What Is The Suspicious Activity Report?
A suspicious Activity Report (SAR) is a tool to track suspicious activities that would not be normally stated in other reports. For example, when money laundering or fraud is suspected, financial institutions and those associated with their business should apply to the Financial Crimes Enforcement Network (FinCEN). These SARs are required under the Bank Secrecy Act(BSA) of 1970. SARs alert law enforcement agencies to potential money laundering or terrorist financing cases. SARs are an important source of intelligence not only in economic crime but also in criminal activities. The overall purpose of SAR is to identify illegal activities such as money laundering and terrorist financing, tax evasion, and other financial fraud.
Although the report varies from country to country, monitoring any activity that could threaten public security is often necessary. However, there is a suspicion that the account holder is trying to hide something or take illegal action. The Suspicious Activity Report is usually sent to the country's financial crime enforcement agency to collect and analyze transactions and then report them to the relevant law enforcement agencies. SAR file must be submitted no later than 30 calendar days from the date of the first identification of facts that may serve as the basis for filing.
Suspicious Activity Report for Transaction Monitoring
Transaction Monitoring also has an important place for Suspicious Activity Report. Transaction Monitoring responds to companies' AML (Anti-Money Laundering), CFT (Counter-Financing of Terrorism), and KYC (Know Your Customer) requirements. Transaction monitoring generates an alarm for suspicious situations. When the software issues an alarm, the transaction is automatically stopped, and the transaction is reviewed in detail by the Firm's Compliance or Risk Department. At this point, if the SAR comes into play and detects crime in the customer transaction, the suspicious transactions report to the AML, CFT, and KYC regulators.
Suspicious Activity Report Process
Suspicious Activity Reports are a tool provided by the BSA of 1970. SARs allow governments to identify and analyze trends and patterns that arise in a wide range of personal and organized crime. With this information, they can predict and resist fraudulent and criminal behavior before gaining a place. Even though most SARs come from the financial sector, institutions such as law enforcement, public safety workers, and business owners also submit a SAR. Federal law requires that a financial institution and its managers, officers, employees, and agents reporting suspicious or known criminal violations or suspicious activities not report to any person reporting the transaction.
The following information sections are required to submit a SAR file:
- Information such as the names, passport numbers, birth dates, addresses, social security numbers, and phone numbers of all parties related to the suspicious event is collected.
- Dates of suspicious events that took place and documentation of suspicious activity codes are required.
- Contact information is required for the financial institution and the institution where the auspicious event took place.
- A written description of the suspicious event is developed.
Regulators of the Suspicious Activity Report
A suspicious Activity Report (SAR) is made by the financial institution that observes suspicious activity in an account. The report is sent to The Financial Crimes Enforcement Network (FinCEN), which is investigating the incident. The financial institution can report within 30 days of any account activity they deem suspicious or unusual, and a 60-day extension can be obtained to gather more evidence as needed. Financial institutions should keep a copy of SAR for five years. Failure to comply with any of these regulations may result in civil and criminal penalties, including significant fines, legal restrictions, loss of banking contracts, and even prison terms. Total monetary settlements collected by regulatory agencies and law enforcement agencies for money laundering, sanctions, and tax evasion exceeded $ 13.4 billion in 2014.
Confidentiality of Suspicious Activity Reports
The Suspicious Activity Report's effectiveness depends on these reports' extreme confidentiality because it contains customers' confidential personal information and potentially has significant legal consequences. The person under investigation is never informed about the pending report. Similarly, discussions with third parties like media companies are a federal crime. When a bank or financial institution submits a SAR file, the information provided is reviewed by financial researchers, management staff, and lawyers before concluding the SAR. As a result. Special privileges are given to protect those who submit SARs as part of a company or alone; for example, people who submit SARs do not need to disclose the name of their name or organization.