Gunster – Banking Advisory, October 2008
On October 22, 2008, the Financial Crimes Enforcement Network (“FinCEN”) published Issue 14of the Suspicious Activity Report (“SAR”) ActivityReview, Trends, Tips and Issues (“Report”). TheReport discusses: (i) the use of Bank Secrecy Act(“BSA”) data by federal and state regulatory agencies;(ii) investigations where SARs, Currency Transaction Reports and other BSA information played an important role in the investigation and prosecution of criminal activity; and (iii) issues raised with regard tothe preparation of SARs, among others.
The Report clarifies ambiguities regarding the timing of SAR filings. BSA regulations require that a SAR be filed no later than thirty (30) calendar days from the date of initial detection of facts that may constitute a basis for filing a SAR.1
The first guidance on timing of SAR filings was set forth in the October 2000, SAR Activity Review: Tips, Trends & Issues – Issue 1 (“October 2000Guidance”). In May 2006, FinCEN issued additional guidance in The SAR Activity Review: Tips, Trends &Issues – Issue 10, to clarify ambiguities in the October2000 Guidance. However, following these publications,financial institutions have continued to seek additional clarification regarding the phrase “initial detection.”
The Report responds to requests for clarification and provides that the phrase “initial detection” should not be interpreted as meaning the moment a transaction is highlighted for review. There are a variety of legitimate transactions that may raise red flags simply because they are inconsistent with an account holder’s normal account activity. A financial institution’s automated account monitoring system,such as system-generated reports, may flag a transaction for review; however, this should not be considered initial detection of potential suspicious activity. Upon identification of unusual activity, additional research is typically conducted and institutions may need to review customer transaction or account activity to determine whether to file a SAR. The need to review a customer’s account activity,including transactions, does not necessarily indicate the need to file a SAR, even if a reasonable review of the activity or transaction might take an extended period oftime. The 30-day period does not begin until an appropriate review is conducted and a determination is made that the transaction under review is “suspicious” within the meaning of the SAR regulations.
FinCEN understands that financial institutions may have implemented “multi-layer review processes” in order to better detect and report suspicious activity.Furthermore, FinCEN recognizes that these multi-layer review processes may involve such steps as a red flag notice from an account monitoring system, a brief review by an analyst and an investigation by an investigator.
For example, a financial institution may have implemented an automated red flag system that detects unusual patterns in transactions. It may then use an analyst as a first step to determine whether the red flagis a “false positive” or whether the activity should beforwarded to an investigator. Here, the analyst makes no formal determination as to whether the activity maybe suspicious based on the unusual transaction, but instead refers the matter to an investigator. After a period of appropriate review, the investigator determines whether the activity is suspicious. In this example, the date of initial detection is the date whenthe investigator makes a determination that the activity is suspicious, not when the analyst refers the matter to the investigator.
The Report provides additional examples to illustrate that the date of initial detection does not necessarily occur on the date of the transaction, thedate an automated red flag is generated, or the date an employee initially reviews the transaction.
Should you wish to receive further informationconcerning matters discussed in this Banking Advisory,please contact Clemente Vazquez-Bello, Esq. at (305)376-6082, Andres A. Fernandez, Esq. at (305) 376-6097 or Marina Olman, Esq. at (305) 376-6069 or [email protected],[email protected] or [email protected].
This Banking Advisory is for general informationonly. It is not legal advice, and legal counsel should be contacted before any action is takenwhich might be influenced by this Banking Advisory.
