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Suspicious activity report


Dec 16, 2021

In financial regulation, a Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) is a report made by a financial institution about suspicious or potentially suspicious activity. The criteria to decide when a report must be made varies from country to country, but generally is any financial transaction that does not make sense to the financial institution; is unusual for that particular client; or appears to be done only for the purpose of hiding or obfuscating another, separate transaction. The report is filed with that country’s financial crime enforcement agency, which is typically a specialist agency designed to collect and analyse transactions and then report these to relevant law enforcement. Front line staff in the financial institution have the responsibility to identify transactions that may be suspicious and these are reported to a designated person that is responsible for reporting the suspicious transaction. The financial institution is not allowed to inform the client or parties involved in the transaction that a SAR has been lodged, otherwise known as tipping off under the Financial Action Task Force’s Recommendations.[1]

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The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (May 2014)
This article relies largely or entirely on a single source. (December 2011)

The Financial Action Task Force’s Recommendations are widely recognized as the international standard in anti-money laundering and countering financing terrorism with endorsements from 180 nations.[2]FATF Recommendations set forth essential measures to combat money laundering and to protect domestic and international monetary systems including the application of preventive measures for the financial sector and other designated sectors; and establishment of powers and responsibilities for the relevant competent authorities (e.g., investigative, law enforcement and supervisory authorities), including guidelines regarding suspicious activity reports.[3] Most countries have laws that require financial institutions to report suspicious transactions and will have a designated agency to receive them. The agency to which a report is required to be filed for a given country is typically part of the law enforcement or financial regulatory department of that country. For example, in the United States, suspicious transaction reports[4] must be reported to the Financial Crimes Enforcement Network (FinCEN), an agency of the United States Department of the Treasury. In Australia the SAR must be reported to Australian Transaction Reports and Analysis Centre (AUSTRAC), an Australian government agency.

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SARs include detailed information about transactions that are or appear to be suspicious. The goal of SAR filings is to help the government identify individuals, groups and organizations involved in fraud like terrorist financing, money laundering, and other crimes.

The purpose of a suspicious activity report is to detect and report known or suspected violations of law or suspicious activity observed by financial institutions subject to the regulations (for example, the Bank Secrecy Act (BSA)). In many instances, SARs have been instrumental in enabling law enforcement to initiate or supplement major money laundering or terrorist financing investigations and other criminal cases.[5] Information provided in SAR forms also presents FinCEN with a method of identifying emerging trends and patterns associated with financial crimes. The information about those trends and patterns is vital to law enforcement agencies and provides valuable feedback to financial institutions.[5]

Under the Bank Secrecy Act (BSA), financial institutions are required to assist U.S. government agencies in detecting and preventing money laundering, such as:

  • Keep records of cash purchases of negotiable instruments,
  • File reports of cash transactions exceeding $10,000 (daily aggregate amount), and
  • Report suspicious activity that might signal criminal activity (e.g., money laundering, tax evasion)

Each SAR must be filed within 30 days of the date of the initial determination for the necessity of filing the report. An extension of 30 days can be obtained if the identity of the person conducting the suspicious activity is not known. At no time, however, should the filing of an SAR be delayed longer than 60 days. The Bank Secrecy Act specifies that each firm must maintain records of its SARs for a period of five years from the date of filing.

The report can start with any employee of a financial service. The employees are generally trained to be alert for suspicious activity, such as situations where people are trying to wire money out of the country without identification, or activity by someone with no job who starts depositing large amounts of cash into an account. Employees are trained to communicate their suspicion up their chain of command where further decisions are made about whether to file a report or not.[citation needed]

Many different types of finance-related industries are required to file SARs. These include:[6]

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