In the same way that a financial institution’s compliance program works in conjunction with law enforcement to combat financial crime, the 314(b) information sharing system allows financial institutions to work with each other to achieve the same goal.
As first explained in the U.S. PATRIOT ACT, 314(b) information sharing allows that “2 or more financial institutions and any association of financial institutions may share information with one another regarding individuals, entities, organizations, and countries suspected of possible terrorist or money laundering activities.”
What does that mean? For banks and other financial institutions, it means that – so long as you are registered as a 314(b) participant and play by the rules – your institution “shall not be liable” for choosing to disclose information in pursuit of AML efforts.
With the passage of the PATRIOT ACT, Congress made information sharing amongst financial institutions legal for anti-money laundering (AML) and countering the financing of terrorism (CFT) purposes. Enforcement, on the other hand, is left to the Financial Crimes Enforcement Network (FinCEN). It’s FinCEN’s job to organize the 314(b) program and make sure financial institutions participate.
How do they do this? Well, in short, by asking nicely. FinCEN’s Section 314(b) Fact Sheet makes it clear that while joining the program is voluntary, financial institutions are “strongly encouraged” to participate. Fortunately for FinCEN, there are lots of benefits to participating in 314(b) information sharing:
Benefits of 314(b) Information Sharing
- Getting new, important information
Information sharing can produce important new information about a subject, associated entities, accounts or transactions. That information can be critical to building a more complete picture of a case-in-progress, highlighting the need for new case creation, or connecting the dots on a money laundering operation moving between multiple financial institutions.
- Helping other financial institutions spot criminal activity.
When institutions share information, it can often alert two financial institutions that they may share a customer (and that customer’s suspicious activities). If this is a subject whose suspicious activity hadn’t yet merited a SAR, the fact that such activity is going on at two separate locations can be enough to move an investigation forward.
- Improving SAR quality – or even filing joint SAR reports.
When information that improves the breadth and depth of an investigation is shared, the SAR report is of a higher quality. It’s even possible for the financial institutions sharing information to join forces on the submission of a joint SAR report.
- Identifying new money laundering techniques.
How’s the old saying go? Once is happenstance, twice is a coincidence, three times is a pattern? Money launderers are always trying out new methods of moving money while avoiding detection. By sharing information about suspicious behavior, financial institutions are able to identify new money laundering tactics for what they are.
Putting things in context:
Who’s eligible to participate in 314(b) information sharing?
If you’re a regulated business and are required to have an AML program in place, you’re eligible to register for 314(b) information sharing. Some of the main financial institutions that fall under this umbrella include:
- Loan or Finance companies
- Casinos and Card Clubs
- Money Service Businesses (MSBs)
- Mutual Funds
- Insurance Companies
How do I register for 314(b) information sharing?
If you’re a financial institution that qualifies for 314(b) information sharing, registration is easy. Just head to fincen.gov/314b/Register.
Like the SAR, 314(b) information sharing is both a communications channel and a financial crime-fighting tool. Because of this unique distinction, it is both made better and limited by the number of investigators who make use of it. Compliance departments often face a surplus of casework, meaning that – at times – 314(b) information sharing is relegated to the sidelines. But as compliance needs grow, and compliance-specific tools facilitate processes, more of this important collaborative work will take place.