Suspicious Activity Report: Meaning and Process
Suspicious Activity Report is a document that collects information about the unusual events happening around. The money laundering cases are not just financial breaches but also terrorist financing and illegal activities. To limit the access of financial information to the money launderers, a SAR report has been developed. Read through the blog to know more.
We are well aware of the skyrocketing money laundering cases. The greed and the passion for committing financial frauds are increasing in people so much that businesses and institutions don’t feel safe in their own business parameters. Be it physical attacks or online attacks, the urge to snatch money from the hard workers is escalating.
Money laundering cases are not limited to one type of business. In fact, the cases are entering small businesses too. The launderers don’t think of any business as small or big; they just want to drain them financially. Today, the financial breach doesn’t mean theft but also involves terrorist financing and conducting illicit activities.
Many companies have taken the concern of spiraling money laundering cases into account and designed anti-money laundering software. The software helps to identify illegal activities and financial frauds. The process includes PEP screening, reviewing the sanction list, and recognizing the red flags.
What is SAR?
Transactions which have:
- No apparent purpose
- Requested by a Person without reasonable explanation
- Where the size or pattern of Transactions, without reasonable explanation, is out of line with any pattern that has previously emerged or may have been deliberately structured to avoid detection;
- unnecessary routing of funds through third party accounts
- Customer's refusal to provide the information requested without reasonable explanation are suspicious and need to be reported.
As per the Bank Secrecy Act of 1970, it is imperative to apply for suspected frauds to FinCEN.
The laws regarding money laundering cases are different in different countries. However, monitoring any illicit activity that directly or indirectly threatens public security is vital. Businesses or financial institutions cannot raise a concern for minor suspicious transactions. It needs to be monitored and gained evidence.
SAR for Monitoring Illegal Activities
As the term evinces, financial transaction monitoring is the act of pruning illicit activities from a pool of financial transactions. Financial institutions and other businesses handle hundreds of transactions a week and find the suspicious seem difficult. Our tool can effectively recognize suspicious activities. The transaction monitoring helps the companies to implement AML, KYC, and CFT processing.
CFT or Counter-financial of terrorism. This term sounds dangerous, and honestly, it is. Terrorist financial is a huge financial fraud that many people conduct today. To gain preferences and financial profits, people indulge in illegal activities. Ignoring CFT can negatively affect the reputation of the business or the company. Alongside, it can put the business in legal trouble.
KYC or Know Your Customer. The term indicates the process of examining your customers and their ties with other people. The fraudulent are not naive; they have experience and understanding of how security systems work. They plan out some strategies that hide them from getting noticed. KYC is a process of analyzing the customers and checking their background with the best practices. This helps the companies or financial institutions identify the risk parties.
Suspicious Activity Report Process
SAR is a tool offered and mandated by the BSA of 1970. The tool is adopted by all the financial institutions and businesses associated with money laundering risks. SAR allows the government bodies to recognize and observe the patterned activities that happen in an organized crime. Since financial transactions are not limited to any company or business, it gets difficult to find the illegal activities happening around.
SARs give important information about the cyclical pattern of activities that help the government bodies to predict and resist financial frauds. SARs are not necessarily obtained from the financial sector, but businesses, institutions, and public safety workers also issue the report.
Here are some information sections that require to submit the SAR files-
- The dates of the alleged suspicious activities and the documentation of the events codes are also required.
- The contact information of the institutions where the suspicious activity occurred is required.
- Essential information like names, passport numbers, addresses, social security numbers, birth dates, and phone numbers of the involved parties is required.
- A detailed written description of the suspicious event is recorded for submission.
The Regulators of SARs
SARs is developed by the financial institution that is in charge of observing and analyzing suspicious activity. The report of illicit or doubtful activities is sent to the FinCEN or The Financial Crimes Enforcement Network. The financial institutes of businesses have 30 days to report the unusual activity. If the institution requires more time to gather solid proof, they are allowed 60 days of time.
The financial institutions that submit the report and proof of the suspicious activities are suggested to keep the copy of the report for five years. Any violation of rules can lead to civil and criminal penalties followed by loss of banking contracts and significant fines.
Money laundering cases require control, and SARs is the way to attain it.