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A federal letter asking money services businesses to turn over data on their agents marks the first broad U.S. effort in 14 years to better understand the scope of the fractured money transmitter market.
Some 17 federal law enforcement agencies issued 826 requests to financial institutions, garnering nearly 49,000 positive matches and 41 convictions, a rate of about 5 percent, according to the Financial Crimes Enforcement Network.
If a bank releases too much or too little information or takes too long to respond to a request from law enforcement officials, an investigation might be bogged down or even compromised.
The system, expected to be in operation next month, will help banks streamline the process of providing examiners with proof of compliance with law enforcement requests, FinCEN Director James Freis said.
Because data protection laws in Europe and elsewhere make it difficult for a multinational financial institution to share data among all of its branches, the laws "will be the biggest impediment to protection from terrorism," the officials said.
A financial institution should ask for a written request from any law enforcement agency that asks it to keep an account open, according to the U.S. Treasury Financial Crimes Enforcement Network.
Limits such as a rule prohibiting financial institutions from sharing SAR information with nonbank affiliates hinder banks due diligence efforts, Bank of America Compliance Chief William Fox said at a compliance conference in Atlanta.
Many bank employees can't differentiate between SAR-related and other information requests they receive from law enforcement agencies, regulators and other financial institutions. As a result, some hinder financial investigations by ignoring the requests.
