A Suspicious Activity Report (SAR) is a document that financial institutions, and those associated with their business, must file with the Financial Crimes Enforcement Network (FinCEN) whenever there is a suspected case of money laundering or fraud. These reports are tools to help monitor any activity within finance-related industries that is deemed out of the ordinary, a precursor of illegal activity, or might threaten public safety.
Who regulates suspicious activity reports?
Suspicious activity reports are a tool provided by the Bank Secrecy Act (BSA) of 1970. Originally called a "criminal referral form" the SAR became the standard form to report suspicious activity in 1996. Mainly used to help financial institutions detect and report known or suspected violations, the USA Patriot Act expanded SAR requirements to help combat domestic and global terrorism. Whether financial or otherwise, SARs enable law enforcement agencies to uncover and prosecute significant money laundering, criminal financial schemes, and other illegal endeavors. SARs give governments an opportunity to spot and analyze emerging trends and patterns across a broad spectrum of personal and organized crimes. With this knowledge, they can anticipate and counteract fraudulent and criminal behavior before it gains a foothold.
When is a suspicious activity report required?
The criteria for providing a SAR differs from country to country and even from institution to institution, depending on the nature of the suspicious activity and the particulars of the bank or fund. In the United States, FinCEN requires a suspicious activity report in a few instances. First, if financial institutions believe an employee engaged in insider activity, they must file a report. However, it is not limited only to employees. Financial institutions monitor customer transactions, too. If potential money laundering or violations of the BSA are detected, a report is required. Computer hacking and customers operating an unlicensed money services business also trigger an action. Once potential criminal activity is detected, the SAR must be filed within 30 days. If more evidence is needed – such as identifying a subject involved – an extension not to exceed 60 days is available. Finally, SAR filings must be kept for five years from the date of the filing. Failure to comply with any of these regulations can result in civil and criminal penalties, including substantial fines, regulatory restrictions, loss of banking charter, and even imprisonment.
What institutions need to be aware of suspicious activity reports?
Many different types of financial industries require SAR reports, including banks and credit unions, stock and mutual fund brokers, and various money service businesses (check cashing companies, money order providers, etc.) However, casinos and card clubs, precious metals or gems dealers, insurance companies, and those involved in the mortgage business, all fall under the stipulations of the BSA. If there is an opportunity for money laundering, tax evasion, or criminal financing within the day-to-day business of the institution, the organization and its employees are required to be aware of the rules and regulations around suspicious activity reports.
Who can report suspicious activity?
A suspicious activity report can start with any employee within a financial institution. Employees are generally trained to flag and investigate suspicious activity. For example, if an employee notices an anonymous wire transfer of money out of the country or large amounts of money deposited into an account that had never seen such activity before, they would communicate their findings to supervisors who decide whether to file a report. While most SARs come from the financial sector, law enforcement, public safety workers, city or state officials, business owners, and even the general public can submit a suspicious activity report. The report functions in the same way as it does with financial matters. Whether it is a financial matter, or one related to national security, a suspicious activity report ultimately circulates to local, state, and federal agencies through the use of fusion centers. These centers make the information available to whatever other agencies may be affected by the flagged activity.
How confidential are suspicious activity reports?
The effectiveness of a SAR report is connected to the extreme confidentiality required for such reporting. At no time is the person under investigation told about the pending report. Likewise, any discussion with outside groups such as media companies is considered an unauthorized disclosure and is a federal criminal offense. When a bank or financial institution files a SAR, they are required to take significant steps to ensure the information provided is reviewed at multiple stages by financial investigators, company management, and attorneys before finalizing the SAR. Maintaining a high level of confidentiality is vital. As a result. there are special privileges that protect people who submit suspicious activity reports, whether as a part of a company or on their own. The individual (or organization) is not required to disclose their name and are immune to the discovery process. All reporters receive immunity for statements made in the SAR.
How do you submit a suspicious activity report?
Since 2012, all SAR filings are required to go through FinCEN's BSA e-file system. This system allows for greater standardization of the information, as well as increased efficiency, which is critical in situations where public safety is a concern. When a SAR is filed, five sections of information are required. First, reporters collect names, addresses, social security numbers, birth dates, driver licenses or passport numbers, occupations, and phone numbers of all parties involved. Next, the dates of the incident, as well as codes for the suspicious activity require documentation. Reporters are then asked to provide information about the financial institution where the activity occurred, as well as contact information for the institution. Finally, a written description of the activity is developed, providing a narrative to the data.
Where can I find SARs forms?
The standard SAR form is on the BSA e-file system. However, there are many online tutorials and databases to help financial employees, legal professionals, and lay people navigate the complexities of the reporting process.