A suspicious activity report (SAR) is a document that banks must file with the Financial Crimes Enforcement Network (FinCEN) when they suspect transactions that might indicate illegal activities. These illicit activities can include money laundering and tax evasion. Banks file a SAR when customers exceed certain transaction amount thresholds, have strange deposit patterns, or have questionable wire transaction recipients.
What Triggers a Suspicious Activity Report?
Certain types of transactions will cause a bank to file a SAR. Some of these transactions are completely normal for a business, but a bank may still report them out of an abundance of caution. None of these transactions guarantee that illegal activity is happening. However, these transactions can be signs of illegal activities.
Types of transactions that can cause a bank to file a SAR include:
| Suspicious Transaction | Description |
|---|---|
| Large Monetary Transactions | Transactions of large amounts of money, especially amounts that are unusual to a particular account, may be suspicious. |
| Foreign Transactions | Transactions involving foreign banks or businesses. These can be suspicious if they are repeating or single-time transactions. |
| Unusual Senders or Receivers | In addition to transactions with foreign entities, this can apply to two businesses that wouldn’t seem to have a reason to send and receive funds from each other. |
| Unusual Volume of Transactions | If a business that usually has just a few monthly transactions has a sudden surge of transactions, this can raise suspicions. |
| Lack of Legitimate Business | If one or both businesses involved in a transaction seem to show a lack of evidence of any legitimate business operations. |
| Unusually Large Wire Transfers | If businesses are sending unusually large wire transfers or an unusually large volume of transfers. |
| Structured Transactions | Transactions that attempt to avoid the $10,000 transaction limit that requires banks to file a Currency Transaction Report. For example, transactions over several consecutive days for slightly less than $10,000 each. |
| Abnormal Customer Behavior | If a customer exhibits unusual behavior when making a transaction, this could be suspicious. |
| Other Unusual Transactions | Any other factor in a transaction that might seem unusual for a typical customer. For example, if your business typically deposits $2,000 daily but then one day deposits $20,000 |
In addition, the Federal Financial Institutions Examination Council (FFIEC) lists these specific examples from its online BSA regulatory compliance manual[b] that would require a bank to file a SAR:
- Criminal violations involving insider abuse in any amount.
- Criminal violations aggregating $5,000 or more when a suspect can be identified.
- Criminal violations aggregating $25,000 or more regardless of a potential suspect.
- Transactions conducted or attempted by, at, or through the bank (or an affiliate) and aggregating $5,000 or more, if the bank or affiliate knows, suspects, or has reason to suspect that the transaction:
- May involve potential money laundering or other illegal activity, such as terrorism financing
- Is designed to evade the BSA or its implementing regulations
- Has no business or apparent lawful purpose or is not the type of transaction that the particular customer would normally be expected to engage in, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction
When a SAR is required, it must be filed within 30 calendar days from the date of initial detection, unless no suspect can be identified. Banks have up to 60 days to file a SAR if a suspect can’t be identified.
Why a Suspicious Activity Report Is Important
SAR filing was ramped up by the passage of the USA PATRIOT Act on Oct. 26, 2001. Passed in the aftermath of the Sept. 11, 2001, terrorist attacks, it encouraged the use of suspicious activity reporting to combat money laundering and terrorism.
In general, SARs are important because they:
- Identify potential terrorist organizations funneling money through the financial system to support organizations and future attacks
- Help stop other illegal activities, including money laundering and fraud
- Provide an essential link between banks and law enforcement in their efforts to curb illegal activities that might otherwise go undetected
It is critical that banks file SARs promptly. This allows law enforcement to arrest criminals before they leave the country or go underground.
What Happens After a SAR Is Filed
Unless your business banking activities result in further investigation by FinCEN, you may never know that your bank filed a SAR due to one of your transactions. No bank director, officer, employee, or agent is allowed to inform a person that a SAR has been filed.
If law enforcement contacts your business about an investigation into suspicious transactions, be sure to follow these tips:
- Have your legal and financial advisors handle the issue.
- Try to ascertain what transactions might have raised red flags and avoid those transactions in the future.
- Try to be transparent with the bank at the time of the transaction so that it can include as much information in the report as possible if there are unusual transactions that may flag future SAR filings
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Frequently Asked Questions (FAQs)
Any suspicious transaction can trigger the filing of a SAR. This can include transactions of unusual amounts, frequency, or involving suspicious parties. Any transactions that imply illegal activities or attempt to evade normal bank reporting deposit amounts will likely result in a SAR being filed.
A structured transaction is one example of a transaction that would trigger suspicious activity reporting. For example, a sole proprietor who makes $9,000 deposits for seven days in a row may trigger a SAR, as it appears the customer is trying to evade the $10,000 transaction threshold that requires the bank to record the transaction in its Currency Transaction Report.
The SAR is a multi-part document that a bank must complete and submit through the online BSA E-filing System. Sections of a SAR include the filing institution’s contact information, the financial institution where the activity occurred, the subject’s information, suspicious activity information, and a narrative section.
Bottom Line
A suspicious activity report allows banks to report any questionable activity to law enforcement, helping prevent illegal activities. In most cases, businesses with a SAR filed for a banking transaction will never know it occurred. As long as your company isn’t involved in any illegal activity and can explain any strange transactions, this should never be a concern for your business. If you receive an inquiry about a suspicious transaction, be sure your financial and legal advisors are prepared to handle the situation.
References:
[a]Suspicious Activity Report (SAR) Program | OCC
[b]BSA/AML Manual – Assessing Compliance with BSA Regulatory Requirements – Suspicious Activity Reporting
