[Code of Federal Regulations]

[Title 31, Volume 1]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 31CFR103.19]



[Page 377-379]

 

                  TITLE 31--MONEY AND FINANCE: TREASURY

 

                       DEPARTMENT OF THE TREASURY

 

PART 103_FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND FOREIGN 

TRANSACTIONS--Table of Contents

 

                  Subpart B_Reports Required To Be Made

 

Sec. 103.19  Reports by brokers or dealers in securities of suspicious 

transactions.



    (a) General. (1) Every broker or dealer in securities within the 

United States (for purposes of this section, a ``broker-dealer'') shall 

file with FinCEN, to the extent and in the manner required by this 

section, a report of any suspicious transaction relevant to a possible 

violation of law or regulation. A broker-dealer may also file with 

FinCEN a report of any suspicious transaction that it believes is 

relevant to the possible violation of any law or regulation but whose 

reporting is not required by this section. Filing a report of a 

suspicious transaction does not relieve a broker-dealer from the 

responsibility of complying with any other reporting requirements 

imposed by the Securities and Exchange Commission or a self-regulatory 

organization (``SRO'') (as defined in section 3(a)(26) of the Securities 

Exchange Act of 1934, 15 U.S.C. 78c(a)(26)).

    (2) A transaction requires reporting under the terms of this section 

if it is conducted or attempted by, at, or through a broker-dealer, it 

involves or aggregates funds or other assets of at least $5,000, and the 

broker-dealer knows, suspects, or has reason to suspect that the 

transaction (or a pattern of transactions of which the transaction is a 

part):

    (i) Involves funds derived from illegal activity or is intended or 

conducted in order to hide or disguise funds or assets derived from 

illegal activity (including, without limitation, the ownership, nature, 

source, location, or control of such funds or assets) as part of a plan 

to violate or evade any federal law or regulation or to avoid any 

transaction reporting requirement under federal law or regulation;

    (ii) Is designed, whether through structuring or other means, to 

evade any requirements of this part or of any other regulations 

promulgated under the Bank Secrecy Act, Public Law 91-508, as amended, 

codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-

5332;

    (iii) Has no business or apparent lawful purpose or is not the sort 

in which the particular customer would normally be expected to engage, 

and the



[[Page 378]]



broker-dealer knows of no reasonable explanation for the transaction 

after examining the available facts, including the background and 

possible purpose of the transaction; or

    (iv) Involves use of the broker-dealer to facilitate criminal 

activity.

    (3) The obligation to identify and properly and timely to report a 

suspicious transaction rests with each broker-dealer involved in the 

transaction, provided that no more than one report is required to be 

filed by the broker-dealers involved in a particular transaction (so 

long as the report filed contains all relevant facts).

    (b) Filing procedures--(1) What to file. A suspicious transaction 

shall be reported by completing a Suspicious Activity Report--Brokers or 

Dealers in Securities (``SAR-S-F''), and collecting and maintaining 

supporting documentation as required by paragraph (d) of this section.

    (2) Where to file. The SAR-BD shall be filed with FinCEN in a 

central location, to be determined by FinCEN, as indicated in the 

instructions to the SAR-S-F.

    (3) When to file. A SAR-S-F shall be filed no later than 30 calendar 

days after the date of the initial detection by the reporting broker-

dealer of facts that may constitute a basis for filing a SAR-S-F under 

this section. If no suspect is identified on the date of such initial 

detection, a broker-dealer may delay filing a SAR-S-F for an additional 

30 calendar days to identify a suspect, but in no case shall reporting 

be delayed more than 60 calendar days after the date of such initial 

detection. In situations involving violations that require immediate 

attention, such as terrorist financing or ongoing money laundering 

schemes, the broker-dealer shall immediately notify by telephone an 

appropriate law enforcement authority in addition to filing timely a 

SAR-S-F. Broker-dealers wishing voluntarily to report suspicious 

transactions that may relate to terrorist activity may call FinCEN's 

Financial Institutions Hotline at 1-866-556-3974 in addition to filing 

timely a SAR-S-F if required by this section. The broker-dealer may 

also, but is not required to, contact the Securities and Exchange 

Commission to report in such situations.

    (c) Exceptions. (1) A broker-dealer is not required to file a SAR-S-

F to report:

    (i) A robbery or burglary committed or attempted of the broker-

dealer that is reported to appropriate law enforcement authorities, or 

for lost, missing, counterfeit, or stolen securities with respect to 

which the broker-dealer files a report pursuant to the reporting 

requirements of 17 CFR 240.17f-1;

    (ii) A violation otherwise required to be reported under this 

section of any of the federal securities laws or rules of an SRO by the 

broker-dealer or any of its officers, directors, employees, or other 

registered representatives, other than a violation of 17 CFR 240.17a-8 

or 17 CFR 405.4, so long as such violation is appropriately reported to 

the SEC or an SRO.

    (2) A broker-dealer may be required to demonstrate that it has 

relied on an exception in paragraph (c)(1) of this section, and must 

maintain records of its determinations to do so for the period specified 

in paragraph (d) of this section. To the extent that a Form RE-3, Form 

U-4, or Form U-5 concerning the transaction is filed consistent with the 

SRO rules, a copy of that form will be a sufficient record for purposes 

of this paragraph (c)(2).

    (3) For the purposes of this paragraph (c) the term ``federal 

securities laws'' means the ``securities laws,'' as that term is defined 

in section 3(a)(47) of the Securities Exchange Act of 1934, 15 U.S.C. 

78c(a)(47), and the rules and regulations promulgated by the Securities 

and Exchange Commission under such laws.

    (d) Retention of records. A broker-dealer shall maintain a copy of 

any SAR-S-F filed and the original or business record equivalent of any 

supporting documentation for a period of five years from the date of 

filing the SAR-S-F. Supporting documentation shall be identified as such 

and maintained by the broker-dealer, and shall be deemed to have been 

filed with the SAR-S-F. A broker-dealer shall make all supporting 

documentation available to FinCEN, any other appropriate law enforcement 

agencies or federal or



[[Page 379]]



state securities regulators, and for purposes of paragraph (g) of this 

section, to an SRO registered with the Securities and Exchange 

Commission, upon request.

    (e) Confidentiality of reports. No financial institution, and no 

director, officer, employee, or agent of any financial institution, who 

reports a suspicious transaction under this part, may notify any person 

involved in the transaction that the transaction has been reported, 

except to the extent permitted by paragraph (a)(3) of this section. 

Thus, any person subpoenaed or otherwise requested to disclose a SAR-S-F 

or the information contained in a SAR-S-F, except where such disclosure 

is requested by FinCEN, the Securities and Exchange Commission, or 

another appropriate law enforcement or regulatory agency, or for 

purposes of paragraph (g) of this section, an SRO registered with the 

Securities and Exchange Commission, shall decline to produce the SAR-S-F 

or to provide any information that would disclose that a SAR-S-F has 

been prepared or filed, citing this paragraph (e) and 31 U.S.C. 

5318(g)(2), and shall notify FinCEN of any such request and its response 

thereto.

    (f) Limitation of liability. A broker-dealer, and any director, 

officer, employee, or agent of such broker-dealer, that makes a report 

of any possible violation of law or regulation pursuant to this section 

or any other authority (or voluntarily) shall not be liable to any 

person under any law or regulation of the United States (or otherwise to 

the extent also provided in 31 U.S.C. 5318(g)(3), including in any 

arbitration proceeding) for any disclosure contained in, or for failure 

to disclose the fact of, such report.

    (g) Examination and enforcement. Compliance with this section shall 

be examined by the Department of the Treasury, through FinCEN or its 

delegees, under the terms of the Bank Secrecy Act. Reports filed under 

this section shall be made available to an SRO registered with the 

Securities and Exchange Commission examining a broker-dealer for 

compliance with the requirements of this section. Failure to satisfy the 

requirements of this section may constitute a violation of the reporting 

rules of the Bank Secrecy Act and of this part.

    (h) Effective date. This section applies to transactions occurring 

after December 30, 2002.



[67 FR 44056, July 1, 2002, as amended at 68 FR 6617, Feb. 10, 2003]