your staff what your credit union’s specific policies and procedures are regarding the disclosure of SARs. By effectively safeguarding SAR information, not only is your credit union meeting its regulatory obligations, it is preventing itself from being the subject of future breaking news.