The Financial Crimes Enforcement Network (“FinCEN”) recently assessed the maximum possible civil penalty against a former bank official in California, Frank Mendoza, who had intentionally disclosed the existence of a Suspicious Activity Report (a “SAR”) to the subject person of the SAR. The Bank Secrecy Act prohibits the disclosure of the existence of a SAR to any person involved in the transaction. Penalties for violation of this restriction can include civil penalties of up to the greater of $25,000 or the amount involved in the transaction (up to $100,000), criminal fines of up to $250,000, and up to five years imprisonment.
Mr. Mendoza, who was a loss mitigation expert, conducted an investigation of a bank customer and came to suspect fraud in connection with a series of mortgage loans. The bank in turn filed a SAR with FinCEN. Mr. Mendoza later contacted the borrower and offered, in return for a payment of $25,000, to assist the borrower in the bank’s investigation and a potential federal criminal investigation related to the loans. Mr. Mendoza disclosed the existence of the SAR and told the borrower that a federal criminal investigation was imminent. The borrower in turn contacted the FBI, which conducted a sting operation in which Mr. Mendoza accepted two payments of $5,000 from the borrower. Mr. Mendoza was eventually charged and convicted of three counts of bribery and one count of unauthorized disclosure of a SAR.
Following Mr. Mendoza’s conviction for the willful disclosure of the existence of a SAR, FinCEN imposed the maximum possible civil penalty of $25,000. FinCEN believes that Mr. Mendoza is the first bank official to have been criminally convicted of revealing the filing of a SAR.
Banks should remember that when the filing of a SAR is required under the Bank Secrecy Act, the SAR must be filed within 30 days of initial detection of the facts that constitute the basis for filing the SAR, or 60 days if no suspect can be identified. Except under very limited circumstances, the existence of a filed SAR, and any information that would reveal the existence of the SAR, must be kept strictly confidential.