The Securities Industry Association is objecting to a proposed rule by the New York State Banking Department requiring firms to submit copies of their suspicious activity reporting (SAR) to the state’s superintendent of banks. Requiring financial institutions to submit identical information to multiple regulators is inconsistent with the intent of the Bank Secrecy Act, the SIA wrote in a comment letter. Furthermore, the Financial Crimes Enforcement Network, which already requires firms to submit SARs, makes those filings available to all state regulators as part of a mandate to facilitate regulatory coordination, the SIA added. The SIA is asking that the state’s banking department coordinate with FinCEN rather than requiring firms to submit duplicate copies of the same report.
The Secretary of the Treasury, under the direction of Congress, designated FinCEN as the government recipient for SARs to relieve firms from the “overwhelming” process of submitting duplicate forms to several regulators, the SIA argued in its comment letter. Congress made clear its intention to “alleviate duplicative regulatory burdens on financial institutions” and allow them to spend more time on other ways to deter and detect money laundering, the SIA said. FinCEN established Project Gateway in 1993 to coordinate anti-money laundering enforcement among the states. Since 1997, all 50 states, the District of Columbia and Puerto Rico have had direct access to information firms are required to submit to FinCEN, the SIA said. Requiring additional SAR reporting also increases the chances of inadvertent disclosure of the sensitive information contained in them; it would also set a bad precedent for future state regulatory rulemaking, the SIA said.