Suspicious Activity Reports (SARs) are government-mandated reports completed by a financial institution or money services business with reference to suspicious or potentially suspicious transaction activity. The purpose of the SAR is to report violations or suspected violations of the law. There were over 1.4 million SARs filed in the U.S. in 2011. So the government has a method in place for the collection of such information, what's next? The provided information needs to be collected, reviewed, analyzed, scrutinized, sorted and compiled. The goal for law enforcement is to begin an investigation(s) on those SARs that appear to show potential for activity that could be illegal after the SAR is scrubbed. It should be noted that SARs are confidential. The customer of the financial institution is not advised of the existence of a SAR, and by the same token, law enforcement is not at liberty to disclose the existence of a SAR to anyone outside of the immediate investigation including the subject named on the SAR.
Currently, there are well over 100 SAR review teams around the country including seven High Intensity Financial Crime Area (HIFCAs) teams. The vast majority of those teams are in major metropolitan areas. They may be comprised of several federal agencies, state, city and local law enforcement, prosecutors and regulators. Each SAR review team may cover a particular geographical area or perhaps even an entire state. There is no SAR review team headquarters or ivory tower that passes down policy and/or regulations on how to proceed other than following the basic SAR guidelines set forth by the Financial Crimes Enforcement Network (FinCEN). This enables each SAR review team to run independently depending upon attending agencies, manpower and location.
Depending upon the geographical area and the volume of SARs reported, SAR review meetings may take place monthly, every other month or even quarterly. The meetings usually involve the lead agency, which downloads all the relevant SARs within that area from FinCEN. Federal agencies may download the SARs from the TECS system while state and local law enforcement, unless part of a federal task force, will be able to use the FinCEN Gateway system (upon application to and approval of FinCEN). Basic analysis of the SARs may or may not have occurred at this point depending upon the particular SAR Review Team and their manpower. For example, at the New York HIFCA, all SARs are viewed, about 4,000 per month, and reduced to a few hundred after initial assessment. Basic due diligence is completed on the remaining SARs and then upon secondary review, the number is reduced again. The remaining SARs are then reviewed at the next SAR team meeting.
Due to the limitation of resources, the SAR review team may have created soft criteria for a SAR to pique their interest. The criteria may be based upon SAR transaction amount, while being cognizant that one SAR from one institution will not indicate other SARs from other institutions, familiarization with the subject and/or entity, criminal history, type of business, or unique method or pattern of transactions that are detailed in the SAR narrative. Available manpower and prosecutorial interest form the last part of the criteria matrix.
For years law enforcement operated systematically upon investigation of a crime and/or arrest of a subject. The question would be asked, "Where is the subject's money?" However, with access to SARs, law enforcement can reverse engineer a case. Now we are starting out with information about the money and trying to backtrack and figure out any possible related crime, or specified unlawful activity. It is quite the unique way to operate and, I might add, quite successful too.
These SAR review teams do a great job, but they can only work within the boundaries that their staffing allows. That leaves a lot of room for the rest of the approximately 17,000 law enforcement agencies across the United States to be involved. A SAR that does not rise to the level that the FBI or ICE might maintain for interest, may open the door for local law enforcement to take a closer look at an activity that might be going on in their own backyard. For state, city and local law enforcement, becoming involved with a SAR review team is truly a win-win situation. With that said, let me emphasize again that FinCEN has strict rules for obtaining access to the Gateway system, and confidentiality of the SARS is of the upmost importance. SARs are strictly on a need to know basis and only those investigators/detectives/analysts working those cases are permitted to view the SARs.
Reading a SAR alone may not provide an agent/investigator with the bigger picture. Fortunately, when diving just a little bit deeper with your due diligence, you can check for other SARs that may have been completed on your subject. These SARs may not have been downloaded by your FinCEN Gateway provider as they may not be current and/or they may be from outside the geographical area that was searched. Slick bad guys know enough to try to fly under the radar by keeping their activities to a low level and to cross over jurisdictional borders. Fortunately, with just a little background effort, law enforcement may observe some patterns of activity that could create even more suspicion about the subject.
When performing the SAR due diligence there may be a lot of questions and/or grey areas concerning the incident(s) that the financial institution considered suspicious. You may have additional questions that need to be asked of the financial institution about the SAR. Law enforcement may make such inquires without the requirement of a subpoena. This is commonly referred to as a request for supporting documentation. According to Title 31 CFR 103.18(d), a financial institution shall make all supporting documentation available to FinCEN and any appropriate law enforcement agencies or bank supervisory agencies upon request. What that means is that law enforcement is entitled to copies of any investigative reports that the financial institution completed or any other documents or information that have a direct bearing to the SAR. In other words, what did the financial institution do to reach the conclusion that this particular financial transaction or activity was suspicious? Law enforcement does not require a subpoena for the aforementioned activity. However, for any information or reports concerning matters not noted within the SAR a subpoena would be required. (The financial institution will usually request a mail and/or law enforcement letterhead for the supporting document request.) The request will remain in their files. That further serves as de-confliction in case another law enforcement agency should happen to contact the financial institution about the same customer and/or activity. You would probably be advised that another agency had expressed interest in the same SAR.
The benefits of a SAR review team are numerous:
- Information: They provide information on potential illegal activity.
- Communication: They provide a communication system with various law enforcement agencies because criminal activity often occurs across different jurisdictions, however, the information about a particular activity may not be processed and made available to other law enforcement agencies in the surrounding areas.
- Deconfliction: SARs also provide a means of deconfliction so agencies don't cross investigations. (The SAR form has a field box that denotes if law enforcement was notified by the reporting financial institution. This field may have a name and agency notated. Do not assume that the noted agency is working the case. Reach out for that agent/investigator for verification if possible.)
- Asset Forfeiture: Create the possibility of revenue via asset forfeiture laws.