Suspicious activity report

In financial regulation, a suspicious activity report (or SAR) is a report made by a financial institution about suspicious or potentially suspicious activity. The criteria to decide when a report must be made varies from country to country but generally is any financial transaction that does not make sense to the financial institution, is unusual for that particular client or appears to be done only for the purpose of hiding or obfuscating a transaction. The report is filed with that countries financial crime enforcement unit, which is typical a specialist agency designed to collect and analyse transaction and report these to relevant law enforcement units. Front line staff in the financial institution have the responsibility to identify transactions that may be suspicious and these are reported to a designated person that is responsible for the reporting the transaction. The financial institution is not allowed to inform the client or the parties to the transaction that a SAR has been lodged.

For example in United States suspicious transaction reports must be reported to the Financial Crimes Enforcement Network (FinCEN), an agency of the United States Department of the Treasury. In Australia the SAR must be reported to Australian Transaction Reports and Analysis Centre (AUSTRAC), an Australian government agency. Most countries have laws that require financial institutions to report transactions and will have a designated agency to receive these. The agency is typically part of the law enforcement or financial regulatory department of that country.

Reporting

SARs include detailed information about transactions that are or appear to be suspicious. The goal of SAR filings is to help the Federal government identify individuals, groups and organizations involved in fraud, terrorist financing, money laundering, and other crimes.

The purpose of a suspicious activity report is to report known or suspected violations of law or suspicious activity observed by financial institutions subject to the regulations of the Bank Secrecy Act (BSA). In many instances, SARs have been instrumental in enabling law enforcement to initiate or supplement major money laundering or terrorist financing investigations and other criminal cases.^[1] Information provided in SAR forms also presents FinCEN with a method of identifying emerging trends and patterns associated with financial crimes. The information about those trends and patterns is vital to law enforcement agencies and provides valuable feedback to financial institutions.^[1]

FinCEN requires a SAR to be filed by a financial institution when the financial institution suspects insider abuse by an employee; violations of law aggregating over $5,000 where a subject can be identified; violations of law aggregating over $25,000 regardless of a potential subject; transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act; computer intrusion; or when a financial institution knows that a customer is operating as an unlicensed money services business.

Each SAR must be filed within 30 days of the initial determination for the necessity of filing the report. An extension of 30 days can be obtained if the identity of the person conducting the suspicious activity is not known; however, at no time should an SAR be delayed longer than 60 days. The Bank Secrecy Act specifies that each firm must maintain SARs for a period of five years from the date of filing.

Reporters

The report can start with any employee of a financial service. They are generally trained to be alert for suspicious activity, such as people trying to wire money out of the country without identification, or someone with no job who starts depositing large amounts of cash into an account. Employees are trained to communicate their suspicion up their chain of command where further decisions are made about whether to file a report or not.

Many different types of finance-related industries are required to file SARs. These include:^[2]

• depository institutions (for example, banks and credit unions)
• securities and futures dealers (for example, stock brokers and mutual fund brokers)
• money services businesses (for example, check cashing services, currency exchange bureaus, and money order providers)
• casinos and card clubs
• dealers in precious metals and gems (for example, jewelery dealers)
• insurance companies
• mortgage companies and brokers

Other related forms

There are other forms that FinCEN requires businesses and individuals to file. These include:^[2]

• individuals who transport more than $10,000 into or out of the United States
• shippers and receivers involved in the transfer of $10,000 into or out of the United States
• businesses that receive more than $10,000 in a transaction or in related transactions
• people who have control over more than $10,000 in financial accounts outside of the U.S. during a calendar year

Confidentiality

Unauthorized disclosure of a SAR filing is a federal criminal offense.^[3]

An individual or organization is precluded from discovering the existence of a SAR filed that includes their name. Financial institutions undertake an investigation process prior to filing a SAR to assure that the information reported is appropriate, complete, and accurate. This process will often include review by financial investigators, management and/or attorneys prior to filing.

SAR filing options

Effective July 1, 2012 all SAR Reports must be filed through FinCEN's BSA E-filing System.^[4]

A SAR has five sections each containing information about the filing institution or the activity in question:

Part I - Subject Information

Any name, address, social security or tax ID's, birth date, drivers license numbers, passport numbers, occupation and phone numbers of all parties involved with the activity.

Part II - Suspicious Activity Information

Date Range and codes for the type of Suspicious Activity

Part III - Information about Financial Institution where Activity Occurred

Part IV - Filing Institution Contact Information

Usually contains the contact information for the financial institution's compliance officer or equivalent and list of any law enforcement agency that has been contacted while investigating the activity..

Part V - Suspicious Activity Information - Narrative

A written description of the activity.

Penalties for non-compliance

Financial institutions and their employees face civil and criminal penalties for failing to properly file suspicious activity reports, including any combination of large fines, regulatory restrictions, loss of banking charter, or imprisonment.

History

The requirement for the suspicious activity report and its accompanying implied gag order was added by the Annunzio-Wylie Anti-Money Laundering Act § 1517(b) (part of the Housing and Community Development Act of 1992, Pub.L. 102–550, 106 Stat. 3762, 4060).

See also

• Casino regulations under the Bank Secrecy Act
• Money laundering
• Tax evasion
• Terrorist financing
• Structuring

References

External links

• FinCEN: Financial Crimes Enforcement Network — official site