The Financial Crimes Enforcement Network has issued guidance on common errors that occur in the filing of Suspicious Activity Reports. The guidance provides an explanation of the 10 most common errors and ways to mitigate them. FinCEN identifies three areas that financial institutions should concentrate on to ensure that information contained in their SARs is complete: SAR narratives; certain critical fields that allow users to analyze quickly where activity has occurred; and fields that identify the type, category and character of the suspicious activity.
I. SAR NARRATIVES
The guidance stresses that an accurate and complete SAR narrative should identify the five essential elements – who? what? when? where? and why? – of the suspicious activity being reported. SAR narratives should describe, as fully as possible, why the activity or transaction is unusual for the customer, taking into consideration the types of products and services offered by the industry and the nature and typical activities of similar customers. Explaining why the transaction is suspicious is critical.
Common responses received in the SAR narrative field that do not allow users to fully utilize the information submitted include:
II. RESPONSES IN FIELDS OF CRITICAL VALUE
The FinCEN guidance states that the responses provided in fields of critical value, marked by an asterisk in most SAR forms, are examined by users to track activity and follow up on leads provided in SARs. This information is also used by FinCEN to develop analytical products that are distributed to law enforcement, regulators and other intelligence agencies, as well as to provide general feedback to financial institutions. The quality of this information is important, because if inaccurate or incomplete information is provided, its utility is diminished significantly. Several common issues arising from reports including inaccurate or incomplete information in critical fields are:
III. CATEGORY AND CHARACTER
By filling out SARs as accurately and completely as possible, financial institutions can help mitigate their risk by maintaining a strong component of their anti-money laundering programs. Employee training in the recognition of suspicious activity and the proper filing of SARs helps to protect the financial institution and aid law enforcement in apprehending offenders. Common inaccurate or incomplete responses the agency has received in the SAR fields that identify the type of suspicious activity involved are:
IV. SUGGESTIONS TO REDUCE INCOMPLETE AND/OR INCORRECT SARs
The guidance also provides suggestions that may reduce incomplete and/or incorrect SARs. As anti-money laundering programs are designed on a risk-basis by financial institutions to meet their own specific needs, some of the following suggestions may not be directly applicable.
A. Sign up for BSA E-filing
This will eliminate errors of omission because preparers must enter the required data or a special response in critical fields. Information on signing up for E-filing can be found on http://www.fincen.gov/ by clicking on “BSA E-filing” or by calling 1-866-346-9478 (option 1).
B. Provide Staff and Preparers with Training on Recognizing Suspicious Activity and Avoiding SAR Filing Errors
This training will help the financial institution maintain an effective AML compliance program, as well as protect the institution from potential abuse by criminals.
C. Provide Preparers with Examples of Accurate and Complete SAR Filings with “John Doe” Data in the Fields
This will allow preparers to see the correct format of a completed SAR form and can serve as a reference point for future filings. Please ensure that these sample or mock forms are not filed with FinCEN.
D. Ensure that Preparers know the Company EIN, Address, Telephone Number, Contact Office, etc., for the Reporting Business and Contact for Assistance Fields
This will allow the preparers to provide FinCEN with accurate reporting information; as well as provide law enforcement with accurate contact information should further investigation be required.
E. Provide Preparers with the Instructions for Completing the Form Currently in Use
When a new form is released, do not rely on old instructions and training because there likely will be significant changes. While form changes are infrequent, being up-to-date on the most current forms helps financial institutions with their regulatory compliance requirements and enables them to provide FinCEN and other users with the most accurate data possible.
F. Provide Preparers with the FinCEN Regulatory Helpline Number, (800) 949-2732, the FinCEN Homepage, www.fincen.gov, and the MSB homepage, https://www.fincen.gov/resources/financial-institutions/money-services-businesses.
G. Have a Second Reviewer to Ensure Accuracy and Completeness
An additional review of the SAR will help to eliminate errors and omissions.
V. CONCLUSION
FinCEN emphasizes that when completed correctly, SARs provide users with important information that can be used to analyze broad sets of data and to apprehend suspected criminals and terrorists. When the SAR forms are filled out incorrectly or are incomplete, they generally do not provide useful and adequate information and, in some cases, distort information reviewed by FinCEN and other users.