As credit unions and other financial institutions respond to their Bank Secrecy/Anti-Money Laundering/OFAC responsibilities and file Suspicious Activity Reports (SARs), regulators have fielded numerous questions and have noticed common errors in the filings. The Financial Crimes Enforcement Network (“FinCEN”) continues to provide guidance on SAR filling considerations. The most recent releases were “Requests by Law Enforcement for Financial Institutions to Maintain Accounts,” “Suspicious Activity Report Supporting Documentation” and “Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting.” These releases, dated June 13, 2007, and Oct. 10, 2007, respectively, updated FinCEN’s “Guidance on Preparing a Complete & Sufficient Suspicious Activity Report Narrative” and “The SAR Activity Review Trends, Tips and Issues”.
Q: In what areas should credit unions concentrate efforts to ensure SAR information is complete?
A: FinCEN indicates that financial institutions should concentrate efforts in three areas: (1) SAR narratives; (2) certain critical form fields that allow users to analyze quickly where activity has occurred; and (3) fields that identify the type, category and character of the suspicious activity being reported.
Q: What are the common prevailing problems with SAR narratives?
A: Some are simply inaccurate and incomplete, failing to identify the five essential elements — who, what, when, where and why — of the suspicious activity being reported or to describe why the subject transaction is unusual. Often the narrative field in the SAR form is left blank, failing to explain the information in the supporting documents, or data is merely repeated, failing to explain why a transaction was suspicious, considering the nature and expected activities of the members.
Q: What are the common prevailing problems with SAR form fields?
A: In some reports the filer failed to follow the form instructions and instead input improper special responses such as “N/A” or “Same as above” to indicate unavailable information. EINs may be missing or incomplete due to employee lack of knowledge, typographical errors or improper hyphens. Filer telephone numbers and subject SSNs/EINs are sometimes missing. Filers sometimes fail to indicate the method used to identify the subject and to include the number and issuer of the identification card or document used.
Q: What are the common prevailing problems with the category and character of suspicious activity?
A: The fields which identify the type of suspicious activity sometimes lack accurate and complete information. The category, type or characterization field is sometimes left blank, or the “other” box is checked without a brief and informative description. Many times, the characterization of suspicious activity appears incorrect or has not been selected.
Q: Should supporting documents be filed along with the SAR?
A: No. All SAR Form Instructions specifically state that attachment of supporting documentation is prohibited. However, credit unions must retain such copies and provide it to FinCEN or an appropriate law enforcement or supervisory agency (once verified) upon request.
Q: How may credit unions improve the quality of their SAR filings?
A: FinCen suggests a number of ways for financial institutions to reduce incomplete and/or incorrect SARs, including:
- Signing up for BSA E-filing;
- Providing staff and preparers with training on recognizing suspicious activity and avoiding SAR filing errors;
- Providing preparers with examples of accurate and complete SAR filings with “John Doe” data in the fields (sample or mock forms);
- Ensuring that preparers know the company EIN, address, telephone number, contact office, etc., for the Reporting Business and Contact for Assistance fields;
- Providing preparers with the instructions for completing the form currently in use;
- Providing preparers with the FinCEN Regulatory Helpline number and the FinCEN homepage;
- Having a second reviewer to ensure accuracy and completeness.
May a credit union close an account where a SAR has been filed or a member is suspected of suspicious activity?
The decision to maintain or close an account should be made by the credit union in accordance with its standards, guidelines and policies. It may, however, maintain such an account upon the request of a law enforcement agency (for monitoring purposes, etc.). The credit union should ask for the request in writing, with the purpose and duration (not to exceed six months, unless renewed) stated. If the credit union chooses to keep the account open or maintain the membership relationship at the request of law enforcement, it must still comply with all applicable Bank Secrecy Act recordkeeping and reporting requirements, including retaining the written request for at least five years after the request has expired.
Q: Where can I get additional information on SAR filing?
A: Guidance can be obtained by going to the FinCEN Web site www.fincen.gov and/or calling the FinCEN Regulatory Helpline at (800) 949-2732.
“You Asked Us” is a regular feature of Contact Magazine, featuring questions frequently directed to MCUL Regulatory Affairs by member credit unions. Questions are chosen for publication on the basis of timeliness and those most frequently asked, with answers provided by MCUL staff. If you have a specific question you’d like to see addressed in a future “You Asked Us,” send it along with your name and the name of your credit union to MCUL Regulatory Issues, “You Asked Us,” P.O. Box 8054, Plymouth, MI 48170-8054. Questions can also be e-mailed to email@example.com or faxed to (734) 420-1540. Names and credit unions will remain confidential; this information is needed in case the question requires further clarification.