Sept. 19, 2012 – The Financial Crimes Enforcement Network published an administrative ruling on its website this week clarifying its stance on the extent to which entities may participate in voluntary information-sharing under the USA PATRIOT Act by qualifying as an “association of financial institutions.”
In its ruling, FinCEN notes that entities that qualify as an “association of financial institutions” are allowed to participate in voluntary information sharing as long as it relates to money laundering and terrorist financing. Sharing information on specified unlawful activity is not permitted.
FinCEN issued the ruling in response to a request for determination from a limited liability company made up of financial institutions. The company sought clarity on how FinCEN’s regulations would impact its potential money laundering and fraud detection services. Under section 314(b) of the USA PATRIOT Act, companies that are considered an “association of financial institutions” are allowed to participate in voluntary information sharing, with some restrictions.
The company told FinCEN that participants in its proposed money laundering and fraud detection services would contribute information to a database and share revenue on the use of that data. While FinCEN ruled that the company does meet the definition of an “association of financial institutions,” it also pointed out that some of what the company is proposing “may fall outside the scope of the statutory safe harbor as the service focuses on sharing information on specified unlawful activity and not necessarily money laundering and terrorist financing.”
The agency also urged the company “to consider seriously potential disclosure requirements if information is shared that would not be covered by the safe harbor and the possibility that the limitations on sharing information may negatively impact the open sharing of information envisioned by the statute.”
NCUA’s list of preapproved activities for CUSOs does not include money laundering and fraud detection services.