Here are three ways you can use USA PATRIOT Act 314(b) Information Sharing to set yourself and your institution apart.
1. Don’t Hesitate to Reach-out
When analyzing scores of alerts each day, or just examining a handful of potentially illicit acts each year, upgrade your process for understanding the full picture, with a natural and commonsense step. When a critical problem exists, immediately contact the counterparty to the transaction and ask for additional information.
For example, say a new high-risk client is initially funding the account with a cashier’s check – inquire about more information from the bank at which bank check is drafted. Alternatively, you notice a pattern of cash deposits followed by wire transfers to other financial institutions. Why not instinctively, contact the receiving institutions and find out more about the party receiving the funds?
From a legal standpoint, the USA PATRIOT Act 314(b) allows you and your FI to freely discuss the transaction, including sharing detailed information about customers. Moreover, this is a much more effective way to indeed find out about a counterparty rather than relying on Google searches and commercial databases.
Just do it, leverage 314(b) and contact the counterparty. At best they will reply quickly, and both parties can look into the matter together and file joint SARs referencing 314(b). At worst, if you don’t receive a reply, you will have a notice in your file that you took this step and that you were actively following-up. In both cases, you will have acted professionally, consistent with a culture of compliance and the best practices of an analyst that wants to understand potential risks fully, and not like an ostrich that puts their head in the sand.
2. Reply Quickly
Are you responsible in any way for how your institution responds to information sharing requests that it receives? If so, you probably know that currently producing a reply can take a significant amount of time. All the while, the sender has no idea whether you have received the request or have begun to look into the matter.
At a minimum, why not make it your practice to acknowledge receipt and provide periodic status updates? It’s a simple way of getting the ball rolling and useful for both sides. A more advanced process would share essential details immediately by incorporating phone calls or voice messages. It is only after these steps that a full written response is needed or of any real value. An outbound request followed by months of radio silence before a response is provided is of little to no value and builds up wasted time at each side.
3. Track and Report Successes
Anecdotally we know that near 100% of the time when counter-parties communicate and share information it results in a positive outcome. Why? Because, if both sides discover a problem requiring a SAR filing or account closing, it’s win-win. Conversely, if a transaction or customer is not problematic, that fact has now received enhanced verification and can be relied upon in making decisions going forward to the benefit of the compliance team and the customer.
Financial institutions spend an exorbitant amount of human and technical resources handling monitoring system alerts that at best produce a positive result 5% of the time. It is therefore incumbent upon those seeking to make a difference in the industry, and ultimately stop bad actors, to let others know when they see excellent results from information sharing. However, reporting should happen through statistical analysis, and a formal process to convey the results to executive management and regulators easily.
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