What Is a Suspicious Activity Report (SAR)?
A Suspicious Activity Report (SAR) is a tool provided under the Bank Secrecy Act (BSA) of 1970 for monitoring suspicious activities that would not ordinarily be flagged under other reports (such as the currency transaction report). The SAR became the standard form to report suspicious activity in 1996.
Suspicious Activity Reports can cover almost any activity that is out of the ordinary. An activity may be included in the Suspicious Activity Report if the activity gives rise to a suspicion that the account holder is attempting to hide something or make an illegal transaction.
Understanding Suspicious Activity Report (SAR)
The Suspicious Activity Report (SAR) is filed by the financial institution that observes suspicious activity in an account. The report is filed with the Financial Crimes Enforcement Network who will then investigate the incident. The Financial Crimes Enforcement Network is a division of the U.S. Treasury. The financial institution has the ability to file a report within 30 days regarding any account activity they deem to be suspicious or out of the ordinary. An extension of no more than 60 days may be obtained, if necessary to collect more evidence. The institution does not need proof that a crime has occurred. The client is not notified that the Suspicious Activity Report has been filed regarding their account.
Suspicious Activity Reports are part of the anti-money laundering statutes and regulations which have become much stricter since 2001. The USA Patriot Act significantly expanded SAR requirements in an effort to combat global and domestic terrorism. The goal of the Suspicious Activity Report and the resulting investigation is to identify customers who are involved in money laundering, fraud or terrorist funding. The customer is not told that a report is being filed. Disclosure to the customer, or failure to file a Suspicious Activity Report, can result in very severe penalties for both individuals and institutions. SARs allow law enforcement to detect patterns and trends in organized and personal financial crimes so that they can anticipate criminal and fraudulent behavior and counteract it before it escalates.
In the United States, financial institutions must file a SAR is they think that an employee or customer has engaged in insider trading activity. They must also file a SAR if they detect potential money laundering or violations of the BSA. A SAR is required if a financial institution detects evidence of computer hacking or of a consumer operating an unlicensed money services business. SAR filings must be kept for five years from the date of the filing.
Example of a Suspicious Activity Report Situation
For example, Albert is an account holder at XYZ Financial Institution. Albert has been a client for nearly five years and has an established account history and very predictable transactions. Every month, he deposits $15,000 into the account and buys an index fund. One day, he starts to receive weekly transfers of $9,000 into the account. Almost as quickly as the money hits the account, it leaves again. This is out of the ordinary for Albert's account and usual activity. The financial institution may consider this to be suspicious activity and might file a Suspicious Activity Report.