Archive for the ‘Banking law’ category

Magistrate Judge David Nuffer – Motion for Discovery of a Suspicious Activity Report granted

January 19, 2007

UNITED STATES OF AMERICA, Plaintiff, v. DENNIS B. EVANSON, BRENT H. METCALF, STEPHEN F. PETERSEN, REED H. BARKER, WAYNE F. DEMEESTER and GRAHAM R. TAYLOR, Defendants.

Case No. 2:05-CR-805 TC

United States District Court for the District of Utah, Central Division

2007 U.S. Dist. LEXIS 2816

Magistrate Judge David Nuffer

January 12, 2007

Defendant filed a Motion for Discovery of a Suspicious Activity Report (SAR). Information in the SAR was relied upon and cited by the government in its attempt to obtain a search warrant.

As stated in the opinion, “a Suspicious Activity Report is a document the Secretary of the Treasury requires certain money-handling businesses to file if the business detects a known or suspected violation of federal law, a suspected transaction related to money laundering activity, or a violation of the Bank Secrecy Act.”

Financial instituions that create SARs are: (1) “prohibited from notifying any person involved in the transaction that the transaction has been reported;” and (2) required to “decline to produce the SAR or to provide any information that would disclose that a SAR has been prepared or filed. . . .” (even in the face of a subpoena).

Further, “[N]o officer or employee of the Federal Government or of any State, local, tribal, or territorial government within the United States, who has any knowledge that such report was made may disclose to any person involved in the transaction that the transaction has been reported, other than as necessary to fulfill the official duties of such officer or employee.” 31 U.S.C. § 5318.

The government also cited several policies favoring non-disclosure, including:  (1) disclosure of the contents of a SAR may inadvertently disclose methods by which institutions and law enforcement learn of suspicious and otherwise illegal activity and therefore might allow other wrongdoers to avoid these methods of detection; (2) financial institutions file SARs with the expectation that they will be kept confidential; and (3) disclosure of SARs will tend to have a chilling effect on both the quantity and quality of future SAR filings.

With these arguments in hand, the federal government refused to produced the SAR to the Defendant.

However, Magistrate Judge Nuffer ultimately mandated disclosure of the SAR since: (1) this is a criminal matter (as opposed to a civil action) and the defendant is entitled to additional constitutional rights to defend himself; (2) “the government created the need for disclosure by relying on the SAR in the affidavit” in its hope to obtain a warrant; and (3) the government made the SAR “material to preparing the defense.” Fed.R.Crim.P. 16(a)(1)(E).

The Judge also ruled that the SAR is to remain sealed and accessible only to the court, government and defendant’s counsel.