In an opinion yesterday, Magistrate Judge Gorenstein rejected the Bank of China’s attempt to withhold from discovery documents that the bank claimed were privileged because they relate to “Suspicious Activity Reports” (or SARs) that financial institutions must file with regulators to alert them of suspicious customer behavior. Federal regulations state that “any information that would reveal the existence of a SAR” is generally confidential. The bank established a process for investigating suspicious conduct, and the culmination of the process is a committee vote as to whether or not to file a SAR. According to the bank, “documents produced at each step of this process are protected by the SAR privilege since they result from the implementation of BOC’s policies and procedures for the filing of SARs.” Judge Gorenstein disagreed.
Judge Gorenstein acknowledged that there “is case law arguably supportive of defendant’s position,” but found that “the case law supporting plaintiffs’ position to be more persuasive”:
The relevant regulation bars only disclosure of information that “would” reveal the existence of an SAR; it does not prohibit disclosure of information that “could” or “might” reveal the existence. Here, as might be expected, there was no evidence of any process for investigating suspicious activity other than the process that might ultimately lead to a presentation to the SAR committee to decide whether to file a SAR. But any bank, including BOC, has its own reasons for investigating suspicious activity other than the statutory obligation to file a SAR — including to protect itself from fraud and to make sure it does not violate or abet the violation of other banking regulations and statutes, such as money laundering statutes. Thus, investigatory documents do not by themselves reveal the existence of a SAR.