Academic journal article ABA Banking Journal

Between a SAR & a Hard Place: Statutory Protection for Banks under Attack

Academic journal article ABA Banking Journal

Between a SAR & a Hard Place: Statutory Protection for Banks under Attack

Article excerpt

Superhero Plastic Man can stretch in two different directions, but even his elasticity has limits. Although banks are not endowed with Plastic Man's powers, they are being similarly stretched in opposite directions-thanks to decisions like Cummings v. Doughty, a recent Louisiana Court of Appeals case that held banks can be civilly liable for Suspicious Activity Reports (SARs).

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A bank is required to file a SAR with the Financial Crimes Enforcement Network if it suspects a financial transaction has no apparent lawful purpose. Federal statutes require banks to file SARs, or face civil or criminal penalties. But disgruntled subjects of SARs are suing banks, causing banks to be stretched thin in this legal tug-of-war. Congress tried to provide banks some protection by passing the Annunzio-Wylie Anti-Money Laundering Act (Act). It gives banks immunity from all civil liability arising from SAR filings. The Act's safe-harbor provision states banks "shall not be liable to any person under any law or regulation of the United States" as a result of a SAR filing.

The First and Second Circuits and a majority of the courts accepted the plain language of the Act and held that the safe-harbor provision grants banks absolute immunity. But the Louisiana Court of Appeals ignored the obvious and joined the Eleventh Circuit and a minority of courts that limit banks' immunity by imposing a good-faith requirement to the Act's safe-harbor provision.

The facts and procedural history of Doughty are convoluted, but Doughty, a former bank employee, initially sued the bank for defamation and malicious prosecution. …

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