Suspicious Activity Reports

Discussion in 'Wall St. News' started by buzzy2, Mar 14, 2008.


    Suspicious Activity Reports: Terrorism and you
    By Laura Bruce •

    A government program designed to track down terrorists and money launderers is frightening bank customers, frustrating financial institutions and inundating federal agencies with secret reports of dubious value.

    It's called the Suspicious Activity Report, or SAR, and critics say it victimizes honest citizens who are conducting legitimate financial activities through legitimate banking channels, while generating a flood of useless paperwork and burdening financial institutions with billions of dollars in costs.

    Experts predict nearly 1 million will be filed in 2006, a bit more than half by depository institutions, the rest by money-services businesses, casinos, card clubs and the securities and futures industries. Insurance companies had to begin filing in spring 2006, and mutual fund companies will have to establish anti-money-laundering programs and file SARs in fall 2006.

    In total, 919,230 SARs were filed in 2005. You cannot find out if one has been filed on you; anyone revealing that information is breaking the law.

    What can trigger a SAR? Almost anything out of the ordinary that rouses the suspicion of the personnel where the transaction took place. According to their rules, any group of transactions totaling $5,000 or more that "is not the sort in which the particular customer would normally be expected to engage" can cause enough suspicion to create a SAR. The reports are filed with The Financial Crimes Enforcement Network, or FinCEN, a division of the Department of the Treasury, and shared with law enforcement.

    To be sure, the reports have led to criminal investigations and prosecutions. But it also has mushroomed into a paper-generating monster that threatens to create Suspicious Activities Reports in government files on an increasing number of ordinary citizens.

    One man's fears
    Unlike other government spying programs, this one is out in the open -- and it's creating fear among people doing ordinary banking activities. Take a recent college graduate from Columbus, Ohio, whose parents offered an interest-free loan to pay off his high-interest credit card debt. While surfing online, a message board post caught his attention.

    "A guy said he paid off his credit card and got a call from the bank," says the graduate, who asked not to be identified. "They held his funds for three weeks because his payment deviated from his normal payment. I did my own research and found it was realistic.

    "They could report you to Homeland Security if payments deviate from the norm. It sounded scary and made me nervous. I think it's ludicrous that anyone should be afraid of paying off their debt."

    The SAR was developed in 1996 as a way for banking organizations to report "suspected criminal violations of federal law or a suspicious transaction related to money laundering activity, or a violation of the BSA (Bank Secrecy Act)," according to Federal Financial Institutions Examination Council, or FFIEC, documents.

    The Bank Secrecy Act, according to the FFIEC, was "designed to help identify the source, volume and movement of currency and other monetary instruments transported into or out of the U.S., or deposited in financial institutions."

    Clearly, the Sept. 11 terrorist attacks and the subsequent revelation that the terrorists freely lived here and opened bank accounts at will frightened American citizens and the government. Congress responded with the Patriot Act, aimed at giving government agencies more power to find and clamp down on money laundering and terrorist financing.

    Continues in link
  2. Frozen bank account ruffles nuns.

    The nuns of the Holy Name Monastery say they have been swept into the net cast by the nation’s antiterrorism laws. The sisters say the monastery’s main bank account was frozen without explanation in November, creating financial headaches and making the Benedictine nuns hopping mad. They were told the Patriot Act was the cause. “I think the Patriot Act is unwise, let’s say, and that if it happened to us, it can happen to anybody,” said Sister Jean Abbott, the monastery’s business manager. “I think people need to know that nobody is safe from, in some cases, really ridiculous scrutiny.”

    The nuns did not know anything was amiss until November 10, when their checks started bouncing without warning and the account would not accept deposits, including paychecks from state agencies where some of the sisters hold jobs. Two of the bounced checks had gone to other charities, Abbott said. Others went to pay Visa and utility bills. In all, the account was frozen for a week. In that time, 22 checks were returned with an ominous but baffling stamp, “Refer to Maker”. Before everything was straightened out, the nuns ran up $399.56 in fees, which were later reimbursed by their apologetic local bank, Abbott said. The mess took nearly three months to remedy, she said.

    “It was annoying,” Abbott said. “I wasn’t angry with our local bank because they were doing the best they could.” The corporate entity that owns the bank is another issue. Sister Mary Clare Neuhofer said it was Wachovia. Kevin Bezner, a spokesman for Wachovia, declined to comment, citing privacy concerns. Abbott said she was told the troubles started because one 80-year-old nun who is a signatory to the account did not have her Social Security number and photo ID on file. “Clearly an international spy,” Abbott said wryly. None of the nuns has given the bank that information, Abbott said. “We’ve been in business 116 years. No one’s ever asked.”

    Against the Patriot Act from the start, the sisters have members of Congress on speed dial, Abbott said. “They’ll be hearing from us now that this is all settled.” Among the lesser-known parts of the USA Patriot Act are banking provisions designed to help law enforcement agents track potential terrorists and money launderers. The law holds financial institutions accountable if money is funneled through them to terrorist organizations. Consequently, experts say, banks have set up a variety of rules intended to ensure they know who their customers are. But legal experts familiar with the Patriot Act disagree about what the act requires. One thing is clear. “The Patriot Act does not require that nuns’ bank accounts be frozen,” said Chris Hansen, a staff attorney with the American Civil Liberties Union in Washington.

    Louis Harvey, president of Dalbar Inc., a securities research firm in Boston, said banks are required by law to make sure their records are in order. He said there are good reasons the bank did not notify the monastery its account was under scrutiny. “Let’s assume that it was not nuns and it was some money-laundering scheme run by terrorists,” Harvey said. “The last thing in the world you’d expect the bank to do is notify the terrorists.” He said banks look for patterns of activity, such as large transactions that could raise red flags. But exactly what constitutes a pattern of activity is unclear, Harvey said. The rules are vague by design.

    When a bank detects suspicious activity, he said, it freezes the account and refers the matter to federal regulators. Anne Marie Kelly, a spokeswoman for FinCen, said banks are required to file suspicious activity reports, also known as SARS, but not to freeze accounts. That would be up to the bank, she said, and possibly the Office of Comptroller of the Currency. “Last year, we had what we called defensive filings of SARS, a number of banks filing on a number of accounts that upon review were not deemed suspicious,” Kelly said. “This could have been an example of that.”

    (from the Tampa Tribune, google cache, link doesn't exist anymore)

    Gov. Spitzer Exposed by Bank’s Suspicious Activity Report Technology
    NY Gov. Spitzer raised several red flags at bank, leading to filing of SARs with the IRS.
    By Maria Bruno-Britz
    Bank Systems & Technology
    March 12, 2008

    The latest political scandal that has the world talking centers on soon-to-be erstwhile New York State Gov. Elliot Spitzer and his involvement in a major prostitution ring. Although credit for exposing Spitzer's illicit trysts has been attributed to cell phone records, new evidence shows that his bank's suspicious activities reports (SARs) also played a vital roll in blowing his cover.
    Reports from the news media indicate that Spitzer had made a funds transfer totaling $10,000. Under AML regulations, $10,000 is the limit at which a bank must report back to the Internal Revenue Service regarding a given transaction. That amount in itself is not necessarily suspicious. However, Spitzer had been splitting the transfers into smaller sums (referred to as structured transactions) and even went so far as to ask the bank to remove his name from the transactions. Those acts were enough to trigger red flags at his unnamed Manhattan bank and a SAR was submitted to the IRS. Bank Systems & Technology contacted the IRS to obtain the name of the bank in question, but was told by a spokesman that the agency could not comment. However, later reports in U.S. News & World Report indicate it was North Fork Bank, a division of Capital One.

    Banks' awareness of money laundering activity has been heightened in the post 9-11 world. With the passing of the USA PATRIOT Act, financial institutions have to remain vigilant for any activity that may indicate funding of possible terror activities.

    According to Eva Weber, an analyst in the AML and compliance area with Boston-based Aite Group, "Regulators continue to put a lot of pressure on banks to ensure their institutions are not being used to launder money. Involvement in money laundering carries significant financial and reputational risks for the institution. As a result, many institutions have turned to technology solutions that monitor customer transaction activity."

    Weber says that many of these AML technology solutions are rules-based and allow the bank to set parameters on what needs to be flagged. "When the solution comes across activity the bank has set it to monitor for, an alert is generated for the bank to follow up on and perform additional investigation if necessary," she explains. "Potential structuring of payments—breaking transactions down to smaller sums to avoid Bank Secrecy Act reporting requirements—is something banks must look for, and it's a common reason for the filing of SARs. Anti-money laundering technology solutions can successfully highlight potential instances of money laundering activity on which the bank is required to report and record."
  4. Daal


    I dont think this government is changing anytime soon so how can we avoid unfair SARs?
    I will try to never break down any kind of wire transfer,make sure I dont wire amounts close but below $10K and just diminish the number of wires I make. but I'm wondering if someone familiar with banking can offer some advice