A Quick Guide to the Suspicious Activity Report (SAR) was published by JD Supra on 5/22/18.
The Suspicious Activity Report (SAR) was originally created by five federal financial supervisory agencies (Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration) and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The purpose of the SAR is to report any suspicious transaction relevant to a possible violation of law or regulation. The SAR can only be filed electronically through FinCEN’s Bank Secrecy Act (BSA) E-Filing System. Financial information retrieved from a SAR assists the US Government in combating terrorism, terrorist financing, money laundering, and other financial crimes.
Who Must File the Suspicious Activity Report?
⦁ Bank and Financial Holding Companies
⦁ Casinos and Card Clubs
⦁ Money Services Businesses
⦁ Brokers or Dealers in Securities
⦁ Mutual Funds
⦁ Insurance Companies
⦁ Futures Commission Merchants
⦁ Introducing Brokers in Commodities
⦁ Residential Mortgage Lenders and Originators
What is reported in the SAR?
1. Insider abuse of a financial institution, involving any amount, detected by the institution;
2. Federal crimes against, or involving transactions conducted through, a financial institution that the financial institution detects and that involve at least $5,000 if a suspect can be identified, or at least $25,000 regardless of whether a suspect can be identified;
3. Transactions of at least $5,000 that the institution knows, suspects, or has reason to suspect involve funds from illegal activities or are attempts to hide those funds;
4. Transactions of at least $5,000 that the institution knows, suspects or has reason to suspect are designed to evade any regulations promulgated under the BSA; and
5. Transactions of at least $5,000 that the institution knows, suspects, or has reason to suspect have no business or apparent lawful purpose or are not the sort in which the particular customer would normally be expected to engage and for which the institution knows of no reasonable explanation after due investigation.
The SAR is confidential
The SAR and any information that would reveal the existence of the SAR is confidential, and may not be disclosed. No bank, and no director, officer, employee, or agent of a bank that reports a suspicious transaction may notify any person involved in the transaction that the transaction has been reported. A SAR and any information that would reveal the existence of a SAR is confidential, except as is necessary to fulfill BSA obligations and responsibilities.
The SAR may only be shared with:
(2) Any Federal, state, or local law enforcement agency;
(3) Any Federal regulatory agency that examines the depository institution for compliance with the BSA; (4) Any state regulatory authority that examines the depository institution for compliance with state laws requiring compliance with the BSA.
(5) A U.S. bank or savings association may share a SAR with its controlling company (whether domestic or foreign). The sharing of a SAR or, more broadly, any information that would reveal the existence of a
SAR, with a head office or controlling company (including overseas) promotes compliance with
the applicable requirements of the BSA by enabling the head office or controlling company to
discharge its oversight responsibilities with respect to enterprise-wide risk management,
including oversight of a depository institution’s compliance with applicable laws and regulation.
What information on the SAR may be shared?
⦁ the disclosure of the underlying facts, transactions, and documents upon which a SAR is based, including, but not limited to, disclosures related to filing a joint SAR and in connection with certain employment references or termination notices; and
⦁ the sharing of a SAR, or any information that would reveal the existence of a SAR, within a depository institution’s corporate organizational structure for purposes consistent with Title II of the BSA, as determined by regulation or in guidance
When does the SAR need to be filed?
⦁ No later than 30 calendar days after the date of the initial detection by the reporting financial institution of facts that may constitute a basis for filing a report.
⦁ If no suspect is identified on the date of such initial detection, a financial institution may delay filing a FinCEN SAR for an additional 30 calendar days to identify a suspect, but in no case shall reporting be delayed more than 60 calendar days after the date of such initial detection.
Don’t be a victim of your own making
Identifying unusual activities is a daunting task. Financial Institutions need to review their internal policies, procedures, and processes for identifying, researching, and reporting suspicious activity and ensure that SARs are complete, through and submitted timely. In addition, Board Members at Financial Institutions ought to be consistently aware of their fiduciary duties as it relates to the privacy and confidentiality of the existence and content of a SAR. Financial Institutions ought to consult with specialized tax advisors to ensure that the content of the SARs meet all the BSA requirements.