Does Anyone EVER read my SAR Reports?
One of the most important tasks that a Bank Secrecy Act
(“BSA”) Officer has is to make the decision whether or not to file a suspicious
activity report (“SAR”). Many a BSA
Officer has had the experience of reviewing transactions, analyzing them for
suspicious activity and then making the decision whether or the not the
activity is the type that should require a SAR.
The fact is, that there is no set formula for deciding when a SAR should
or should not ensue from the activity of a banks customer. Moreover, the truth is that there may be
some skepticism over the efficacy of preparing the filing at all. The conversation goes something like “Well,
this seems strange to me, but really, what’s the point? Does anyone even read these things? For
those of you who engage in this conversation or one that is similar, take
heart! Recent comments by the Director
of FinCEN and the first ever law enforcement awards ceremony conducted by
FinCEN highlighted the fact that not
only are your SARS read, but in many cases,
they lead to legal action.
You Are Part of
Something Big
In her comments to the International Bankers annual
anti-money laundering seminar, FinCEN Director, Jennifer Calvery[1] described the federal government’s efforts
to fight the terror group commonly known as ISIS. She noted that although much of the
activity of that group is in Syria and Iraq, the fact of the matter is that
they have to have trading partners around the world to get the supplies that
they need to wage war. There are
several things that FinCEN and similar agencies are trying to accomplish to
stop them; disrupting revenue streams by denying funds wherever possible,
limited the access to the international financial system and finally, punishing
any individual or group that helps ISIS.
Here is one example that has been
cited:
…[A] case originated in 2008 with BSA data concerning an
individual who was later convicted of conspiring to provide and providing
material support to the Pakistani Taliban. The defendant funneled money to
Pakistan as Taliban insurgents fought for greater control in northwest
Pakistan. BSA data was critical in
uncovering the diverse and complex methods the individual used to send money
from the United States to Pakistan, each of which was designed to conceal and
support his activities. Investigators uncovered at least three methods: 1) wire
transfers from the United States to Pakistan, where an associate picked up and
administered the funds; 2) transfers of funds from cashier’s checks drawn on
U.S. banks to a bank in Pakistan where co-conspirators could draw checks; and
3) bulk cash carried by family members and other travelers from the United
States to Pakistan. [2]
All of this may seem really far away and possibly irrelevant
to a community bank in a rural town in central California, but that is in fact,
not the case at all. Ms. Calvery pointed
out that FinCEN uses the information contained in SAR filings to track
everything from potential support of ISIS activity to funds transferred to a
potential supporter of ISIS in the United States. Even though there are approximately 50,000
filings per day, the data is reviewed by software that is similar to the BSA/AML
software that is maintained at community banks.
The software looks for trends, key words and other information to
aggregate potential suspicious activity.
In your own way, by maintaining a strong BSA/AML compliance program, and
by filing SARS, you are doing your part to fight terrorism!
BSA as a Defender of
the General Public
In line with the comments of the FinCEN director, FinCEN also announced its first ever law
enforcement awards for agencies that used the information in SAR’s to
successfully develop prosecutions.
Here are a few examples:
·
BSA data provided the leads that helped the
Boston BSA Financial Review Task Force, hosted by the IRS, identify a
multi-million dollar Ponzi scheme – the largest Ponzi scheme in that city since
the days of the infamous Charles Ponzi.
The BSA reporting that started it all was of relatively low dollar
amount. But local law enforcement,
recognizing the threat to the community, seized on the information provided in
the BSA reporting and acted to prevent further losses. And a further review of
BSA filings revealed additional instances of possible structuring, money
laundering, and other suspicious activities. At least 42 victims lost more than
$10 million through this scheme.
·
Utilizing financial analysis of BSA data and
undercover operations, the NY El Dorado Task Force (EDTF) successfully
dismantled a highly sophisticated transnational money laundering and healthcare
fraud organization that utilized a complicit money services business (MSB),
multiple shell corporations, U.S. bank accounts of former J-1 visa holders, and
attorneys to defraud government agencies and healthcare issuers of tens of
millions of dollars. BSA records provided important leads and clues for
investigators. For instance, BSA
reporting on the suspects identified a series of suspicious transactions
involving multiple businesses writing checks to each other, noting the signers
all had recently issued SSNs, and that the businesses were listed at the same
address, a residence.
·
The case,
initiated by the Southern
California Drug Task Force
High Intensity Drug Trafficking Area (HIDTA), began as the result of BSA reporting
filed by an alert
financial institution and targeted an
international money laundering operation involving a
Black Market Peso Exchange (BMPE)
scheme. During the course of this investigation, BSA
data tied financial activities to the subjects of the
investigation. Analysis of BSA filings by the case agent
indicated the company’s bank account
received structured cash deposits
in locations where the business
did not have any customers.
This case resulted in the first BMPE money laundering conviction in the Central District
of California. It involved the convictions of multiple customers using the BMPE scheme, operating unlicensed money transmitting business,
and
evading financial reporting
requirements. It was transnational
and touched illegal
activity by the Sinaloa Cartel and money launderers in Colombia. This case
was also the impetus for another BMPE investigation targeting the garment district
in Los
Angeles which resulted in the seizures of narcotics and over $100 million in cash during September
2014. While there were many investigative tools used during
the course of the
investigation, BSA data strongly supported the successful
prosecutions of the subjects in this case. In
the end, nine individuals ended up
pleading guilty to various money laundering related charges.
The above cases make it clear that
not only do people read the SARs that you file, they take the information in
them seriously!
The corollary to cases cited above
is that a strong and effective BSA/AML compliance program can aid both law enforcement
and your bank. Systems that allow your
BSA staff to fully understand and know customers will allow for the efficient
review of transactions. For example, in
the first case above, it was the BSA staff’s recognition of the idea that the culprits’
stories of needing unconventional cash loans was suspicious that started the
investigation at the bank. In the second
case, the ability to recognize a large number of checks being written back and
forth and then doing the additional research to determine that the companies
were all at the same addresses ultimately lead to major convictions. Knowing who your customers are and what the
type of transactions that are normal is a key tenant of a strong BSA
program. Of course, there is no substitute for good old
fashion intuition!
In the end, it is still the case
that when you are in doubt, file the SAR!
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