Suspicious activity reporting forms the cornerstone of the BSA reporting system. It is critical to the United States' ability to utilize financial information to combat terrorism, terrorist financing, money laundering, and other financial crimes.
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Examiners and banks should recognize that the quality of SAR content is critical to the adequacy and effectiveness of the suspicious activity reporting system. Within this system, FinCEN and the federal banking agencies recognize that, as a practical matter, it is not possible for a bank to options trading charts and report all potentially illicit transactions that flow through the bank.
Examiners should focus on evaluating a bank's policies, procedures, and processes to identify, evaluate, and report suspicious activity. However, as part of the examination process, examiners should review individual SAR filing decisions to determine the effectiveness of the bank's suspicious activity identification, evaluation, and reporting process.
Banks, bank holding companies, and their subsidiaries are required by federal regulations 53 Refer to 12 CFR Is designed to evade the BSA or its implementing regulations. Has no business or apparent lawful purpose or is not the type of transaction that the particular customer would normally be expected to engage in, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.
A transaction includes a deposit; a withdrawal; a transfer between accounts; an exchange of currency; an extension of credit; a purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument or investment security; or any other payment, transfer, or delivery by, through, or to a bank. Safe Harbor for Banks From Civil Liability for Suspicious Activity Reporting Federal law 31 USC g 3 provides protection from civil liability for all reports of suspicious transactions made to appropriate authorities, including supporting documentation, regardless of whether such reports are filed pursuant to the SAR instructions.
Specifically, the law provides that a bank and its directors, officers, employees, and agents that make a disclosure to the appropriate authorities of any possible violation of law or regulation, including a disclosure in connection with the preparation of SARs, "shall not be liable to any person under any law or regulation of the United States, any constitution, law, or regulation of any State or political subdivision of any State, or under any contract or other legally enforceable agreement including any arbitration agreementfor such disclosure or for any failure to provide notice of such disclosure to the person who is the subject of such disclosure or any other person identified in the disclosure.
Systems to Identify, Research, and Report Suspicious Activity Suspicious activity monitoring and reporting are critical internal controls.
Proper monitoring and reporting processes are essential to ensuring that the bank has an adequate and effective BSA compliance program. Appropriate policies, procedures, and processes should be in place to monitor and identify unusual activity.
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The sophistication of monitoring systems should be dictated by the bank's risk profile, with particular emphasis on the composition of higher-risk products, services, customers, entities, and geographies. The bank should ensure adequate staff is assigned to the identification, research, and reporting of suspicious activities, taking into account the bank's overall risk profile and the volume of transactions.
Monitoring systems typically include employee identification or referrals, transaction-based manual systems, surveillance automated systems, or any combination of these. Generally, effective suspicious activity monitoring and reporting systems include five key components refer to Appendix S "Key Suspicious Activity Monitoring Components".
The components, listed below, are interdependent, and an effective suspicious activity monitoring and reporting process should include successful implementation of each component. The five key components to an effective monitoring and reporting system are: Identification or alert of unusual activity which may include: employee identification, law enforcement inquiries, other referrals, and transaction and surveillance monitoring system output.
Managing alerts. SAR completion and filing. Monitoring and SAR filing on continuing activity. These components are present in banks of all sizes. However, the structure and formality of the components may vary. Larger banks will typically have greater differentiation and distinction between functions, and may devote entire departments to the completion of each component. Smaller banks may use one or more employees to complete several tasks e.
Policies, procedures, and processes should describe the steps the bank takes to address each component and indicate the person s or departments responsible for identifying or producing an alert of unusual activity, managing the alert, deciding whether to file, SAR completion and filing, and monitoring and SAR filing on continuing activity.
Identification of Unusual Activity Banks use a number of methods to identify potentially suspicious activity, including but not limited to activity identified by employees during day-to-day operations, law enforcement inquiries, or requests, such as those typically seen in section a and section b requests, advisories issued by regulatory or law enforcement agencies, transaction and surveillance make money on the Internet with the SAR program reviews system output, or any combination of these.
Employee Identification During the course of day-to-day operations, employees may observe unusual or potentially suspicious transaction activity. Banks should implement appropriate training, policies, and procedures to ensure that personnel adhere to the internal processes for identification and referral of potentially suspicious activity. Banks should be aware of all methods of identification and should ensure that their suspicious activity monitoring system includes processes to facilitate the transfer of internal referrals to appropriate personnel for further research.
Law Enforcement Inquiries and Options in real business Banks should establish policies, procedures, and processes for identifying subjects of law enforcement requests, monitoring the transaction activity of those subjects when appropriate, identifying unusual or potentially suspicious activity related to those subjects, and filing, as appropriate, SARs related to those subjects.
Law enforcement inquiries and requests can include grand jury subpoenas, National Security Letters NSLand section a requests. Mere receipt of any law enforcement inquiry does not, by itself, require the filing of a SAR by the bank. Nonetheless, a law enforcement inquiry may be relevant to a bank's overall risk assessment of its customers and accounts.
For example, the receipt of a grand jury subpoena should cause a bank to review account activity for the relevant customer.
The bank should determine whether a SAR should be filed based on all customer information available.
Due to the confidentiality of grand jury proceedings, make money on the Internet with the SAR program reviews a bank files a SAR after receiving a grand jury subpoena, law enforcement discourages banks from including any reference to the receipt or existence of the grand jury subpoena in the SAR. Rather, the SAR should reference only those facts and activities that support a finding of suspicious transactions identified by the bank. National Security Letters NSLs are written investigative demands that may be issued by the local Federal Bureau of Investigation FBI and other federal governmental authorities in counterintelligence and counterterrorism investigations to obtain the following: Telephone and electronic communications records from telephone companies and Internet service providers.
Information from credit bureaus.
Financial records from financial institutions. NSLs are highly confidential documents; for that reason, examiners will not review or sample specific NSLs.
Banks that receive NSLs must take appropriate measures to ensure the confidentiality of the letters and should have procedures in place for processing and maintaining the confidentiality of NSLs.
The SAR should reference only those facts and activities that support a finding of unusual or suspicious transactions identified by the bank. Contact information for the FBI field offices can be found at www. Transaction Monitoring Manual Transaction Monitoring A transaction monitoring system, sometimes referred to as a manual transaction monitoring system, typically targets specific types of transactions e.
Examples of MIS reports include currency activity reports, funds transfer reports, monetary instrument sales reports, large item reports, significant balance change reports, ATM transaction reports, and nonsufficient funds NSF reports.
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Many MIS or vendor systems include filtering models for identification of potentially unusual activity. The process may involve review of daily reports, reports that cover a make money on the Internet with the SAR program reviews of time e.
MIS or vendor system-generated reports typically use a discretionary dollar threshold. Thresholds selected by management for the production of transaction reports should enable management to detect unusual activity. Upon identification of unusual activity, assigned personnel should review CDD and other pertinent information to determine whether the activity is suspicious. Management should periodically evaluate the appropriateness of filtering criteria and thresholds used in the monitoring process.
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Each bank should evaluate and identify filtering criteria most appropriate for their bank. The programming of the bank's monitoring systems should be independently reviewed for reasonable filtering criteria. Typical transaction monitoring reports are as follows. Currency activity reports. These reports assist bankers with filing CTRs and identifying suspicious currency activity.
The purpose of the SAR is to report violations or suspected violations of the law. There were over 1.
Currency transactions involving multiple lower dollar transactions e. Currency transactions aggregated by customer name, tax identification number, or customer information file number. Such filtering reports, whether implemented through a purchased vendor software system or through requests from information service providers, significantly enhance a bank's ability to identify and evaluate unusual currency transactions.
Funds transfer records. Periodic review of this information can assist banks in identifying patterns of unusual activity.
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A periodic review of the funds transfer records in banks with low funds transfer activity is usually sufficient to identify unusual activity. For banks with more significant funds transfer activity, use of spreadsheet or vendor software is an efficient way to review funds transfer activity for unusual patterns.
Most vendor software systems include standard suspicious activity filter reports. These reports typically focus on identifying certain higher-risk geographic locations and larger dollar funds transfer transactions for individuals and businesses. Each bank should establish its own filtering criteria for both individuals and businesses.
Noncustomer funds transfer transactions and payable upon proper identification PUPID transactions closed options be reviewed for unusual activity. Activities identified during these reviews should be subjected to additional research to ensure that identified activity is consistent with the stated account purpose and expected activity. When inconsistencies are identified, banks may need to conduct a global relationship review to determine if a SAR is warranted.
Monetary instrument records. Records for monetary instrument sales are required by the BSA.