Suspicious Activity Reporting: A Watchful Observation

Many financial institutions and KYC or AML regulators seek to acquire a variety of tools and techniques to fight against money laundering and other financial terrorism all across the world. Therefore, these financial organisations must file suspicious activity reporting first to combat these threats to their companies. However, SAR in AML can be filed by gathering particular information about money laundering activities and showing proper evidence.

In order to file these activities, there are numerous SAR filing requirements that need to be fulfilled and combat fraudulent crimes. This KYC AML Guide will take you through each step of reporting anonymous activity and protect against further financial loss.

What is Suspicious Activity Reporting?

Suspicious activity reporting, also known as SAR, is a tool that is offered under the Bank Secrecy Act (BAS) of 1970. The purpose of SAR is to keep track of anonymous activities that are usually considered under other reports such as currency transaction reports.

However, SAR filing has become regulatory for many financial organisations in order to report financial fraud. SAR in AML can cover almost every activity that is unusual. These activities include those acts that may lead to the suspicious account holder attempting something to hide or making illegal transactions.

Significance of SAR Filing

SAR is one of the important parts of anti-money laundering compliance regulations that have become the standard since 2001. Nonetheless, the Patriot Act essentially boosted the SAR reporting requirements being a part of AML to fight against national and international terrorism. The objective of SAR and its consequential analysis is to identify clients who are engaged in money laundering, financing terrorism, and other fraudulent activities.

If the financial company fails to file a SAR or discloses the customer's identity, they may encounter huge penalties for both people filing SAR reports and the institution. However, SAR allows law enforcement to observe any trends and patterns of fraudulent activities being conducted in an organised manner.

Through this, financial organisations can monitor any criminal activity or fraudulent behaviour, and combat it before it goes up. The requirements for reporting suspicious transactions in money laundering have been expanded dramatically since 2021 along with the representation of the AML act of 2020.

SAR Reporting Requirements

In case a financial institution wants to file a report against money laundering, it must do it within 30 days regardless of the type of fraudulent activity that is not ordinary. However, the reporting time can be extended to up to 60 days, only if more evidence is required. Yet, the firm does not require any proof of the occurrence of the crime and the customer or account holder does not get notified about the SAR filing.

To file a suspicious activity reporting, the financial firm needs to fill out the SAR form and provide information about several factors of the crime being reported. These elements include:

• Information about the person conducting suspicious activity.
• If any specific tool or instrument is being used to conduct the crime.
• The place where the crime took place.
• The time when the event occurred.
• The reason that the filer thinks the activity is suspicious.

3 Best Ways to Identify and File Suspicious Activities

If you witness any suspicious activity and want to file a report, there could be three best ways to file suspicious activity reporting:

i. Educate your Team about SAR Principles

Well, it is crucial to make sure that all employees dealing with clients’ accounts are knowledgeable about SAR regulations, principles, and common risks associated with it. Yet, the more people within an organisation are aware of these money laundering red flags, the more convenient it would be to monitor and prevent suspicious activity in bank accounts or other institutions.

ii. File SAR as Soon as Possible

Well, if you want to file a suspicious activity report, it is compulsory to do it within 30 days. However, this period can be extended to 60 days in case more evidence is required. However, if it is convenient for financial organisations to wait for weeks or so in order to complete the paperwork, it is crucial to file the report as early as possible. Nevertheless, while filing a SAR report, financial firms should convey as information about the transaction red flags to minimise the likelihood of facing future penalties.‍

iii. Record Unusual Transactions

There are numerous signs and red flags that can indicate money laundering or other mysterious activities. However, the most common one is unusual or suspicious transactions. It may include a significant amount of funds deposit, money transfers that are not relevant to the underlying business, or international transactions. Recording all these transactions and observing them make it easier for financial companies to monitor and file against criminal activities.

Bottom Line

Suspicious activity reporting is a tool that helps financial institutions to file reports against money laundering and fraudulent activities. If financial firms observe any suspicious activity, it is mandatory to file a report against such occurrences while keeping the customer or account holder confidential. However, in case they fail to file against these acts or disclose user information, they may face huge penalties in the future. Thus, if you witness any criminal activity within a financial organisation, there are various ways to report these events and prevent your business from further loss.