Let's review suspicious activity reports (SARs), the United States Financial Crimes Enforcement Network (FinCEN), common triggers, and what you need to know about them.
Suspicious Activity Reports (SARs) are an essential tool under the Bank Secrecy Act (BSA) for combatting financial crime.
Financial institutions must report any suspicious activity to the Financial Crimes Enforcement Network (FinCEN), which is part of the United States Financial Intelligence Unit, which then assesses and investigates the reported activity. They are a division of the United States Treasury.
It is essential for individuals, businesses, and other entities to understand what triggers a SAR as well as how FinCEN handles them to protect themselves from potential investigations or penalties.
SARs is designed to deal with any activity that is not ordinary or standard business practice. Simply put, it's something unusual.
So, for example, an action could be included in the SAR if it looks suspicious enough to make it appear that the perpetrator is attempting to hide something or process an unlawful transaction.
The SAR is filed with FinCEN, who will investigate the incident. The report is filed by the financial institution that has noticed suspicious activity in an account, which is responsible for filing a report within 30 days on any account activity they consider suspicious, out of the ordinary, or fraudulent.
However, it is possible to obtain an extension of up to 60 days if more time is needed to collect evidence. Of note is that the financial institution filing the SAR does not need to have proof that a crime has occurred.
Also, the account holder (client) will not be notified that a SAR has been filed regarding their account. Let's review this federal-related content further below.
Suspicious Activity Report - Explained
As noted, a SAR is a document that financial institutions are required to file with the Financial Crimes Enforcement Network (FinCEN) if they detect any suspicious activity or transactions related to money laundering or other criminal activities.
The report aims to alert authorities to possible criminal activity and allow them to take appropriate action.
Of note is that the failure of a financial institution to file a SAR when applicable is itself a federal crime.
The SAR is a provision of the Bank Secrecy Act of 1970 (BSA), which empowers government agencies to detect signs of money laundering and other financial criminal activities.
The requirements under the anti-money laundering statutes were expanded with the enactment of the Anti-Money Laundering Act of 2020.
With the Patriot Act of 2001, SAR requirements were greatly expanded as the government sought to ferret out terrorism in the wake of the 9/11 attacks.
FinCen has a requirement that the SAR forms filed by financial institutions must include specific factors of the suspicious activity being reported, such as the following:
- Who is causing the suspicious activity?
- When and where did the suspicious activity occur?
- What tools or devices are being used?
- What is their method of operation?
- Why does the activity look suspicious?
As noted, SARs are part of the United States anti-money laundering statutes and regulations. The primary goal of the SAR and the investigation is to identify account holders who are involved in money laundering, fraud, or funding terrorism.
A SAR allows federal law enforcement agencies to identify organized and personal financial crime patterns. This way, they can predict fraudulent behavior and take action before it becomes significant.
Of note is that a SAR is also required if an institution detects evidence of computer hacking or someone operating an unlicensed money services business.
What Triggers a Suspicious Activity Report?
The criteria for triggering a SAR vary from institution to institution. Generally speaking, however, banks and other financial institutions must report unusual or suspicious transactions.
These include large cash deposits or transfers inconsistent with customer activity and transactions involving known criminals or terrorist groups.
Additionally, many institutions have implemented automated systems that flag certain transactions and require further investigation before they're allowed through.
That being said, FinCEN lays out some common signs for financial institutions to watch for, any/all of which may trigger the generation of a Suspicious Activity Report. Common triggers include:
- Significant transactions made by people with little to no evidence of legitimate business activity;
- Transactions made between businesses types that would have no typical connections with each other;
- Unusual or large transactions with no apparent economic purpose;
- Transactions that are disproportionately large for the type of business conducting them;
- Wire transfers occurring in repetitive patterns or huge numbers or amounts;
- Transactions among multiple accounts and parties that are particularly complex;
- Transactions involving bulk cash, common among smugglers;
- A dormant account that suddenly becomes very active for a short period;
- Transactions that seem to be attempting to avoid reporting requirements (i.e., “structured” transactions or “smurfing”);
- Any other instance in which the financial institution detects known criminal activities in a transaction, such as tax evasion or involvement by someone they know is involved in criminal behaviors.
What Happens When a SAR Is Filed Against You?
If a SAR is filed against you, your financial institution has identified some suspicious behavior and alerted authorities accordingly.
It's important to note that filing a SAR does not necessarily mean that criminal charges will be brought against you; in fact, many SARs are filed purely out of caution without any real suspicion of wrongdoing on the part of the individual in question.
However, if there is sufficient evidence linking you to a potential crime, such as money laundering, it may result in a formal investigation by law enforcement authorities.
In some cases, filing a SAR may also result in your assets being frozen or seized by law enforcement agents.
This is typically done to prevent you from transferring or spending your money while an investigation into your potential criminal activities is pending.
If it turns out that you're not guilty of any criminal activity and charges are never filed, then your assets will be returned to you.
How Do I Know When a SAR Has Been Filed Against Me?
In most cases, you won't. FinCEN's regulations strictly prohibit financial institutions from informing customers, or anyone else, when a SAR has been filed against them.
Unless the SAR triggers an investigation leading to asset seizure and criminal charges, you will likely be none the wiser—especially if FinCEN finds little evidence of wrongdoing and drops the matter.
You can contact our law firm for an initial case examination to review the details and legal options by phone or through the contact form.
The federal criminal defense lawyers at Eisner Gorin LLP offer legal representation across the United States. We are based in Los Angeles, California.