The Department of the Treasury announced earlier this week the issuance of additional regulations implementing the anti-money laundering and anti-terrorism provisions of the USA PATRIOT Act. The regulations, sent on Tuesday to the Federal Register for publication, set forth the requirements of two important information-sharing provisions contained in section 314 of the Act.

{1) In a proposed rule, the regulations seek to utilise the existing communication resources of Treasury’s Financial Crimes Enforcement Network (FinCEN) to establish a link between federal law enforcement and financial institutions for the purpose of sharing information concerning accounts and transactions that may involve terrorist activity or money laundering.

(2) In a regulation effective as soon as it is published in the Federal Register, certain financial institutions will be able to share information amongst themselves for the purpose of identifying and reporting suspected terrorism and money laundering once the financial institutions have notified FinCEN that they intend to share such information and that they will take adequate steps to maintain confidentiality.

The USA PATRIOT Act, in particular Title III of the Act, authorised bold, new measures to protect the USA’s financial system from money laundering and terrorism by reducing the barriers to the sharing of financial information among governmental entities as well as financial institutions, systematically targeting known risks to the financial system, and providing Treasury with the ability to identify new risks as they develop and take appropriate action to counter them. Section 314 of the Act bolsters the information exchange regime by enhancing two key channels for sharing information: (1) information exchange between the government and financial institutions (section 314(a)); and (2) information exchange among financial institutions (section 314(b)).

The proposed rule seeks to create a communication network to link federal law enforcement with financial institutions so that vital information relating to suspected terrorists and money launderers can be exchanged quickly and without compromising pending investigations.

FinCEN, a bureau of Treasury, already maintains a government-wide data access service to assist federal, State, and local law enforcement agencies in the detection, prevention, and prosecution of terrorism, organised crime, money laundering, and other financial crimes.

Under the proposed rule, federal law enforcement will have the ability to locate accounts of, and transactions conducted by, suspected terrorists or money launderers by providing their names and identifying information to FinCEN, which will then blast that information, both electronically and by fax, to financial institutions so that a check of accounts and transactions can made. If matches are found, law enforcement can then follow up with the financial institution directly. The rule is intended to formalise and streamline the information sharing and reporting process that the federal government undertook following the attacks of September 11, 2001, by permitting FinCEN to serve as a conduit for information sharing between federal law enforcement agencies and financial institutions.

This regulation is a proposed rule, meaning that it will not go into effect until publication of a final rule that considers comments received.

In order to facilitate financial institutions’ ability to identify and report to the federal government instances of money laundering or terrorism, Congress authorised the sharing of information among financial institutions about those suspected of terrorism and money laundering. Once notice has been provided to Treasury, financial institutions are free to share such information amongst themselves solely for the purpose of identifying and reporting to the federal government such activities.

The regulation issued Tuesday sets forth a notice provision requiring financial institutions to file a yearly certification if they wish to share information under this provision. The certification, which can be completed online at FinCEN’s web page (see link below) requires financial institutions to take the steps necessary to protect the confidentiality of the information and to use the information only for purposes specified in the rule.

Treasury announced that given the importance of this information sharing provision, it was issuing this regulation as an interim final rule, effective when published in the Federal Register. By also issuing this provision in the proposed rule, Treasury ensures that the public has an opportunity to comment on the rule.