A suspicious activity report (SAR) is vital for combatting financial crimes. Under the Bank Secrecy Act (BSA), financial institutions must assist United States government agencies in detecting and preventing money laundering and keep records of cash purchases of negotiable instruments.
Further, they must file reports of cash transactions greater than $10,000 daily aggregate amount. They must also report any suspicious activity that could indicate criminal activity, such as 26 U.S.C. 7201 tax evasion, 18 U.S.C. 1956 money laundering, 18 U.S.C. 1030 computer hacking, or somebody operating an 18 U.S.C. 1960 unlicensed money transmitting services business.
Financial institutions must use the Bank Secrecy Act E-Filing System to submit suspicious activity reports (SAR). They must file a SAR no longer than 30 calendar days after the date it was initially detected.
Notably, to file a SAR, there does not have to be proof that a crime has been committed. The account holder will not be notified that a SAR has been filed regarding their account.
Suppose no suspect was identified on the date of detection of the incident that required a filing. In that case, the financial institution could delay filing a suspicious activity report for an additional 30 calendar days. Notably, under no circumstances shall reporting be delayed more than 60 calendar days after the initial detection of a reportable transaction.
Financial institutions have to report any suspicious activity to the Financial Crimes Enforcement Network (FinCEN), within the United States Financial Intelligence Unit, a division of the U.S. Treasury.
It's essential to understand what triggers a SAR and how FinCEN handles them to protect themselves from potential penalties. Simply put, a SAR addresses any activity outside the standard business practice.
For example, any behavior might be included in the SAR if it looks suspicious enough to give the impression that somebody is trying to conceal something or engage in an illegal transaction. Once a SAR is filed, then FinCEN, will investigate it. Let's review this topic in more detail below.
Suspicious Activity Report – Defined
As noted above, a SAR is a document that financial institutions must file with the Financial Crimes Enforcement Network (FinCEN) in cases where suspicious activity is detected.
12 CFR 21.11 Suspicious Activity Report says, “(a) Purpose and scope. This section ensures that national banks file a Suspicious Activity Report when they detect a known or suspected violation of Federal law, a suspicious transaction related to a money laundering activity, or a violation of the Bank Secrecy Act. This section applies to all national banks and any Federal branches and agencies of foreign banks licensed or chartered by the OCC.”
(2) Institution-affiliated party means any institution-affiliated party as that term is defined in the Federal Deposit Insurance Act defined under 12 U.S.C. 1813(u) and 1818(b)(5).”
In other words, the SAR alerts authorities to possible criminal activity and allows them to take appropriate action. Suppose a financial institution fails to file a SAR when required. In that case, the failure is a federal crime.
The SAR is a part of the Bank Secrecy Act of 1970 (BSA), which gives agencies a tool to detect criminal financial activities. The legal requirements were expanded with the enactment of the Patriot Act of 2001 (after the 9/11 attacks) and the Anti-Money Laundering Act of 2020.
Financial Crimes Enforcement Network (FinCEN)
FinCen requires the suspicious activity report forms that financial institutions file to include detailed information on the alleged suspicious activity, including the following:
- Why exactly does this activity appear suspicious?
- Who do they believe is the source of the suspicious activity?
- Exactly when and where did the suspicious activity happen?
- What type of tools or devices were used?
- What was the precise method of operation?
The primary purpose of a SAR investigation is to identify the account holders allegedly involved in money laundering, financial fraud offenses or who provide funding for terrorism.
Federal law enforcement agencies will typically attempt to identify organized financial crime patterns to predict future fraudulent behavior.
What Initiates a Suspicious Activity Report?
The factors that will trigger a SAR will vary. Still, banks and other financial institutions must report unusual transactions, including large cash deposits or transfers inconsistent with customer activity.
Some institutions have automated systems that flag specific transactions for an investigation, but FinCEN has listed some common signs that should trigger a suspicious activity report, such as the following:
- Large transactions with no apparent economic-related purpose;
- Disproportionately large transactions for the type of business;
- Any transactions that appear to avoid reporting requirements;
- Any transactions that could involve criminal behaviors;
- Significant transactions by those with no legitimate business activity;
- Transactions between businesses with no connections with each other;
- Wire transfers in repetitive patterns in large dollar amounts;
- Multiple account transactions that are unusually complex;
- Bulk cash transactions that are common with smugglers;
- Dormant accounts that suddenly become very active with transactions;
- Any transactions that appear to be structured or smurfing;
- Any transactions involving known gangs or terrorist groups.
What Happens If a SAR Is Filed Against You?
Suppose a SAR was filed against you by a financial institution that identified suspicious behavior and alerted authorities. First, you need to understand that it does not automatically mean criminal charges will be filed.
Many SARs are filed out of an abundance of caution without knowing whether there is any criminal liability. Still, if sufficient evidence exists, you could be the target of a federal criminal investigation.
Sometimes, filing a SAR could result in your assets being frozen or seized to prevent you from transferring or spending your money during a pending investigation.
In most cases, you will not even know a SAR has been filed as FinCEN's regulations prohibit informing customers. Unless the SAR triggers an investigation, you will likely never know, especially if there is little evidence of wrongdoing and they drop the matter.
To review the details of your case, you can contact our law firm by phone or use the contact form for a free initial case examination. We offer legal representation throughout the United States on federal criminal issues. The Hedding Law Firm is based in Los Angeles, California.
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