A lot is going on behind the scenes at your local bank. For example, did you know that banks take part in fighting crime? They're charged with rooting out money launderers, terrorist groups, and other criminal enterprises. They do that by flagging suspicious activity and filing a Suspicious Activity Report (SAR).
What is a SAR?
SAR is a tool used to combat financial crime as directed under the Bank Secrecy Act, formally referred to as the Currency and Foreign Transactions Reporting Act of 1970. That act requires U.S. financial institutions to help government agencies detect and prevent money laundering.
Specifically, the act requires banks to keep records of cash deposits, purchases of negotiable instruments, and wire transfers. If a transaction exceeds $10,000, a Suspicious Activity Report must be filed within 30 calendar days of discovery.
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The only exception is if the bank is still determining who carried out the transaction. In that case, it has 60 calendar days to make a report.
Where reports are sent
Criminal activity can typically be traced back to money. For example, terrorist groups need money to operate, and money launderers count on financial institutions to hide their criminal activity.
Once an incident is flagged as suspicious, financial institutions send their reports to the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Financial Intelligence Unit and a division of the United States Treasury. FinCEN then begins its investigation.
What the report includes
Banks are required to provide the following information:
- Who initiated the suspicious activity?
- When did the suspicious activity occur?
- Where did the suspicious activity occur?
- How did the activity occur? For example, was it a large cash deposit or wire transfer that appeared suspicious?
SAR triggers
According to FinCEN, these are some of the common activities that can trigger a Suspicious Activity Report:
- Significant transactions made by those with no evidence of legitimate business activity.
- Transactions made between businesses that have no apparent connection to each other.
- Large transactions that serve no apparent economic purpose.
- Disproportionately large transactions for the type of business.
- Repetitive patterns of large wire transfers.
- Transactions involving bulk cash.
- A dormant account that suddenly becomes very active for a short period.
- Transactions designed to avoid detection. For example, regular deposits of $9,999.
What can happen?
If a SAR is filed based on your financial transactions, there's little chance you'll know about it. That's because FinCEN regulations prohibit banks -- whether online or brick and mortar -- from informing customers. And if you've done nothing wrong, there's a good chance you'll never know there was an investigation because FinCEN will drop the matter.
Here's the good news: As long as you're not attempting to break the law, SAR will have little to no impact on your life.
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