FinCEN Clears Broker-Dealers, RIAs to Share Suspected Fraud Data in Real Time
The Financial Crimes Enforcement Network, or FinCEN, updated its guidance on inter-institutional information sharing last week, clarifying that broker-dealers and other covered financial institutions may share information about suspected fraud with other participating firms in real time – without first identifying specific laundering proceeds – under the liability safe harbor established by section 314(b) of the USA PATRIOT Act.
An updated fact sheet issued this month replaces FinCEN’s December 2020 guidance and adds several new provisions, including explicit confirmation that fraud qualifies as a specified unlawful activity for money laundering purposes, enabling information sharing under 314(b) even when a firm has not yet traced specific proceeds of a fraudulent transaction.
The practical implication for broker-dealers and registered investment advisers participating in the 314(b) program is meaningful: firms that previously interpreted 314(b) narrowly – limiting sharing to cases where money laundering was the primary suspected offense – now have clear regulatory footing to share fraud-related client and transaction data with peer institutions as suspicious activity develops.
The updated guidance also confirms that sharing may occur in real time, through any medium, including electronic platforms, and that firms may share a broad range of data types beyond transaction records. The fact sheet specifically enumerates video surveillance footage, cyber-related data such as IP addresses and geolocations, device identification numbers, transaction monitoring alerts, and behavioral indicators such as newly added payees followed by large transfers, multiple accounts sharing identifying information, and login activity from geographically distant locations.
A newly added provision addresses what firms may share with institutions that have no existing relationship with the subject of the information. FinCEN confirmed that a 314(b)-registered institution may share information with another registered institution even when the receiving firm has no prior account, customer, or transaction relationship with the individual or entity described – and that the receiving firm may use such information to strengthen its own anti-money laundering and countering the financing of terrorism programs, including incorporating it into transaction monitoring systems.
Broker-dealers in securities are among the financial institution categories explicitly eligible to participate in the 314(b) program. Participation is voluntary and requires registration through FinCEN’s Financial Industry Portal. Registered firms must verify that any counterparty is also a current 314(b) registrant before transmitting data.
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