Carl Pavlock is a Senior Analyst I, Client Delivery at AML RightSource. We encourage our team members to
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What is a 314 (b)?
Section 314 (b) of the USA PATRIOT Act provides financial institutions with the ability to voluntarily share information. Requesting information is as simple as drafting a letter and sending it to the listed contact on the FinCEN website.
Importantly, FinCEN requires that financial institutions only use the 314 (b) program for potential activities related to anti-money laundering or combating the financing of terrorism. Additionally, organizations are required to establish and maintain procedures to ensure the security and confidentiality of shared information. Per the FinCEN Fact Sheet, information can only be used for:
- “Identifying and, where appropriate, reporting on activities that may involve terrorist financing or money laundering;
- Determining whether to establish or maintain an account or to engage in a transaction; or
- Assisting in compliance with anti-money laundering requirements.”
Who participates in the 314 (b) program?
Participation in the 314 (b) program is voluntary, however, FinCEN does strongly encourage institutions to participate. Organizations that participate in the 314 (b) program operate under a safe harbor, which allows the organizations to identify and report information related to money laundering or terrorist activities without fear of potential liability. This is the same provision that allows financial institutions to file Suspicious Activity Reports without fear of civil liability.
While most people associate the 314 (b) program with banks and credit unions, other institutions participate in the program as well. Investment institutions like Vanguard and E*TRADE, cryptocurrency exchanges like Kraken and Coinbase, and FinTech companies like PayPal all participate in the 314 (b) program.
What should a 314 (b) request include?
A 314 (b) request is a useful tool in mitigating suspicious activity. Common 314 (b) request items include the source or use of funds, the account holder, if the account is a business or personal account, the daily transfer limit of the account, the interest of the account, and if there are any reasons for concern. Questions should be tailored to the specific request, for example, if the customer is receiving several low-dollar transactions, you likely aren’t going to need to ask about the institution’s transfer limits. Additionally, there is no reason to ask an investment institution that primarily works with stocks what the interest rate for the account is.
Different institutions will have different rules about what can and cannot be addressed in a 314 (b) reply. Some institutions will have policies against providing interest rates, transfer limits, or general reasons for concern, while others will happily provide that information, so it is important to ask.
How do you send a 314 (b) request?
Because 314 (b) requests often contain sensitive information like a customer’s contact information, Social Security number, and account number, it is important to exercise caution when sending and replying to requests. It is important to use an encrypted email service, or a program like Verafin, which can allow institutions to securely send each other requests.
How long does the 314 (b) process take?
Process time will vary based on several factors. A smaller institution may have fewer people replying to 314 (b) requests but may be quicker to reply because they receive fewer inquiries. Similarly, a larger bank may have multiple people who respond to 314 (b) requests but receive so many requests for information that it takes longer to reply. The sender of a 314 (b) should set a reminder date to follow up with the institution, then a date when they are going to move forward whether they have received a request or not.
Is a 314 (b) just used to mitigate suspicious activity?
While a 314 (b) request is commonly sent to mitigate suspicion, it can also support a SAR filing. While attempting to find the source of funds for a series of transactions, you may learn that the customer deposited cash just below the CTR threshold before transferring funds to your institution. An attempt to determine what happened to funds that were transferred to another institution may reveal that the funds were moved to a third organization within days of the transfer.
Is sending a 314 (b) letter worth it?
While sending a 314 (b) request may appear to take longer, if it allows you to mitigate a SAR filing it will save you time on the follow-up. Even if you do file on activity before receiving a reply, there is a chance that you will get a reply before the follow-up investigation, which could add support to your initial decision, or explain the activity allowing investigations into the customers to cease.
Overall, a 314 (b) request can be very useful and should be considered when appropriate. It provides greater insight into transactions and allows institutions to focus their resources on truly suspicious activity.