Financial crime doesn’t happen in isolation. Money launderers, fraudsters, and terrorist financiers routinely move funds across multiple financial institutions (FIs) at unprecedented speed. Despite having Section 314(b) of the USA PATRIOT Act in place for over two decades, the financial industry still faces significant challenges when sharing critical information that could stop these criminals in their tracks.
How 314(b) Information Sharing Transforms Financial Crime Prevention
Section 314(b) is a provision of the USA PATRIOT Act that enables information sharing between FIs. Implemented in 2002, it created a framework to detect and deter money laundering and terrorist financing by allowing FIs to collaborate on suspicious activity.
Participation in the 314(b) program is entirely voluntary. FIs must register with FinCEN (Financial Crimes Enforcement Network) before sharing information, and registration must be renewed annually. Information can only be shared with other registered institutions for specific purposes related to detecting money laundering, terrorist financing, or specified unlawful activities (SUAs).
The provision includes a “safe harbor” protection that shields participating FIs from liability under federal and state laws when they share information appropriately. To qualify for this protection, FIs must:
- Maintain a current registration with FinCEN
- Verify that recipient institutions are also registered
- Share information only for permissible purposes
- Maintain adequate security procedures to protect confidentiality
According to FinCEN data from 2020 (the most recent data provided by FinCEN), just over 7,000 of more than 14,000 FIs were registered to participate in 314(b). This includes banks, casinos, money services businesses, securities brokers and dealers, mutual funds, insurance companies, and other eligible financial entities.
Why Financial Institutions Hesitate to Share AML Information
Despite the clear advantages of collaboration, many FIs hesitate to fully participate. According to research with anti-money laundering (AML) executives, the top barriers to information sharing include:
- Privacy and data security concerns (cited by over 50% of respondents)
- Perceived lack of value in participating
- Resource constraints in already stretched AML teams
- Inconsistent internal policies on what can be shared
Some FIs limit what they’re willing to share, particularly in fraud cases where money is transferred to another institution. Despite FinCEN’s December 2020 guidance clarifying that SUAs like fraud are included in permissible sharing topics, some institutions still restrict information related to these activities.
Other FIs share selectively based on their relationships with peer institutions. Large banks readily exchange information with similar-sized institutions but hesitate to share with smaller banks or non-bank FIs due to concerns about differing privacy standards and controls.
Navigating SAR Disclosure Limitations in 314(b) Information Sharing
While 314(b) facilitates information sharing, it doesn’t relax prohibitions against SAR (Suspicious Activity Report) disclosures. FIs cannot share a SAR or any information that points to its existence. This restriction applies even when sharing with other registered FIs under the safe harbor provision.
Care must be taken when describing activity to another FI. Simply indicating that activity is deemed “suspicious” could inadvertently point to the existence of a SAR. Best practice is to use alternative language like “questionable” or “unusual” and clearly describe the purpose of the information request.
Cross-Institutional Financial Crime Detection: Why Information Sharing Matters
The ability to follow money movement beyond a single institution is crucial. Criminals rarely act alone—networks spread across multiple FIs using various names and entities. While an individual FI has visibility only into its own customers and transactions, robust information sharing can illuminate larger criminal patterns.
As criminal networks become more sophisticated, collaboration becomes increasingly important. Money that used to take days to transfer internationally can now move in seconds via mobile devices, creating complex webs of transactions that are difficult for any single institution to unravel alone.
Moving Forward: Solutions to the Conundrum
For FIs ready to enhance their information-sharing approach, several steps can make a difference:
- Participate actively in Section 314(b)—Register and share allowable information with other registered FIs in a timely manner. Some FIs take weeks or months to respond to requests, which often renders the information useless.
- Apply current guidance to internal policies—Remember that SUAs like fraud, embezzlement, and trafficking have always been included in allowable sharing topics.
- Review SAR procedures—Ensure sensitive SAR information is only shared with those permitted by regulation and should never be shared via 314(b).
- Consider technology solutions—Vendor platforms can streamline information sharing while maintaining privacy and security. Ensure those solution providers are unable to see any of the shared information.
Future Trends in AML Information Sharing
While Section 314(b) participation remains voluntary, its importance continues to grow as financial crime becomes increasingly sophisticated. FIs that develop robust information-sharing processes will be better positioned to protect their customers and the integrity of the financial system.
The 314(b) provision has limitations—it’s US-specific and doesn’t support international information sharing, despite the global nature of financial crime. Participation isn’t mandatory, which may signal to some institutions that it’s not a priority. And internal policies around sharing vary greatly, creating inconsistent collaboration across the industry.
Nevertheless, effective information sharing shouldn’t increase an FI’s risk. Instead, it should serve as evidence of high-quality investigations and a control to minimize risk. The technology exists to create efficiencies in the process and allow for more robust information sharing.
By breaking down these barriers to collaboration, the financial industry can build stronger frameworks to combat financial crime—stopping criminals who don’t follow the same rules when sharing information about their victims.
The Cost of Information Silos in Financial Crime Prevention
Without collaborative intelligence, FIs operate with critical blind spots that sophisticated criminals exploit. The financial and reputational costs of these blind spots are significant. Institutions that don’t actively participate in information sharing can face:
- Increased exposure to evolving money laundering techniques
- Greater vulnerability to organized criminal networks
- Higher compliance costs from inefficient investigations
- Potential regulatory scrutiny for failing to utilize available tools
- Reputational damage when preventable financial crimes succeed
For more insights on building effective financial crime prevention programs and latest developments in information sharing frameworks, you can read my report, The Conundrum of Information Sharing and Section 314 of the USA PATRIOT Act, or contact me at [email protected].