Suspicious activity report
||The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (May 2014)|
|This article relies largely or entirely upon a single source. (December 2011)|
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 country's financial crime enforcement unit, which is typically a specialist agency designed to collect and analyse transactions 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 the 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 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.
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, 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 (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. 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.
In the United States, FinCEN requires that an SAR 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;[clarification needed] 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 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.
The report can start with any employee of a financial service. The employees are generally 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 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:
- 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
There are other forms that FinCEN requires businesses and individuals to file. These include:
- 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
Unauthorized disclosure of a SAR filing is a federal criminal offense.
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. Second, SAR filers enjoy immunity for all statements made in their SARs, regardless of whether those statements were allegedly made in bad faith.
SAR filing options
Effective July 1, 2012 all SAR Reports must be filed through FinCEN's BSA E-filing System.
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[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 - 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[quantify] fines, regulatory restrictions, loss of banking charter, or imprisonment.
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).
- Casino regulations under the Bank Secrecy Act
- Money laundering
- Tax evasion
- Terrorist financing
- See generally 31 C.F.R. sec. 1010.320.
- "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 March 12, 2013.
- "Bank Secrecy Act Forms and Filing Requirements". Financial Crimes Enforcement Network. Retrieved 2013-06-28.
- "Unauthorized Disclosure of suspicious activity reports" (PDF). Financial Crimes Enforcement Network. 2004-08-18. Retrieved 2011-12-22.
- Union Bank of California v. Superior Court, 130 Cal. App. 4th 378, 29 Cal. Rptr. 3d 894 (2005)
- Lee v. Bankers Trust Co., 166 F.3d 540 (2d Cir. 1999)
- Stoutt v. Banco Popular de Puerto Rico, 320 F.3d 26 (1st Cir. 2003).
- "FinCEN Reports Going Paperless". Financial Crimes Enforcement Network. Retrieved 2012-06-13.
- FinCEN: Financial Crimes Enforcement Network — official site