In the fight against financial crime, suspicious activity reports (SAR) are vital and it is important to get them right. How is this done?
In a recent post by Sentinels, the company detailed the intracies of a SAR filing and what it takes for a company to do them correctly.
The firm said, “Regulators around the world have developed a variety of compliance requirements and processes in response to the growing threat of money laundering and other financial crimes, and financial institutions are obligated to act accordingly.
“When financial institutions detect suspicious transactions, for example, they are obliged to report them to the authorities. This helps to prevent potential criminality such as money laundering, fraud, and the financing of terrorism from taking place.”
In Europe, these suspicious activities are reported through the submission of a SAR. This is an official document submitted by a financial institution to the relevant authority in their jurisdiction.
Sentinels explained that a SAR is a mechanism for reporting suspicious activity, such as potential instances of financial crime, to the authorities. SARs can be used for a variety of purposes, but they are most commonly used to report potential instances of money laundering.
Some SARs provide immediate opportunities to stop crime and arrest offenders, for example, while others help to uncover potential criminality that needs to be investigated and provide intelligence that might be useful in the future.
The purpose of a SAR filing is to make the authorities aware of transactions and any other activities that are out of the ordinary and could potentially be linked to criminality, or that might otherwise threaten the safety of the general public.
Suspicious activity related to banking and finance often involves money laundering, fraud, and terrorist financing, so it’s important that regulated institutions screen for suspicious activity through processes like automated transaction monitoring and KYC.
Certain circumstances that may lead to a suspicious activity report include transactions over a specified value, transactions that are unusually large, unusual account activity and international money transfers over a certain value.
Sentinels said, “Although SARs usually relate to transactions and money laundering offences, they can apply to a whole range of activity. They can, for example, arise where a financial institution believes that an employee is engaged in suspicious behaviour, if a computer system is compromised, or if they receive a third-party report.
“Although suspicious activity is usually detected by a financial institution’s automated monitoring system, it comes down to human operators to review any flagged activity and generate a report if it is deemed to be suspicious.”
SARs must be filed with 24-48 hours of a transaction being reviewed and determined as suspicious. Sentinels noted that this can vary by jurisdiction, such as in the US, where there is a greater timeframe of 30 days, and the nature of a transaction also has an impact. A suspected case of terrorist financing, for example, will mean that authorities need to be notified immediately.
The firm added, “Due to the amount that can be at stake when it comes to SARs, larger organizations will usually have a nominated AML or compliance officer who acts as a single point of contact and is ultimately responsible for SAR filings.
“This isn’t always the case, however, and employees at smaller firms may find that they cannot turn to an appointed individual for help. In such cases, employees should seek guidance from line managers and seek to complete and submit a SAR in accordance with local guidelines.”
Read the full post here.
Copyright © 2023 RegTech Analyst
Copyright © 2018 RegTech Analyst