Organizational Considerations: Identifying Appropriate Suspicious Activity Reports

Let’s first talk about some organizational considerations.  The decision of whether or not to file a suspicious activity report often involves weighing the aggravating and mitigating factors arising from the research conducted during the investigative process. 

Organizational Considerations

Financial institutions should draft procedures that document the factors to consider and organizational considerations when determining whether a SAR is appropriate.  Properly trained personnel in charge of investigating and reporting suspicious activities need to have a clear and concise procedure for escalating their findings to a compliance officer, manager, or other staff members with authority to make the filing decision.  The final decision should be documented and supported by the reasoning that was used to make the determination.  Frequently, the reason not to file an STR maintains a similar level of importance as the reason to file an STR.

In essence, the ultimate decision to file a SAR should result from an accumulation of aggravating factors and a lack of mitigating factors combined with the knowledge of what is expected activity for the institution’s client base, product offerings, and geographical area of service.  The SAR filing should include the suspicious activity and the related demographics, and why the institution finds the activity suspicious.  The SAR recipient does not have the intimate knowledge of what is expected activity for a particular institution, clients, and products and will only stand to benefit from this information’s inclusion.  Besides, capturing any known typologies identified as part of the review should be added as well.

If the institution decides that it should file a SAR, it should notify the investigators or prosecutors as soon as possible.  However, this may not be practical in certain jurisdictions due to the SAR filing process’s continuous nature and the volume of reports being filed by the reporting institution.  Establishing a filing timeline in concert with country guidelines is also critical to avoiding institutional penalties or fines.  The failure to file timely reports is often cited in regulatory actions against financial institutions. 

The designated AML compliance officer or deputy should keep the management and board apprised of SAR filing metrics and any significant issues resulting from those filings, especially items that pose a regulatory or reputational risk to the institution and organizational considerations.

Besides, you should also never neglect the point of quality assurance in organizational considerations .  All financial institutions are required to file timely and complete STRs. The quality of the STRs can indicate the quality of a financial institution’s AML/CFT program. At least, some regulators see it like this.  Quality and consistency in the STR decision-making process are critical to ensuring the appropriate oversight level in the investigative process. 

A quality assurance review helps to ensure that STR filings are internally consistent. The right decisions are being made, and that high-priority matters are identified and escalated to leadership.  In any event, financial institutions that implement a QA process should document the requirements and qualifications of QA reviewers and regularly review the outcome of QA reviews to assess the quality of staff, training requirements, and the program’s general health.  

Let’s also consider to organizational considerations the points of SAR oversight and escalation.  An institution should have robust policies and procedures documenting the appropriate oversight of the investigations process and regulatory reporting requirements.  This should include specific actions to be taken, such as escalating senior management in cases where a customer-facing employee or individual in the AML/CFT chain of command is complicit or willfully blind to suspicious financial activities.

Organizational Considerations

The Value Of SARs

Some SARs provide immediate opportunities to stop crime and arrest offenders, while others assist in uncovering potential criminality that needs to be investigated, and still others provide intelligence that will be useful in the future and organizational considerations.

Contact information, alias identities, investment activity, bank accounts, and other assets provided through SARs can lead to the launch of new investigations or the enhancement of ongoing operations.

SARs can assist in identifying changes in the nature or prevalence of certain types of organized crime, such as mortgage and boiler room fraud. This enables detection and prevention activity, as well as the sending of alerts to businesses that are at risk from such activity and organizational considerations.

Multiple SARs on the same subject or company can help identify new operational targets. By assisting in restraint orders, confiscation orders, and cash seizures, information leads to the recovery of criminal proceeds.

SARs provide intelligence about criminal methods, contribute to the UK’s understanding of crime, and inform crime-reduction strategies.

Final Thoughts

SARs contain specific details about transactions that are or appear to be suspicious. SAR filings are intended to assist the government in identifying individuals, groups, and organizations involved in fraud such as terrorist financing, money laundering, and other crimes with organizational considerations. A suspicious activity report is used to detect and report known or suspected violations of law or suspicious activity observed by financial institutions subject to regulations (such as the Bank Secrecy Act (BSA)).

In many cases, SARs have aided law enforcement in initiating or supplementing major money laundering or terrorist financing investigations and other criminal cases. The information provided in SAR forms also provides FinCEN with a method of identifying emerging trends and patterns associated with financial crimes.

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