Responding to Federal Subpoenas as a Bank or Financial Institution

Responding to Federal Subpoenas as a Bank or Financial Institution

Getting a subpoena can be scary for banks and financial institutions. You want to fully comply with the law, but you also have duties to protect your customers’ privacy. This article will walk you through the key steps and considerations when your bank receives a federal subpoena. We’ll aim to make it as simple as possible!

What is a subpoena?

A subpoena is a written order requiring you to produce documents, records, or testimony. There are two main types of federal subpoenas that banks receive:

• Subpoenas from federal agencies like the SEC or DOJ as part of an investigation
• Grand jury subpoenas from federal prosecutors

The subpoena will tell you what information is being requested and when/where it needs to be produced. You are legally required to respond, but there are important limitations we’ll discuss.

Key privacy laws

Banks have duties under two main federal privacy laws:

• The Right to Financial Privacy Act (RFPA) – 12 U.S.C. ch. 35
• The Bank Secrecy Act (BSA) – 31 U.S.C. § 5311 et seq

These laws limit what customer information banks can disclose and how. Understanding them is key to properly responding to a subpoena.

Right to Financial Privacy Act (RFPA)

The RFPA applies when federal agencies or departments seek customer records from banks. It requires:

• Advanced notice to the customer
• An opportunity for the customer to challenge the subpoena
• Reimbursement of the bank’s costs in complying

See 12 U.S.C. § 3405 for details. The RFPA does NOT apply to subpoenas from state/local agencies or private parties. See 12 U.S.C. § 3401.

Bank Secrecy Act (BSA)

The BSA requires banks to file Suspicious Activity Reports (SARs) on potential financial crimes. Banks CANNOT disclose SARs or even acknowledge their existence, with limited exceptions. See 31 CFR § 1020.320(e).

This means a subpoena demanding SARs cannot be complied with. The bank must assert the SAR privilege and refuse to produce any such documents.

Responding to a federal subpoena step-by-step

Here is a step-by-step guide on responding:

1. Notify customers – If the RFPA applies, provide notice to impacted customers within 10 days. Give them an opportunity to file a motion to quash the subpoena per 12 U.S.C. § 3405.
2. Review for SARs – Scrutinize the subpoena for any request that would require disclosing SARs. Remember, SARs cannot be produced.
3. Negotiate – Discuss the scope with the agency. See if you can narrow the subpoena to reduce the burden.
4. Collect documents – Gather responsive materials from your systems and records. Omit any SARs.
5. Produce – Deliver the authorized materials by the deadline and keep a record of compliance.

This process ensures you comply with privacy laws and fully respond to the subpoena. Maintain an open dialogue with the agency throughout.

FAQs

Here are some common questions banks have:

What if the subpoena is overly broad?

You can try to negotiate a narrower scope. Explain the burden of complying and offer to produce more targeted records. But if talks fail, you ultimately must comply or challenge the subpoena in court.

Can we charge fees for production?

Under the RFPA, you can charge “reasonable fees” for document reproduction, searches, etc. See 12 U.S.C. § 3415. This helps cover your costs.

What if we accidentally disclose SARs?

First, notify the requesting agency not to review the SAR material. Then inform FinCEN of the unauthorized disclosure. You may need to implement additional controls to prevent future errors.

Can customers sue if we comply?

Generally no, as long as you follow required procedures under RFPA and other privacy laws. But consult counsel, as lawsuits are possible.

Key takeaways

Here are some key tips when responding to federal subpoenas:

• Notify customers if required under RFPA
• Carefully review for requests of SARs
• Negotiate the scope if overly broad
• Omit any SAR materials from production
• Maintain compliance records

Responding properly takes time but is key to complying with the law. Consult counsel early when you receive a subpoena. Smart preparation will make the process smoother.