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To file or not to file, that is the question

Dec 17, 2019

According to its SAR Stats, FinCEN received over 2.1 million SAR filings in 2018, and filings for 2019 will likely surpass that total. That is a lot of information for FinCEN to filter and disseminate. The role that suspicious activity reports (SARs) play in law enforcement investigations cannot be overstated; however, BSA professionals should be cognizant of filing requirements and not file unnecessary SARs. The question of whether to file or not file is much simpler when an effective decision-making process is in place.   

The decision to file a SAR is an inherently subjective. As auditors, we focus on whether a financial institution has an effective SAR decision-making process, not individual SAR decisions. Regulatory examinations and third-party audit procedures may review individual SAR decisions as a means to test the effectiveness of the SAR monitoring, reporting, and decision-making process; however, in those instances where a financial institution has an established SAR decision-making process, has followed existing policies, procedures, and processes, and has determined not to file a SAR, it should not be criticized for the failure to file a SAR unless the failure is significant or accompanied by evidence of bad faith. 

Whether a SAR investigation is prompted by notification from front-line personnel, through an automated surveillance monitoring system alert, as a result of another internal monitoring method, or through an external source, such as the newspaper or other media, a financial institution’s SAR decision-making process should start with the minimum filing requirements, which include:   

  • Insider abuse involving any amount.
  • Violations aggregating $5,000 or more where a suspect can be identified.
  • Violations aggregating $25,000 or more regardless of a potential suspect.
  • Any transaction conducted or attempted by, at or through the financial institution and aggregating $5,000 or more that:
    • May involve potential money laundering or other illegal activity.
    • Is designed to evade the BSA or its implementing regulations.
    • Has no business or apparent lawful purpose or is not expected activity for the consumer, and after examining the available facts, including the background and possible purpose of the transaction, the institution knows no reasonable explanation for the transaction.

If any of the above apply, a SAR should be filed. It should be noted that the reason "no loss to the financial institution or the consumer" is not a valid reason for not filing.  

However, for those instances that may fall into a grey area, a financial institution should incorporate the information received at account opening and through ongoing monitoring to aid in the SAR filing decision-making process. A comprehensive CIP and due diligence program should ensure that a financial institution can answer the following questions: Are the transactions consistent with the purpose of the account? Is there a reasonable explanation the transactions occurred? What other information is available to aid in the decision (prior investigations, subpoenas, 314(b) information sharing)? The answers to these questions should guide BSA staff in making their decision on whether or not to file a SAR.  

It is also important to document SAR filing decisions. Thorough documentation provides a record of the SAR decision-making process and is indicative of a strong BSA program. Next time your institution is faced with a SAR investigation, remember these guidelines in making your decision on whether or not to file.    

Author(s)

Craig E. Johnson, CRCM, CMQCS
Manager
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