The "safe harbor" provision, which was codified in 31 U.S.C. Because cannabis remains a controlled substance, all assets related to CRBs and the assets of the financial institutions that service CRBs are subject to seizure by federal authorities. In the Whitney case, individuals filed a defamation suit against a bank, claiming that the bank wrongfully accused them of illegal lending activity when it filed a SAR. 5318(g)(3), provided for complete immunity from civil liability for the reporting of known or suspected … Ongoing marketing and sales initiatives under the Safe Harbor Program™ purview, All services marketed under Safe Harbor Program™ branding, Prospects driven to the Safe Harbor Program™ website to complete the registration and on-boarding processes, Every candidate verified as banking ready through a stringent, know your customer (KYC) compliance assessment process, Assessment includes business document authentication, owner investigation, operations analysis and information to help you verify funds deposited, Initial account application through the Safe Harbor Program™, Application tracking that includes monitoring of customer document uploads, Safe Harbor relationship managers available to assist in CRB application review, Support to review application progress, monitor activity and generate regulatory reports, Risk quantification through a proprietary BSA calculator built around almost three years of industry data, Support generating reporting documentation, Automated Bank Secrecy Act (BSA) reports and monitoring, Support with tracking license renewals, state filings and key service provider contracts, Independent validation of the Safe Harbor Program™ by a top 25 CPA firm, Formal reporting to Safe Harbor and your financial institution, Industry best practices around servicing CRB customers, Mandatory training and education for your employees, Streamline the process of onboarding new cannabis-related business (CRB) accounts, Follow FinCEN guidelines for providing financial services to CRBs, Retain control and embrace the booming yet underserved CRB customer market, Foster a safer atmosphere in the communities where your CRB customers are located. To that end, the Act provides a “safe harbor for depository institutions,” which would allow such institutions to provide “financial services to a cannabis-related legitimate business or service provider.” U.S. Rep. Steve Stivers (ROH) recently introduced an amendment to the SAFE Banking Act of 2019 extending that safe harbor to insurers providing financial … As the nation’s first service-based program that specializes in helping financial institutions provide business banking to cannabis-related businesses (CRBs), the Safe Harbor Program™ can help you complete and exceed the due diligence, monitoring and reporting requirements that are typical barriers to providing services to CRBs Prerequisites to Safe Harbor Protection: To obtain the benefit of the safe harbor, financial institutions must satisfy certain requirements as specified in FinCEN regulations. A jury convicted Mr. Farkas on April 19, 2011, and he later was sentenced to 30 years in prison. The “SAFE Banking Act of 2019” or the “Secure and Fair Enforcement Banking Act of 2019 ’’ is a safe harbor for depository institutions. A financial institution or association of financial institutions that shares information pursuant to paragraph (b) of this section shall be protected from liability for such sharing, or for any failure to provide notice of such sharing, to an individual, entity, or organization that is identified in such sharing, to the full extent provided in subsection 314 (b) of Public Law 107-56. Debtor Is a Financial Institution for Purposes of Settlement Payment Safe Harbor, Rules Southern District of New York. Nor do financial institutions need to have made a conclusive determination that the activity is suspicious in order to benefit from the statutory safe harbor. the existence or content of oral communications to authorities regarding suspected or possible violations of laws or regulations that did not lead to the filing of a SAR. Marijuana remains illegal under the Federal Controlled Substances Act and as such, any information provided on this website regarding the use of the Safe Harbor Program™ to provide financial services to cannabis related businesses (“CRBs”) is based on the guidance issued by the United States Department of Treasury Financial Crimes Enforcement Network (“FinCEN”). Bankruptcy Code Section 546(e) bars a bankruptcy trustee from avoiding “a transfer that is … a settlement payment … made by or to (or for the benefit of) … a financial institution … in connection with a securities contract.”4 On February 27, 2018, the Supreme Court unanimously held in Merit that “the only relevant transfer for purposes of the safe harbor is the transfer that the trustee seeks to avoid.” In ruling that courts should focus on the “overarching transfer” — the one subject to a trustee’s challenge — the Supre… More particularly, the safe harbor provides immunity to any “financial institution that makes a voluntary disclosure of any possible violation of law or regulation to a government agency.” This comprehensive protection precludes liability under any federal, state or local law or … Regulation P requires financial institutions to provide certain privacy notices and to comply with certain limitations on the disclosure of nonpublic personal information to nonaffiliated third parties and requires financial institutions and others to comply with certain limitations on redisclosure and reuse. The sooner you become a Safe Harbor partner, the greater your opportunity to capture early market share and gain access to a variety of additional revenue streams. Author: Kristian W. Gluck . While the Whitney court ruled in a case involving a national bank and the rules and regulations of the Office of the Comptroller of the Currency, the five federal financial institutions supervisory agencies and FinCEN believe that the court’s rulings apply to all financial institutions that file SARs in accordance with suspicious activity reporting rules. Last week, the Financial Crimes Enforcement Network (“FinCEN”) released new guidance (the “Fact Sheet”) that clarifies the information sharing safe harbor of Section 314(b) of the USA PATRIOT Act. It provides financial institutions with the ability to share information with one another, under a safe harbor provision that offers protections from civil liability, in order to better identify and report potential money laundering or terrorist financing. Some courts have limited the safe harbor protection to disclosures based on a good faith belief that a violation has occurred, or have declined to extend the protection to financial institutions that may have misrepresented material facts to law enforcement. Several of the federal financial institutions supervisory agencies jointly filed a brief with the court arguing that a financial institution that reports suspected crimes should not be subject to discovery of its communications with law enforcement. While the USA PATRIOT Act's creation of the safe harbor for employment references is important and institutions should be encouraged to provide accurate and truthful reports, it is also important that financial institutions establish an internal process to ensure that the protections are maintained. Once the due diligence is complete and a determination to move forward has been made, the Safe Harbor team will present your business to participating financial institutions that fit … You also increase your market position as a go-to industry leader in your state as well as nationally. In 1992, the Annunzio-Wylie Anti-Money Laundering Act, which contained a specific provision that provided a "safe harbor" for financial institutions and their employees, was passed by Congress. Nor do financial institutions need to have made a conclusive determination that the activity is suspicious in order to benefit from the statutory safe harbor. Further, financial institutions may share information about activities as described, even if the activities do not constitute a “transaction.” This can include an attempted transaction, or an attempt to induce … Safe harbor 401k plans are one of the most popular 401k retirement plans for businesses that have employees. SAFE Banking Act. Navigating Safe Harbor by Sundie Seefried Federal laws make it difficult for cannabis businesses to open checking or savings accounts in federally insured financial institutions. Safe Harbor is a name only and the use of “Safe Harbor” in our name is not meant to imply any additional security. Specifically, financial institutions or an association of financial institutions sharing information under the safe harbor created by Section 314(b) may share information relating to activities that a financial institution or association suspects may involve Financial institutions can use the program to gather information about customers with flagged activity, including accounts held away from … What is a Safe Harbor 401k? The shareholder argued that “the transfers were ‘made by or to’ a financial institution because the funds passed through Citizens Bank and Credit Suisse” and that, therefore, the transfer was protected under the safe harbor of Section 546(e). What is a Safe Harbor 401k? In particular, if Tribune itself qualified as a “financial institution” because it was a “customer” of a financial institution and such financial institution was acting as Tribune’s agent, then Tribune would be covered by Section 546(e)’s safe harbor, insulating the LBO transfers from constructive fraudulent transfer claims. The District Court held that § 546(e) safe harbor shielded the transfer to Merit Management from being avoided because Credit Suisse and Citizens Bank, as financial institutions, transferred or received funds in connection with the transaction. Associations of Financial Institutions: The new FinCEN Fact Sheet expands the types of entities that are eligible for the Section 314(b) safe harbor. The Whitney court ruled that a bank may not produce documents in discovery evidencing: The court noted, however, that the safe harbor protections do not apply to documents upon which a SAR was based that a bank may have generated or received in its ordinary course of business, unless producing these documents would confirm the existence of a SAR. Safe Harbor Institutions The IOLTA Rule also allows eligible financial institution to apply an index, or "Safe Harbor" rate equal to the higher of 55% of the Federal Funds Target Rate or 0.75%. The result is an industry that has been forced to pay its bills, employees, suppliers, and taxes in cash. SCOTUS determines that 546(e) Safe Harbor does not protect transfers where financial institution is a mere conduit; SCOTUS determines that 546(e) Safe Harbor does not protect transfers where financial institution is a mere conduit. This safe harbor removes the liability financial institution directors and officers have solely for providing services to state-legal cannabis businesses. Transfer Pricing Transfer Pricing Transfer pricing refers to the prices of goods and services that are exchanged between commonly controlled legal entities within an enterprise. This law is codified at 31 U.S.C. In light of the Whitney decision, the agencies remain confident that financial institutions and their employees that follow the prescribed agency regulations and SAR filing instructions should be fully protected by the safe harbor provisions of the law. Specifically, they reduce many of the limitations and IRS non-discrimination testing. 3 Section 314(b) establishes a safe harbor from liability for a financial institution or an association of financial institutions that voluntarily chooses to share information with other financial institutions for the purpose of identifying and, where appropriate, reporting possible money laundering or terrorist activity. Safe harbor 401k plans are one of the most popular 401k retirement plans for businesses that have employees. It states that … 1 However, the majority of courts have ruled that the safe harbor provision provides unqualified protection to … The Safe Harbor Program™ is designed to manage the due diligence, monitoring and reporting issues that are the typical barriers to providing financial services to CRBs. SAFE Banking Act Provides Safe Harbor To Financial Institutions Posted by Maverick Business Advice, Credit Card The SAFE Banking Act or the Secure and Fair Enforcement of Banking Act of 2019 was put in place to create protections for depository institutions that provide financial services to cannabis-related legitimate businesses. The information contained on this website does not purport to offer a legal “safe harbor” from the current conflict that exists between your state laws and federal law. In particular, if Tribune itself qualified as a “financial institution” because it was a “customer” of a financial institution and such financial institution was acting as Tribune’s agent, then Tribune would be covered by Section 546(e)’s safe harbor, insulating the LBO transfers from constructive fraudulent transfer claims. . Sheltered Harbor is not a vendor, product or service. § 5318(g)(3). The court determined that the safe harbor’s purpose and its language in context made clear that it protects transfers to a financial institution only where the recipient financial institution was itself a creditor. Once a Financial Institution submits a SAR, the entity and FinCEN are strictly prohibited from disclosing to the suspect or any third party the fact that a SAR has been submitted and the nature of the suspicious activity. The purpose of this advisory is to tell financial institutions about a recent federal court case, Whitney Nat’l Bank v. Karam, 306 F. Supp.2d 678 (S.D. In 1992, Congress passed the Annunzio-Wylie Anti-Money Laundering Act and provided a safe harbor for financial institutions and their employees from civil liability for reporting known or suspected criminal offenses or suspicious activity by filing a SAR. Safe harbor plans allow business owners to maximize contributions to their own account while minimizing many of the IRS rules. 2002); Stoutt v. Banco Popular de Puerto Rico, 158 F.Supp.2d 167, 175 (D.P.R. Check out Safe Harbor for Business, As the nation’s first service-based program that specializes in helping financial institutions provide business banking to cannabis-related businesses (CRBs), the Safe Harbor Program™ can help you complete and exceed the due diligence, monitoring and reporting requirements that are typical barriers to providing services to CRBs. Credit Suisse and Citizens Bank were merely intermediaries in the exchange of stock for cash, so Section 546(e) did not provide a safe harbor against avoidance by the trustee. The federal district court in Whitney sided with the majority of courts that have interpreted the safe harbor provision to afford unqualified protection to financial institutions and their employees from civil suit. This combined with the no federal “safe harbor” law regarding financial institutions, has led to uncertainty and ongoing FI reluctance to serve the growing U.S. market for legal weed. Become a Safe Harbor Program™ Partner today. This excludes many financial institutions (such as banks, investment houses, credit unions, and savings & loans institutions), ... Reviewers criticized the DOC's 'Safe Harbor Certification Mark' offered to companies to use as a "visual manifestation of the organization when it self-certifies that it will comply" as misleading, because it does not carry the words "self certify" on it. Formal reporting for Safe Harbor and financial institutions You receive a simplified, secure way to extend your reach to the multibillion-dollar cannabis industry. To avail itself of this statutory safe harbor from liability, a financial institution or an association must notify FinCEN of its intent to engage in information sharing and that it has established and will maintain adequate procedures to protect the security and confidentiality of the information. 5318(g)(3)] to the BankSecrecy Act (BSA). The Safe Harbor Program is the nation’s first and only service-based program that specializes in connecting cannabis-related businesses (CRBs) with financial institutions. When bankruptcy follows a leveraged buyout or leveraged recapitalization, it is common for a creditors committee or bankruptcy trustee to sue shareholders to claw back merger consideration or other payments received for securities. Banks, thrift institutions, bank holding companies and non-bank subsidiaries, credit unions, the U.S. branches and agencies of foreign banks, and certain other financial institutions are required to file Suspicious Activity Reports (SARs) pursuant to regulations issued by the five federal financial institutions supervisory agencies and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The IOLTA Rule also allows eligible financial institution to apply an index, or "Safe Harbor" rate equal to the higher of 55% of the Federal Funds Target Rate or 0.75%. Posted in Avoidance Actions, Safe Harbors. FTI Consulting, Inc., holding that 11 U.S.C § 546(e), which creates a safe harbor against the avoidance of certain transfers made “by or to (or for the benefit of)” financial institutions, does not apply merely because the challenged transfer is completed through a financial institution. By Tyler R. Ferguson, Sean T. Scott, Aaron Gavant & Thomas S. Kiriakos on May 21, 2019. 5318(g)(3) protects financial institutions, and their directors, officers, employees, and agents, from liability for reporting suspicious activity. To avail itself of this statutory safe harbor from liability, a financial institution or an association must notify FinCEN of its intent to engage in information sharing and that it has established and will maintain adequate procedures to protect the security and confidentiality of … With the Safe Harbor Program™ helping manage the due diligence, monitoring and reporting requirements that are typical barriers, we make it effective for you to provide banking services to CRBs. Failure to comply with the Safe Harbor has no regulator endorsements, express or implied, related to the information contained herein or related to the Safe Harbor Program™. First, they must submit a Section 314(b) notification to FinCEN. Safe Harbor from Liability for Submitting SAR. However, to rely on the Section 314(b) safe harbor, a financial institution or an association of financial institutions need not have specific information indicating that the activity in regards to which it proposes to share information directly relates to proceeds of an SUA or to transactions involving the proceeds of money laundering, nor must a financial institution or association … 2004), that reaffirms the scope of that statutory protection, generally referred to as a “safe harbor.”. The House Financial Services Committee voted 45-15 Thursday, March 28, 2019, to advance the bill after amending it to include provisions to provide a safe harbor for insurance companies and … The information contained on this website does not purport to offer a legal “safe harbor” from the current conflict that exists between your state laws and federal law. On appeal, the Seventh Circuit Court of Appeals disagreed and found that the transfer was not protected by … Section 314(b) establishes a safe harbor from liability for financial institutions or associations of financial institutions to share information with each other, on … The safe harbor provides that if the financial institution files a SAR in compliance with the law and regulations, the institution is safe from civil liability. 4 To avail itself of the section 314(b) safe harbor, a … Subject to paragraphs (b)(2), (b)(3), and (b)(4) of this section, a financial institution or an association of financial institutions may, under the protection of the safe harbor from liability described in paragraph (b)(5) of this section, transmit, receive, or otherwise share information with any other financial institution or association of financial institutions regarding individuals, … According to the indictment Mr. Farkas had devised a scheme to misappropriate over $1 billion in funds from various financial institutions, including TBW, the FHLMC, the Government National Mortgage Association, and the Troubled Asset Relief Program. communications pertaining to the filing of a SAR or its contents; communications with government authorities that led to the filing of a SAR or in preparation for the filing of a SAR; communications that follow the filing of a SAR intending to explain or clarify the SAR; or. Here is how you become a Safe Harbor Partner. Ind. After receiving feedback from the financial industry, FinCEN is providing three main … ? The Bankruptcy Court agreed with the seller and dismissed the action. Nothing contained on this website constitutes legal advice and Safe Harbor Services encourages you to work closely with your legal advisors to evaluate all information provided. . Section 314(b) is a safe harbor provision that protects financial institutions from liability when disclosing customer information to other financial institutions in order to flag possible money laundering or terrorist activities. Section 314(b) is a safe harbor provision that protects financial institutions from liability when disclosing customer information to other financial institutions in order to flag possible money laundering or terrorist activities. Safe harbor. The report did not elaborate on the concerns of financial institutions, but instead encouraged FinCEN to “address areas of concern regarding the Section 314(b) program and … Only … For instance, if a subsidiary company sells goods or renders services to … 1 See, e.g.,Lopez v. First Union Nat’l Bank and Coronado v. BankAtlantic Bancorp., Inc., both at 129 F.3d 1186, 1195 (11th Cir. In 1992, Congress passed the Annunzio-Wylie Anti-Money Laundering Act and provided a safe harbor for financial institutions and their employees from civil liability for reporting known or suspected criminal offenses or suspicious activity by filing … 952207), arecent … Tex. 2 See, e.g., Lee v. Bankers Trust Co., 166 F.3d 540, 544-45 (2d Cir. The Bank Secrecy Act and the agencies’ SAR regulations also provide protection to financial institutions and their employees from civil liability for filing a SAR or for making disclosures in a SAR. Not a financial institution? 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