Suspicious Activity Report (SAR)
The Wisconsin Legislature may be voting on a bill this session that requires a basic understanding of a SAR or Suspicious Activity Report.
A Suspicious Activity Report (SAR) is a document that financial institutions must file with the Financial Crimes Enforcement Network (FinCEN) following a suspected incident of money laundering or fraud. These reports are required under the United States Bank Secrecy Act (BSA) of 1970.
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. 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.
A SAR must be filed no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for the filing. Financial institutions have to keep a copy of the SAR and the original or business record of any supporting documentation for five years. Federal law requires that a financial institution and its directors, officers, employees and agents who report suspected or known criminal violations or suspicious activity may not notify any person involved in the transaction that the transaction has been reported.
Bank Secrecy Act
The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act, is legislation passed by the United States Congress in 1970 that requires U.S. financial institutions to collaborate with the U.S. government in cases of suspected money laundering and fraud. The purpose of the BSA, aside from making money laundering more difficult to propagate, is to prevent banks from becoming unknowing intermediaries in illicit activity.
In order to help prevent money laundering, the BSA requires banks to report transactions involving more than $10,000 in cash from one customer as a result of a single transaction or two or more related transactions that occur within a 24-hour period. Cash is defined as being currency and coins of the United States and any other country or certain monetary instruments such as cashier's checks, bank drafts, traveler's checks or money orders. A personal check is not considered to be cash.
The BSA also requires banks to report suspicious activity that might indicate possible money laundering or fraud. An activity is considered to be suspicious if it involves $5,000 or more in funds or assets that the financial institution suspects may indicate profit from illegal activity or transacted in order to hide illegal activity. Aside from traditional financial institutions such as banks and brokers, a variety of other institutions are required to report suspicious activity under the BSA, including businesses that issue or redeem money orders, casinos and dealers of gemstones and precious metals.
The BSA is sometimes referred to as an anti-money laundering law (AML) or jointly as BSA/AML. Several anti-money laundering acts, including provisions in title III of the USA PATRIOT Act, have been enacted up to the present to amend the BSA. The legislation is enforced by the Financial Crimes Enforcement Network (FinCEN). Reports filed with FinCEN are done so according to the Suspicious Activity Report (SAR) format.
Financial Crimes Enforcement Network (FinCEN)
Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury dedicated to safeguarding financial systems from abuse. FinCEN was established in 1990 to promote transparency in the U.S. and international financial systems. In 1994, FinCEN's responsibilities were broadened to include facilitation of the Bank Secrecy Act (BSA) of 1970 – the country's most comprehensive anti-money laundering (AML) legislation.
Under the regulations of the BSA, FinCEN requires financial institutions to record and report suspicious activity that might signify money laundering and fraud. FinCEN also acts as an intelligence liaison for law enforcement by coordinating information reported under the BSA with information from a variety of other public and governmental sources. Reports filed with FinCEN must follow the Suspicious Activity Report (SAR) format.
For more information, please contact Mike Semmann at WBA, (608) 441-1206.