Recently, on January 19, 2021, FinCEN issued seven questions and answers (FAQs) related to suspicious activity reporting and other anti-money laundering considerations. Although the issued guidance states that the FAQs don’t alter existing BSA/AML legal or regulatory requirements, they do provide the industry with guidance on the criteria for filing, maintaining a customer/member relationship, and the completion of a SAR. This includes clarifying the instructions for the narrative and how to handle exceeding the character limitation. I’d like to recap the FinCEN SAR FAQs and provide you with a few common SAR questions we receive from our customers.
Question 1: Requests by Law Enforcement for Financial Institutions to Maintain Accounts
In the event that law enforcement provides the institution with a “keep open” request, a financial institution is not obligated to maintain the relationship with their customer/member. The written request from law enforcement should be detailed enough to indicate the purpose and duration of the request to keep the account open. However, a financial institution may decide based on their policy and procedures to terminate the relationship with their customer/member. If that is the case, the FAQs state that the financial institution should not be criticized for closing out the relationship, but the requests by law enforcement may be highly useful.
Question 2: Recepit of Grand Jury Subpeonas/Law Enforcement Inquiries and SAR Filing
A law enforcement inquiry such as a grand jury subpoena does not require that a SAR be filed. However, a grand jury subpoena should prompt a financial institution to conduct an investigation/review of their customer’s/member’s relevant transaction activity. If a financial institution determines that the customer’s/member’s activity is suspicious and a SAR is to be filed, the suspicious activity being reported should be focused on the facts and circumstance of the suspicious activity rather than the grand jury subpoena.
Question 3: Maintaining a Customer Relationship Following the Filling of a SAR or Multiple SARs
In the event that a financial institution filed multiple SARs on the same customer/member, terminating that relationship isn’t specifically required. There is no specific number of SARs that must be filed in order to terminate or maintain a relationship with the customer/member. The financial institution should have risk-based policies and procedures in place to ensure that they can identify and report suspicious activity. In addition, the procedures should address when to terminate a relationship in the event that the activity of the customer/member is deemed out of the institution’s risk tolerance.
Question 4: SAR Filing on Negative News Identified in Media Searches
Information from a third party such as the news or by conducting a media search does not require the financial institution to file a SAR. The financial institution may review various resources including media and news articles in order to obtain information on the suspect being reported, however the negative news information identified during an investigation should not solely prompt a decision to file a SAR.
Question 5: SAR Monitoring on Multiple Negative Media Alerts
If a financial institution receives several alerts that are generated on the same underlying event, they are not required to conduct a separate investigation for each alert. The financial institution can manage a high volume of alerts by investigating based on negative news if the alerts are triggering on the same event. This allows for the institution to identify and evaluate new information and investigate the transactions that may lead to a SAR filing.
Question 6: Information in Data Fields and Narrative
When completing a SAR narrative, information that is included elsewhere in the SAR does not need to be included within the narrative as well. The narrative may be more beneficial when information is included about the suspicious activity that may not be readily evident from the SAR data fields. Keep in mind that FinCEN Advisories may include guidance that requests a financial institution to include certain terms in the SAR field 2 and in the narrative to provide a connection between the suspicious activity reported and the subject addressed in an Advisory.
Question 7: SAR Character Limits
Multiple SARs are not required to be filed when the financial institution filing the SAR includes a narrative or reported information that exceeds the character limits of the SAR form. The SAR form includes a limit on characters in order for the filer to provide a clear, complete and concise description of the suspicious activity. If the information being reported on the SAR exceeds the limit, then the financial institution should consider focusing on the relevant information and if necessary attach a CSV file when filing the SAR.
Although FinCEN’s FAQs covers various topics related to SARs, we often receive questions related to additional SAR topics such as filing SARs on continuing activity and what dollar amount to report on the SAR. Here are a few SAR questions that we frequently receive.
Question: We filed a SAR initially for structuring activity. During our follow-up review, no structuring was identified during the review. If the structuring activity occurs again would we file an initial SAR or a continuing activity SAR?
Answer: You would be correct to file an initial SAR as it really is not a SAR for continuing activity. A SAR for continuing activity must be filed no later than 120 days after the date of the previously related SAR filing. You can always file a continuing activity report prior to 120 day deadline, but if the activity reported on the initial SAR stops and you are not prompted to file another report, then you wouldn’t have continuing activity based on FinCEN’s timeframe. This is addressed in the FFIEC BSA/AML Exam Manual in the SAR Overview section.
Question: Unfortunately, we are filing a SAR on kiting activity. I see the checks going back and forth from my institution to another institution. How do I determine what amount to report on the SAR? Do I add every transaction involved in the kiting activity? Debits and credits?
Answer: When it comes to reporting a certain dollar amount on the SAR, the instructions state that you are to file on the total aggregate amount of suspicious activity; therefore, it depends on what you are documenting in your investigation as suspicious or kiting activity. Each transaction related to the kite may be considered suspicious and should be reported as an aggregate amount for both debits and credits. I recommend including detail in your narrative on how you calculated the total amount.
Between FinCEN’s SAR FAQs and common questions from our customers, hopefully this article will assist in answering your most sought out SAR questions. If you have additional questions related to SARs don’t hesitate to submit your question through our Compliance Advisory Service.