This Week's TriComply Newsletter Article

March 8, 2012

Suspicious Activity Reporting: When Does An Activity Become Suspicious?

by Blair Rugh

It seems like every regulatory requirement has its season: 20 years ago it was CRA: 10 years ago it the Bank Secrecy Act; today it is Dodd Frank or one of its offspring.  The problem is that after the season is over the regulation continues to live, but too frequently, because it is no longer the hot button, we tend to let down our compliance guard a little bit. I can remember not too long ago when thirty percent of the questions we received involved some aspect of the Bank Secrecy Act. It was at the top of the regulatorsí hit list and the fines that were being issued were widely reported. BSA compliance is no less important than it was 10 years ago, but because it is no longer a front burner item, some banks are not as diligent in detecting suspicious activity as they once were.

Under the Bank Secrecy Act banks are required to report:

* Criminal violation involving insider abuse in any amount,
* Criminal violations aggregating $25,000 or more when a suspect can be identified,
* Criminal violations aggregating $25,000 or more regardless of a potential suspect, and
* Transactions conducted or attempted by, at, or through the bank and aggregating
   $5000 or more, if the bank or affiliate knows suspects, or has reason to suspect that
   the transaction: 
   *  May involve potential money laundering or other illegal activity
   *  Is designed to evade the BSA or its implementing regulations, or
   *   Has no business or apparent lawful purpose or is not the type of transaction
       that the particular customer would normally be expected to engage in and the
       bank knows of no reasonable explanation for the transaction after examining the
       available facts, including the background and possible purpose of the transaction. 

One of the most frequent violations is the customer who is aware of the CTR reporting requirements but not SAR reporting. To avoid having a CTR filed the customer makes one or frequent cash deposits under the $10,000 CTR reporting level. Most bank automation systems will detect that pattern. The more difficult situation is a transaction or a series of transactions that are not of the type that the customer would normally be expected to engage in and for which the bank is not aware of any business purpose. For example, if I were to deposit a significant amount of cash into my account at my bank it would certainly be out of the ordinary and one that I would not normally be expected to engage in. I have had my account for probably 40 years and I donít believe that I have ever made a cash deposit. The first time I do it, it probably does not rise to the level of something that should be reported, but if I continue to do it then either the bank would have to ask me where the money was coming from and determine a legitimate purpose for it or file a suspicious activity report.

I donít know how many times a banker has called me, described an activity or a pattern of activity on the part of a customer and asked whether or not I thought it was suspicious. My response normally is that I donít know the customer or the situation but if the activity was sufficient for the banker to call me to get my opinion then obviously the banker was suspicious which means a SAR probably should be filed.

The first problem with filing SARs under suspicious circumstances is that what is suspicious is very subjective. What one person thinks is suspicious another may not. The second problem is that the examiners can look at it in perfect hindsight. A bank determined that the activity was not suspicious and did not file a SAR. The customer was subsequently arrested for money laundering. Also, just because law enforcement is aware of the criminal activity is no reason for not filing a SAR. There was a case in Alabama where a person was embezzling money from the company for which he worked. He was arrested and committed suicide. The bank where he was depositing the embezzled funds felt that because law enforcement was already involved and the person was dead there was no reason to file a SAR. Bad decision.

The BSA requires employee training.  Part of that should be for front line personnel regarding the types of transactions that might be suspicious. There should be a person or a committee of people in each bank who determine whether a SAR should be reported. All bank employees should be trained to report to that person or committee all transactions or conduct that have any potential of being suspicious then the person or the committee can investigate and make the correct decision regarding filing. 

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TriComply, Compliance Service

Blair Rugh would like to inform you of our TriComply, compliance service.  We can offer banks a full compliance package that will provide you with quality assistance at a price that will allow you the ability to meet your compliance budget. With our newest feature being the compliance manual we are now providing our clients with a complete compliance service. TriComply provides you with the TriComply Knowledgebase, Compliance manual, Policy Manual (written and reviewed), Compliance Newsletter (weekly), Advertisement Review, Compliance Calendar, Helpful Resources and an Online Training Library of compliance webinars.  Please contact Starr Largin at (205) 588-4316 or starr.largin@trinovus.com or Darryl Brasfield at darryl.brasfield@trinovus.com  to receive information regarding TriComply or to schedule a demo.

 

 

TriComply

To receive special pricing as a client of DBI Financial Systems
please contact:

   Starr Largin (205) 588-4316
starr.largin@trinovus.com

     To receive special pricing as a
     client of DBI Financial Systems
                please contact:

        Starr Largin (205) 547-2765
          starr.largin@trinovus.com
                          or
               Darryl Brasfield
       darryl.brasfield@trinovus.com

                      Website
            www.trinovus.com