Financial institutions know that suspicious activity reports (SARs) and information that would reveal a SAR’s existence may not be disclosed except under specific, limited circumstances. However, when you’re facing a civil discovery request, deciphering exactly what falls within the privilege can be a challenge.
Take one recent decision from the Court of Appeals of the State of Washington. That court applied the privilege not only to SARs and information that would reveal their existence, but also to a bank’s internal systems for detecting money laundering and monitoring suspicious activity, and even to the identity of the individuals conducting these internal investigations.1
And while financial institutions may welcome this privilege-friendly interpretation of the applicable regulations, other courts have not cast the net so broadly. As one court has stated regarding internal investigative materials, “although a bank may undertake an internal investigation in anticipation of filing a SAR, it is also a standard business practice for banks to investigate suspicious activity as a necessary and appropriate measure to protect the bank’s interests, and the internal bank reports or memorandum generated by the bank regarding such an investigation are not protected by SAR privilege.”2
Another court recently took the middle ground, finding that the SAR privilege protects underlying internal investigative reports “of an evaluative nature intended to comply with federal reporting requirements,” but not other internal emails and communications related to the investigation.3
This lack of consistency presents a challenge for financial institutions, which often face litigation in dozens of jurisdictions at any given time. Unfortunately, one size doesn’t fit all when it comes to applying the SAR privilege. Accordingly, when confronting a civil discovery request that may implicate SAR-related information, make sure you (1) know the local rule, and (2) where there is any uncertainty, err on the side of requiring a court to compel this information.
1Norton et al. v. U.S. Bank Nat’l Assoc. et al, __ P.3d __, No. 68531-7-I, 2014 WL 627509 (Ct. App. Wash. Feb. 18, 2014).
2In re Whitley, 10-10426C-7G, 2011 WL 6202895 (Bankr. M.D.N.C. Dec. 13, 2011).
3Wiand v. Wells Fargo Bank, N.A., 8:12-CV-557-T-27EAJ, 2013 WL 5925545 (M.D. Fla. Oct. 25, 2013).