Tips for how to catch the eye of law enforcement agents and still meet regulators’ guidance in your suspicious activity reporting—and also on when disclosure is allowed
Suspicious activity report writing and filing is arguably one of the most important responsibilities of financial crimes professionals. In 2018, FinCEN Director Kenneth A. Blanco testified that Bank Secrecy Act reporting, particularly through CTRs (currency transaction reports) and SARs, is critical in ensuring the protection of the U.S. financial system, keeping our country strong and prosperous, and keeping our families and communities safe from harm. As larger financial institutions continue to implement sophisticated tools and software to detect illicit transactions, the bad actors are shifting toward credit unions and other smaller community financial institutions with the hope that their activity will not be detected.
While financial crime professionals fully understand the importance of SARs, compliance teams have many challenges when knowing what procedures to follow for SAR completion and disclosure. For example, there seems to be ongoing conflict between what law enforcement wants in a SAR and what the regulators require. With approximately two billion SARs filed each year, how can a credit union increase the chances that the SARs it labors to write will actually be read?
Four Ways to Balance Capturing Attention and Being Compliant
Law enforcement has repeatedly stated in training sessions, conferences and interviews that to get their attention and possibly lead to them opening an investigation or using a SAR in an ongoing case, a credit union should do the following:
Make your opening paragraph eye-catching. Be sure to emphasize the suspicious activity early. If it doesn’t grab law enforcement’s attention in the first two sentences, the SAR most likely will not be read in its entirety.
Put the what and the why in the opening paragraph. The opening paragraph should summarize the suspicious activity, particularly what you are reporting as unusual and why you believe the activity to be suspicious. Further descriptions of the activity should be in the body of the SAR narrative, with transaction details as an attachment.
Tell your story in plain English and be careful with financial institution acronyms. Use keywords within your narrative to make it easier for law enforcement to pull pertinent SARs, which also satisfies FinCEN requests to add certain keywords in the narrative, such as “human trafficking,” “funneling” and “political corruption.”
Be concise, thorough and accurate. Leave out any unnecessary information and reread the narrative before filing. Remember to succinctly address the who, what, when where, why and how of the suspicious activity. Delete any extra “fluff,” such as the year your credit union was chartered, that would hide the important case information and lose law enforcement’s interest.
This may seem counter to what the regulatory agencies require that you write in your SAR narrative. For example, examiners may expect a standard opening or concluding paragraph that would not capture law enforcement’s attention, or that you repeat non-essential facts in the narrative. It is possible to follow the above law enforcement tips while satisfying regulator expectations. Use the most recent regulatory SAR guidance to satisfy these requirements without risking that your SAR will be lost in the abyss of unread SARs. If necessary, speak with your examiner with these documents in mind:
- FinCEN. Use SAR form instructions and the 2012 SAR form Q & A (FIN-2012-G002)
- FFIEC. 2014 Exam Manual, Appendix: L, SAR Quality Guidance
It is important to always follow your regulator’s instructions. While your regulator may want something in the SAR narrative that you believe will not assist law enforcement, pick your battles. A strong relationship and open communication with your regulator are healthy and critical for a strong BSA program.
When Is SAR Disclosure Legal?
Another area of confusion is when the disclosure of a SAR is allowable. The Right to Financial Privacy Act generally prohibits credit unions from disclosing a member’s financial records without service of legal process, such as a subpoena. Financial crime professionals understand that SARs are confidential, but when can a credit union provide SAR information to law enforcement without due process? The RFPA does allow for financial records or information to be released in response to a FinCEN or an appropriate law enforcement or supervisory agency request when it is supporting documentation underlying a SAR.
In 2007, FinCEN clarified this point. According to FIN-2007-G003, credit unions must:
- Provide all documentation supporting the filing of a SAR upon request by FinCEN or an appropriate law enforcement or supervisory agency
- Verify the agency prior to release of the information
- Include verification procedures in written procedures
It is best practice for law enforcement requests for supporting documentation to be in writing, even if it is in the form of an email. After a credit union files a SAR, it is also allowable for the BSA officer or designee to call and notify the local law enforcement agency best suited to investigate the nature of the SAR. Law enforcement has access to all SARs from the FinCEN database, but there are times when it is critical to expedite the process, such as if you suspect terror financing or human trafficking.
When releasing information to law enforcement without a subpoena, it is critical to remember that a SAR must have been filed. National Security Letters and 314(a) requests, on the other hand, each have their own procedures to follow and do not require a subpoena. Branch personnel should be trained not to be intimidated if law enforcement visits the credit union requesting information. Information should never be released at the branch level and all inquiries should be referred to the BSA officer.
SAR filing is a complex—but critical—part of a BSA professional’s job. By following these tips, the gray areas causing confusion should be lessened and your SARs will be more likely to be read and acted on by law enforcement. Your compliance resources are knowledgeable and valuable, so make them count!