Simplified Reporting System Benefits Bankers and Law Enforcement

A new regulation announced Monday will aid criminal investigations while significantly cutting costly and burdensome paperwork for America's banking community.

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC), along with the Federal Reserve Board, issued final rules that simplify and streamline the process by which banks report suspicious activity to law enforcement.

The new rule replaces six overlapping systems with one central reporting system that bankers project will reduce related paperwork by 80 percent. The single system will provide more than a dozen federal law enforcement and regulatory agencies simultaneous access to Suspicious Activity Report (SAR) information and allow for more comprehensive analyses of trends and patterns in financial crime activity. Such activity can include bank fraud, money laundering, embezzlement, check kiting or misdeeds by bank officials.

"Preventing and deterring money laundering and bank fraud have always been and will remain our goals as we work to develop reasonable, effective and cost efficient rules," said Treasury Secretary Robert E. Rubin. "This simplified reporting system is a major achievement resulting from Treasury's firm commitment to constructive cooperation among the financial, regulatory and enforcement communities."

Since the early 1980s, banks have been required to file reports to alert regulators and law enforcement personnel of possible criminal activity affecting or conducted through those institutions. The banks reported these activities by filing multiple copies of Criminal Referral Forms with their respective federal regulators and law enforcement agencies. Banks were also encouraged to report suspicious transactions by marking a "suspicious" box on another form, the Currency Transaction Report.

Under the new regulation, banks will be required to send only one SAR form to a single government agency - FinCEN. SARs may be filed in paper or magnetic format, and the information will be input into a single database. FinCEN will manage the computer system, coordinate the information and make it available to law enforcement and regulatory agencies.

FinCEN Director Stanley E. Morris said, "If we are to deter criminals from using banks illegally, the capacity to identify suspicious activity cannot be impeded by burdensome reporting. The new procedures will enable financial, regulatory and law enforcement authorities to work smarter; everyone benefits."

The new Treasury Rule is issued under the authority of the Bank Secrecy Act, the core of Treasury's anti-money laundering efforts. It is to be published in the Federal Register Monday and become effective April 1, 1996.

The Rules of the Federal Reserve Board and the OCC are issued under the independent supervisory authorities of those agencies. The Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union Administration are expected to take similar actions in the near future.