Suspicious activity reports (SARs), sometimes known as suspicious transaction reports (STRs), form a vital link between the police and key professions, including financial institutions, solicitors, accountants, and estate agents.
The International Compliance Association (ICA) is a professional membership and awarding body. ICA is the leading global provider of professional, certificated qualifications in anti-money laundering; governance, risk, and compliance; and financial crime prevention. ICA members are recognized globally for their commitment to best compliance practice and an enhanced professional reputation. To find out more, visit the ICA website.
Last year saw more than 3.5 million SARs submitted in the United States, almost 1 million in the United Kingdom, and many more across the globe.
Given this volume, we can see why it is crucial SARs are informative, succinct, and of a high quality. Verbosity, inaccuracy, or sloppiness will neuter their effect and potentially obfuscate important information that might otherwise have exposed criminal activity.
What is a SAR?
A SAR is exactly what it says it is: A report outlining potential suspicious activity. The reports furnish law enforcement with important intelligence and information from organizations about which they might not have known. SARs can be used to report all manner of potential criminal activity and economic crimes.
In most jurisdictions, it is a requirement for employees of firms in the regulated sector to submit a SAR if they come across information that leads them to believe money laundering or terrorist financing is taking place. For example, in the United Kingdom, individuals are required under Part 7 of the Proceeds of Crime Act 2002 and the Terrorism Act 2000 to submit a SAR “in respect of information that comes to them in the course of their business if they know, or suspect or have reasonable grounds for knowing or suspecting, that a person is engaged in, or attempting, money laundering or terrorist financing,” according to the National Crime Agency (NCA).
In most jurisdictions, SARs are received, analyzed, and disseminated by a financial intelligence unit (FIU). The FIU in the United Kingdom is the NCA. In the United States, it is the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). In Singapore, it is the Suspicious Transaction Reporting Office.
It is a requirement for all members of the European Union to have a designated FIU under EU regulations to comply with international standards.
Below are examples from FinCEN of the success providing quality SARs can bring:
Example 1: A multiagency money laundering/marijuana trafficking investigation was initiated following the filing of a SAR by a bank in Tennessee. The SAR disclosed an individual was depositing large amounts of U.S. currency into three bank accounts. The deposits ranged from $5,000 to $25,000, with most of the deposits consisting of $100 bills. Approximately $1.2 million was deposited into these accounts during a one-year period. Seven defendants were indicted on multiple counts of money laundering and marijuana trafficking.
Example 2: A bank filed a SAR on an elected official from a suburban locality who structured transactions totaling hundreds of thousands of dollars. The SAR triggered an investigation that confirmed the elected official committed perjury while filing a bankruptcy petition. Additional SARs filed on the defendant detailed structuring at the bank as well as at a money services business.
Even though the defendant claimed he was bankrupt, in an 18-month period he made over 1,000 deposits at several different bank locations into his accounts totaling more than $500,000. His defense attorney stated his business dealings took place throughout a large area, making cash transactions at different locations a necessity and not a means of attempting to avoid reporting requirements.
Why are SARs important?
SARs provide a link between firms and law enforcement. This enables law enforcement to obtain information to which they wouldn’t formerly have been privy, which is instrumental in tracking down murder suspects, locating drug dealers or sex offenders, identifying victims of trafficking, or tracing those involved in distributing illicit material.
Secondly, some SARs provide law enforcement with an immediate opportunity to locate and arrest criminals, while other SARs help highlight potential criminal activity that needs to be investigated or intelligence useful for future investigations.
This leads nicely into a third point: SARs provide law enforcement with information relating to new or emerging types of organized crime or changes in criminals’ methods. This helps enable earlier detection and prevention, as well as giving the police the opportunity to issue alerts warning businesses of potential threats.
As the NCA states, “SARs can also help establish a geographical picture or pattern of the vulnerability of a particular sector or product and can be used in the analysis of suspicious activity before and after a specific event such as a terrorist incident.”
Submitting quality SARs
It is key that when SARs are submitted they are of a high quality.
Good SARs make it easier for FIUs to analyze and disseminate; they also affect the ability to prioritize and process reports and have an impact on the applicable agency’s decision or ability to investigate.
If they are poor, they can lead to unnecessary delays. SARs should include as much detail as possible so the FIU obtains a clear picture of your concerns.
The details you provide should enable the FIU to establish:
- Who is doing what;
- Who they are/were doing it with;
- When they are/were doing it;
- Why they are/were doing it;
- Where they did it; and
- How they are doing it.
The NCA in February published guidance on submitting better quality SARs, which includes requirements for the basic structure of SARs, what information to include, and what to leave out.
The International Compliance Association is a sister company to Compliance Week. Both organizations are under the umbrella of Wilmington plc.