Bank Secrecy Act |
APPENDIX L: SAR QUALITY GUIDANCE
The following information is provided as guidance. Refer to FinCEN’s “Guidance on Preparing a Complete & Sufficient Suspicious Activity Report Narrative” (November 2003) for original text, which can be found at www.fincen.gov.
Often Suspicious Activity Reports (SARs) have been instrumental in enabling law enforcement to initiate or supplement major money laundering or terrorist financing investigations and other criminal cases. Information provided in SAR forms also allows FinCEN and the federal banking agencies to identify emerging trends and patterns associated with financial crimes. The information about those trends and patterns is vital to law enforcement agencies and provides valuable feedback to financial institutions.
Banks must file SAR forms that are complete, sufficient, and timely. Unfortunately, some banks file SAR forms that contain incomplete, incorrect, or disorganized narratives, making further analysis difficult, if not impossible. Some SAR forms are submitted with blank narratives. Because the SAR narrative serves as the only free text area for summarizing suspicious activity, the narrative section is “critical.” The care with which the narrative is written may make the difference in whether or not the described conduct and its possible criminal nature are clearly understood by law enforcement, and thus a failure to adequately describe the factors making a transaction or activity suspicious undermines the purpose of the SAR.
The SAR form should include any information readily available to the filing bank obtained through the account opening process and due diligence efforts. In general, a SAR narrative should identify the five essential elements of information (who? what? when? where? and why?) for the suspicious activity being reported. The method of operation (or how?) is also important and should be included in the narrative.
Who is conducting the suspicious activity?
While one section of the SAR form calls for specific suspect information, the narrative should be used to further describe the suspect or suspects, including occupation, position or title within the business, the nature of the suspect’s business (or businesses), and any other information and identification numbers associated with the suspects.
What instruments or mechanisms are being used to facilitate the suspect transactions?
A list of instruments or mechanisms that may be used in suspicious activity includes, but is not limited to, funds transfers, letters of credit and other trade instruments, correspondent accounts, casinos, structuring, shell companies, bonds or notes, stocks, mutual funds, insurance policies, traveler’s checks, bank drafts, money orders, credit or debit cards, stored value cards, and digital currency business services. The SAR narrative should list the instruments or mechanisms used in the reported suspicious activity. If a SAR narrative summarizes the flow of funds, the narrative should always include the source of the funds (origination) and the use, destination, or beneficiary of the funds.
When did the suspicious activity take place?
If the activity takes place over a period of time, indicate the date when the suspicious activity was first noticed and describe the duration of the activity. When possible, in order to better track the flow of funds, individual dates and amounts of transactions should be included in the narrative rather than only the aggregated amount.
Where did the suspicious activity take place?
The narrative should indicate if multiple offices of a single bank were involved in the suspicious activity and provide the addresses of those locations. The narrative should also specify if the suspected activity or transactions involves a foreign jurisdiction.
Why does the filer think the activity is suspicious?
The SAR should describe, as fully as possible, why the activity or transaction is unusual for the customer, considering the types of products and services offered by the filing bank’s industry, and drawing any applicable contrasts with the nature and normally expected activities of similar customers.
How did the suspicious activity occur?
The narrative should describe the “modus operandi” or the method of operation of the subject conducting the suspicious activity. In a concise, accurate, and logical manner, the narrative should describe how the suspect transaction or pattern of transactions was committed. For example, if what appears to be structuring of currency deposits is matched with outgoing funds transfers from the accounts, the SAR narrative should include information about both the structuring and outbound transfers (including dates, destinations, amounts, accounts, frequency, and beneficiaries of the funds transfers).
A bank should not include any supporting documentation with a filed SAR nor use the terms “see attached” in the SAR narrative.
When SAR forms are received at the IRS Detroit Computing Center, only information that is in an explicit, narrative format is keypunched; thus tables, spreadsheets, or other attachments are not entered into the BSA-reporting database. Banks should keep any supporting documentation in their records for five years so that this information is available to law enforcement upon request.
