Suspicious activity report
Encyclopedia
In United States
financial regulation
, a suspicious activity report (or SAR) is a report made by a financial institution
to the Financial Crimes Enforcement Network
(FinCEN), an agency of the United States Department of the Treasury
, regarding suspicious or potentially suspicious activity.
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. 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.
FinCEN requires a SAR report 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.
where further decisions are made about whether to file a report or not.
Many different financial industries are now required to file SARs. Each SAR form was specifically designed to accommodate respective institution types such as depository institutions, money services businesses (MSBs) or the securities and futures industry.
For example, MSBs such as check cashing establishments and money remitters use the SAR-MSB form, while casino
s use the SARC form.
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.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
financial regulation
Financial regulation
Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system...
, a suspicious activity report (or SAR) is a report made by a financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
to the Financial Crimes Enforcement Network
Financial Crimes Enforcement Network
The Financial Crimes Enforcement Network is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes.As reflected in its name, the Financial...
(FinCEN), an agency of the United States Department of the Treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
, regarding suspicious or potentially suspicious activity.
The purpose of a suspicious activity report is to report known or suspected violations of law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
or suspicious activity observed by financial institutions subject to the regulations of the Bank Secrecy Act
Bank Secrecy Act
The Bank Secrecy Act of 1970 requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering...
(BSA). In many instances, SARs have been instrumental in enabling law enforcement to initiate or supplement major money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
or terrorist financing
Terrorist Financing
Terrorist financing came into limelight after the events of terrorism on 9/11. The US passed the USA PATRIOT Act to, among other reasons, attempt thwarting the financing of terrorism and anti-money laundering making sure these were given some sort of adequate focus by US financial institutions...
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.
FinCEN requires a SAR report 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
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
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.
Reporters
The report can start with any bank employee. 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 commandChain of Command
Chain of Command may refer to:* Chain of command, in a military context, the line of authority and responsibility along which orders are passed* "Chain of Command" , the fifth episode of the first season of Beast Wars...
where further decisions are made about whether to file a report or not.
Many different financial industries are now required to file SARs. Each SAR form was specifically designed to accommodate respective institution types such as depository institutions, money services businesses (MSBs) or the securities and futures industry.
For example, MSBs such as check cashing establishments and money remitters use the SAR-MSB form, while casino
Casino
In modern English, a casino is a facility which houses and accommodates certain types of gambling activities. Casinos are most commonly built near or combined with hotels, restaurants, retail shopping, cruise ships or other tourist attractions...
s use the SARC form.
Structure
SAR reports include detailed information about transactions that are or appear to be suspicious. While many institutions file thousands of SARs a year, very few people will have a SAR filed with their name included. 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.Confidentiality
Unauthorized disclosure of a SAR filing is a federal criminal offense. In other words, any bank employee who has a suspicion is trained to discuss the suspicion only with their supervisors, and not anyone else, including the customer who is under suspicion and coworkers. The fact that an SAR has been filed is also supposed to be a secret.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
An institution can file SARs through the mail (paper forms are Adobe Acrobat screen fillable), electronically through FinCEN's BSA E-file program, or through a magnetic media format on either a cartridge or 3.5" floppy disk.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.Sections
A SAR has five sections each containing information about the filing institution or the activity in question.Part I
The filing institution's name, address, tax ID number, location of the activity and any account numbers involved with the suspicious activity.Part II
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 III
The date range of the activity, total dollar amount and a list of any law enforcement agency that has been contacted while investigating the activity.Part IV
Usually contains the contact information for the financial institution's compliance officer or equivalent.See also
- FBI
- IRS Criminal Investigation DivisionIRS Criminal Investigation DivisionInternal Revenue Service, Criminal Investigation investigates potential criminal violations of the U.S. Internal Revenue Code and related financial crimes in a manner intended to foster confidence in the tax system and compliance with the law...
- Money launderingMoney launderingMoney laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
- Organized crimeOrganized crimeOrganized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run by criminals for the purpose of engaging in illegal activity, most commonly for monetary profit. Some criminal organizations, such as terrorist organizations, are...
- tax evasionTax evasionTax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...
- Terrorist financingTerrorist FinancingTerrorist financing came into limelight after the events of terrorism on 9/11. The US passed the USA PATRIOT Act to, among other reasons, attempt thwarting the financing of terrorism and anti-money laundering making sure these were given some sort of adequate focus by US financial institutions...
- Structuring
- White collar crime