Notifying senior management or board of directors regarding the SAR you have filed is very important in SAR rules and regulations. After deciding to file an SAR, the institution should report the activity to its regulatory agency, law enforcement, or both as defined by the applicable regulations within its jurisdiction.
Many jurisdictions require Suspicious Transaction Reports, or STRs to be filed within specific days following the discovery of potentially suspicious activity. In many jurisdictions, it is a requirement to report certain information regarding STRs to senior management or the board of directors.
The Importance of Notifying Senior Management
Most regulations do not mandate a particular notification format, and financial institutions should have flexibility in structuring their format. Therefore, financial institutions may not be required to provide actual copies of SARs to the board of directors or a board committee. Alternatively, financial institutions may provide summaries, tables of SARs filed for specific violation types, or other notification forms.
Regardless of the notification format used by the financial institution, management should provide sufficient information on its SAR filings to the board of directors or an appropriate committee to fulfill its fiduciary duties while being mindful of the confidential nature of the SAR.
Also, keep in mind that, in some cases, if the activity presents a significant or potentially ongoing risk to the institution, the institution’s leaders should be made aware since high-level decisions can be made regarding potential changes to systems, staffing, products, services, or particular relationships maintained by the institution.
A compliant and effective Anti Money Laundering, or AML Program includes active involvement and oversight by the board of directors or senior management of a mortgage lender. Active involvement and oversight necessitate gathering enough information on SAR investigations and filings so that the board or its equivalent, such as an senior management committee, can fulfill its fiduciary duties to the company.
Several federal agencies have issued guidance on Board member notification requirements. This guidance may be useful for mortgage lenders in determining how and what to communicate about SAR filings to board or senior management members.
Some SARs should be reviewed individually by the board of directors or a designated committee of the board. Financial institutions are encouraged to develop their own parameters for defining a significant SARs necessitating full reviews. Such guidance must be written and formalized within Bank Secrecy Act, or BSA policies and procedures approved by the board.