PRACTICAL SOLUTIONS
Suspicious Activity Reporting:
R
eporting suspicious activity to proper
governmental authorities is one of
the most important ways financial
institutions participate in the fight against
money laundering and terrorist financing. The
laws of most countries have deputized financial institutions, making them vital sources
of information and intelligence on the suspicious financial activities of their customers.
The suspicious activity report (the term SAR
is used in this article, although many other
jurisdictions call it by other terms) represents
the transfer of this valuable information to law
enforcement. If done properly, it will reflect
well on the institution, demonstrating how its
customer due diligence efforts enabled it to
identify the unusual activity and discern that it
truly was suspicious and reportable.
However, if the report is not well written, it
may result in a failure to convey this vital information. This can reflect poorly on the institution, as well as be the difference between
whether or not law enforcement commences
an investigation into the suspects and puts a
stop to any underlying illegal activities. As the
FFIEC BSA/AML Examination Manual states,
“a thorough and complete [SAR] may make
the difference in determining whether the
described conduct and its possible criminal
nature are clearly understood by law enforcement. Thus, a failure to adequately describe the
factors making a transaction or activity suspicious undermines the purpose of the SAR.”
In the United States, several prominent
enforcement actions have criticized financial
institutions for filing ineffective SARs, both in
terms of inadequate reporting, as well as for
failing to file SARs in a timely manner. While
not all jurisdictions have a deadline by which
a report of suspicious activity must be made,
the sooner the information can be conveyed to
the proper authorities, the sooner appropriate
action can be taken to stop illegal activities.
Financial institutions should have a means
of conducting a review of the timeliness and
quality of SARs to demonstrate their commitment to this critical aspect of their AML
Quality assurance is key to
maximizing reporting value
programs, as well as their overall efforts to
combat crime.
What is meant by quality reporting?
The term quality has been the subject of
numerous guidance documents published by
various regulatory agencies. The common
themes in defining the term quality include
completeness, accuracy and timeliness of
the report. So what really separates a merely
accurate SAR from a quality SAR? Accuracy
of the information in the report should be
considered a minimum standard. All information being filed should be error free and
as complete as possible. It is essential for
the preparer to ensure the accuracy and the
completeness of the reporting fields prior to
formal filing. Inaccurate information could
delay a criminal law enforcement case due
to the inability to identify the right suspect
or potential target. Further, filing a SAR with
incorrect information, such as an inaccurate
personal identifier, could require the financial institution to file a corrected or amended
report, which pulls resources away from
current workloads to correct an item that
should have been prevented initially.
In addition to the accuracy of information, a
quality report should detail all available information from the financia [