Can you tell a customer you are filing a SAR?

Thousands of financial institution employees flagging transactions that somehow don’t look right are the world’s first line of defense against money laundering.

What is a suspicious activity report?

• A document used by financial institutions to report – you guessed it – suspicious activity to U.S. authorities.
• These are strictly confidential – so secret that banks aren’t allowed to publicly confirm their existence.
• They are required when a bank observes a transaction that seems suspicious — for example, if it appears to involve money laundering or corruption. A suspicious activity report (SAR) is not an accusation, it’s a way to alert government regulators and law enforcement to irregular activity and possible crimes.

FinCEN Files includes more than 2,100 suspicious activity reports mostly filed between 2011 and 2017 flagging more than $2 trillion worth of transactions. 

Who files SARs?

• Banks, money exchanges, securities brokers, casinos and other financial institutions are required to file suspicious activity reports to the U.S. Treasury’s Financial Crimes Enforcement Network.
• Failure to report can lead to civil penalties such as fines.

Who filed the most in the FinCEN Files?

The SARs in the FinCEN Files were mostly filed by a few large banks: Deutsche Bank (982), Bank of New York Mellon (325), Standard Chartered Bank (232), JP Morgan Chase (107), Barclays (104) and HSBC Bank (73). Together they filed more than 85% of all SARs in the leak.

How many SARs are filed each year?

The Financial Crimes Enforcement Network (FinCEN) received more than 12 million SARs between 2011 and 2017 – and more than two million in 2019 alone.

The FinCen Files represent less than 0.02% of the SARs filed in the main period they cover. 

What might spark a SAR?

• Insider trading
• Transactions linked to money laundering, terrorism financing or other crimes.
• Odd dealings, like a diamond dealer paying a pizzeria for lingerie.
• Transactions by individuals known or suspected to have links to criminal or terrorist organizations.
• Law enforcement surveillance requests.

What is the most common reason banks give for filing a SAR?

In FinCEN Files, the main trigger was suspicion of money laundering.

This is disguising the source of illegally-obtained money, in an effort to make it appear legitimate. When criminals launder their dirty money, the “washing machine” that they use is the global financial system.

Money-laundering, just like the crimes it tries to hide, is a crime.

How long do banks have to file a SAR?

• A SAR must be filed within 30 days once potential criminal activity is detected
• If more time is needed to identify a subject, 60 days.

The median reporting time for SARs in the FinCEN Files was 166 days (nearly half a year) since the suspicious activity started.

What happens after a bank files a SAR?

FinCEN shares SARs with law enforcement authorities including the Federal Bureau of Investigation and U.S. Immigration and Customs Enforcement. They are used to detect crimes, but cannot be used as direct evidence to prove legal cases.

In financial regulation, a Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) 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 another, separate transaction. The report is filed with that country's financial crime enforcement agency, which is typically a specialist agency designed to collect and analyse transactions and then report these to relevant law enforcement. 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 reporting the suspicious transaction. This means that the front line staff can ask questions and, in some cases, even decline suspicious transactions. The financial institution is not allowed to inform the client or parties involved in the transaction that a SAR has been lodged, otherwise known as tipping off under the Financial Action Task Force's Recommendations.[1]

The Financial Action Task Force's Recommendations are widely recognized as the international standard in anti-money laundering and countering financing terrorism with endorsements from 180 nations.[2] FATF Recommendations set forth essential measures to combat money laundering and to protect domestic and international monetary systems including the application of preventive measures for the financial sector and other designated sectors; and establishment of powers and responsibilities for the relevant competent authorities (e.g., investigative, law enforcement and supervisory authorities), including guidelines regarding suspicious activity reports.[3] Most countries have laws that require financial institutions to report suspicious transactions and will have a designated agency to receive them. The agency to which a report is required to be filed for a given country is typically part of the law enforcement or financial regulatory department of that country. For example, in the United States, suspicious transaction reports[4] 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.

Reporting[edit]

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

The purpose of a suspicious activity report is to detect and report known or suspected violations of law or suspicious activity observed by financial institutions subject to the regulations (for example, 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.[5] 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.[5]

Under the Bank Secrecy Act (BSA), financial institutions are required to assist U.S. government agencies in detecting and preventing money laundering, such as:

• Keep records of cash purchases of negotiable instruments,
• File reports of cash transactions exceeding $10,000 (daily aggregate amount), and
• Report suspicious activity that might signal criminal activity (e.g., money laundering, tax evasion)

Each SAR must be filed within 30 days of the date 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. At no time, however, should the filing of an SAR be delayed longer than 60 days. The Bank Secrecy Act specifies that each firm must maintain records of its SARs for a period of five years from the date of filing.

Reporters[edit]

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

Many different types of finance-related industries are required to file SARs. These include:[6]

• 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, jewelry dealers)
• insurance companies
• mortgage companies and brokers

[edit]

There are other forms that FinCEN requires businesses and individuals to file. These include:[6]

• individuals who transport more than $10,000 in currency into or out of the United States
• shippers and receivers involved in the transfer of $10,000 in currency into or out of the United States
• businesses that receive more than $10,000 in currency in a single 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[edit]

Unauthorized disclosure of a SAR filing is a federal criminal offense.[7][8]

Financial institutions undertake an investigation process prior to filing a SAR to ensure 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.

To encourage complete candor and cooperation, there are disclosure and evidentiary privileges that protect SAR filers. First, an individual or organization is precluded from discovering the existence or contents of a SAR that includes the individual or organization's name. SARs filers are immune from the discovery process.[9] Second, SAR filers enjoy immunity for all statements made in their SARs, regardless of whether those statements were allegedly made in bad faith.[10][11]

SAR filing options[edit]

Effective July 1, 2012 all SAR Reports must be filed through FinCEN's BSA E-filing System.[12]

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

Part I - Subject InformationAny 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 InformationDate Range and codes for the type of Suspicious ActivityPart III - Information about Financial Institution where Activity Occurred Part IV - Filing Institution Contact InformationUsually[clarification needed] 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 - NarrativeA written description of the activity.

Penalties for non-compliance[edit]

Financial institutions and their employees face civil and criminal penalties for failing to properly file suspicious activity reports, including any combination of fines,[13] regulatory restrictions, loss of banking charter, or imprisonment.

History[edit]

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

See also[edit]

• Casino regulations under the Bank Secrecy Act
• FinCEN Files
• Money laundering
• Structuring
• Suspicious Activity Report (justice and homeland security)
• Tax evasion
• Terrorist financing

References[edit]

1. ^ FATF (2012-2020), International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, FATF, Paris, France, www.fatf-gafi.org/recommendations.html; see recommendation 21 under "Reporting of Suspicious Transactions."
2. ^ FATF (2012-2020), International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, FATF, Paris, France, www.fatf-gafi.org/recommendations.html; see introduction,
3. ^ Ibid.
4. ^ See generally Title 31 of the Code of Federal Regulations sec. 1010.320.
5. ^ a b "Guidance on Preparing A Complete & Sufficient Suspicious Activity Report: Narrative" (PDF). Guidance on Preparing a Complete & Sufficient Suspicious Activity Report. Financial Crimes Enforcement Network. Retrieved May 24, 2017.
6. ^ a b "Bank Secrecy Act Forms and Filing Requirements". Financial Crimes Enforcement Network. Archived from the original on 2013-06-26. Retrieved 2013-06-28.
7. ^ "Maintaining the Confidentiality of Suspicious Activity Reports". Financial Crimes Enforcement Network. 2010-11-23. Retrieved 2020-09-21.
8. ^ 31 U.S.C. § 5318, 31 U.S.C. § 5321, 31 U.S.C. § 5322
9. ^ Union Bank of California v. Superior Court, 130 Cal. App. 4th 378, 29 Cal. Rptr. 3d 894 (2005)
10. ^ Lee v. Bankers Trust Co., 166 F.3d 540 (2d Cir. 1999)
11. ^ Stoutt v. Banco Popular de Puerto Rico, 320 F.3d 26 (1st Cir. 2003).
12. ^ "FinCEN Reports Going Paperless". Financial Crimes Enforcement Network. Retrieved 2012-06-13.
13. ^ "BSA Violation Civil Penalties Increase | NAFCU". www.nafcu.org. Retrieved 2021-09-19.

External links[edit]

• FinCEN: Financial Crimes Enforcement Network — official site
• Suspicious Activity Reports (SAR) — Office of the Comptroller of the Currency

Can you share SAR information with customer?

Is a SAR confidential?

Who is responsible for detecting suspicious account activity?

What constitutes suspicious activity for a bank customer?