plaintiff's transactions and communications with the bank involving the
bad check in dispute. Ordering the information produced, the court
reasoned that SAR section did not provide privileged or confidential
information and that it "finds it difficult to believe there is anything
contained in that section of the SAR which plaintiff does not already
know." Id. at *2.
Although Dupre involved 31 C.F.R. § 103.18, this Court does not
find the reasoning persuasive. Nothing in the Act or regulations
prohibits the disclosure of the underlying factual documents which may
cause a bank to submit a SAR. Furthermore, those underlying documents do
not become confidential by reason of being attached or described in a
SAR. For example, if a wire transfer of funds is described in a SAR as a
suspicious activity, the wire transfer transaction remains subject to
discovery. Therefore, the better approach prohibits disclosure of the SAR
while making clear that the underlying transaction such as wire
transfers, checks, deposits, etc. are disclosed as part of the normal
While Dupre interprets § 103.18(e), there are other cases
interpreting 12 C.F.R. § 21.11 (k) and 12 C.F.R. § 563.180 (d).
Interpretation of these regulations is applicable and necessary due to
the almost identical language used in all three regulations.*fn3 The
court In Re Mezvinsky denied a motion to compel the production of an SAR
sought in a subpoena directed to a non-party. No. 00-10745DWS, 2000
Bankr. LEXIS 1067, at *9 (E.D. Pa. 2000). The Court observed that the
Code of Federal Regulations, specifically 12 C.F.R. § 4.31 et seq.,
provides a mechanism for litigants to request the OCC to provide them with
access to SARs. However, the Court applied 12 C.F.R. § 21.11 (k)
which specifically directs a bank to "decline to produce the SAR or to
provide any information that would disclose that the SAR has been prepared
or filed, . . ." Mezvinsky, 2000 Bankr. LEXIS 1067, at *4,
The court in Weil v. Long Island Savings Bank held that
12 C.F.R. § 563.180 (d)(12) prohibits disclosure of SARs or their
content, even in the context of discovery in a civil lawsuit, however,
supporting documentation is discoverable. 195 F. Supp.2d 383, 389 ( E.D.
N.Y. 2001). The court further held that the confidentiality privilege
created by the Act and the regulations is not qualified and is not
subject to waiver by the financial institution. Id. This Court agrees.
Congress and the regulatory agencies made SARs privileged, and courts
have refused to order an exception to that privilege, even if necessary
to raise an affirmative defense. Gregory v. Bank One, Indiana, N.A.,
200 F. Supp.2d 1000, 1003 (S.D. Ind. 2002). In Gregory, the defendant
sought to submit under seal information barred by the Act and the
regulations in order to raise an affirmative defense. Id. at 1000-01. The
court found that the Act created an unqualified discovery and evidentiary
privilege which could not he waived by the reporting financial
institution. Id. at 1002.
PrivateBank argues that because Gibson and his counterparts pleaded
guilty over three years ago, the risk of "the person involved in the
transaction" discovering the existence of a SAR is mollified. Although it
may be irrelevant whether Gibson discovers the existence of a SAR, the
refusal to produce SARs is supported by the legislative history. In
adopting 12 C.F.R. § 563.180 (d)(12), the regulating agency, the
OTS, was "encouraged to
adopt regulations that would make SARs
undiscoverable in civil litigation." Weil, 195 F. Supp.2d at 389.
Permitting the release of any SAR through civil discovery could harm the
law enforcement interests the Act was intended to promote. Release of an
SAR could compromise an ongoing law enforcement investigation, tip off a
criminal wishing to evade detection, or reveal the methods by which banks
are able to detect suspicious activity. Furthermore, banks may be
reluctant to prepare an SAR if it believes that its cooperation may cause
its customers to retaliate. Moreover, the disclosure of an SAR may harm
the privacy interests of innocent people whose names may he contained
Finally, PrivateBank argues that the statutory scheme would not be
thwarted by production of any SAR or related documents because the
language of the statute prohibits disclosure of a SAR only to any person
involved in the transaction. PrivateBank contends that the regulations
are inconsistent with the statute and therefore unenforceable, This issue
has been addressed, and it has been held that "[f]ederal regulations
should be adhered to and given full force and effect of law whenever
possible." In re Bankers Trust Co., 61 F.3d 465, 469 (6th Cir. 1995)
(citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984)). "[I]n order to be valid [regulations] must be
consistent with the statute under which they are promulgated." U.S. v.
Larinoff, 431 U.S. 864, 873 (1977). 12 C.F.R. § 21.11 (k) has been
held to be valid and consistent with U.S.C. § 5318(g)(2). Gregory v.
Bank One, Indiana, N.A., 200 F. Supp.2d 1000, 1002 (S.D. Ind. 2002)
(citing Weil v. Long Island Savings Bank, 195 F. Supp.2d 383, 388 (E.D.
N.Y. 2001)). This Court agrees.
C. DOCUMENTATION SUPPORTING A SAR IS PRIVILEGED INFORMATION BECAUSE IT
COULD DISCLOSE THE EXISTENCE AND REVEAL THE CONTENT OF A SAR.
12 C.F.R. § 103.18 (d) sets the following procedure for retention
(d) Retention of records. A bank shall maintain a copy
of any SAR filed and the original or business record
equivalent of any supporting documentation for a
period of five years from the date of filing the SAR.
Supporting documentation shall be identified, and
maintained by the bank as such, and shall be deemed to
have been filed with the SAR. A bank shall make all
supporting documentation available to FinCEN and any
appropriate law enforcement agencies or bank
supervisory agencies upon request.
There are two types of supporting documents. The first category
represents the factual documents which give rise to suspicious conduct.
These are to be produced in the ordinary course of discovery because they
are business records made in the ordinary Course of business. The second
category is documents representing drafts of SARs or other work product
or privileged communications that relate to the SAR itself. These are not
to be produced because they would disclose whether a SAR has been
prepared or filed.