SARs and The Sitting Ducks

Financial institutions must file Suspicious Activity Reports (“SAR”) under certain circumstances (31 CFR 103.18):  when an insider is involved in the criminal activity, when violations aggregate $5,000 and a suspect can be identified, when violations aggregate $25,000 or more and no suspect can be identified, and when violations aggregate $25,000 or more and involve violations of the Bank Secrecy Act or money laundering.  The filing must occur within 30 days of discovery of the facts surrounding the suspected criminal activity or 60 days, if no suspect was initially discovered.

Some institutions are diligent in detecting and filing SARs, only to be frustrated when no action is ever taken by law enforcement.  If a financial institution has a good fraud detection mechanism, it can often detect attempts to defraud it.  Even when repeated attempts are made to defraud the institution by the same perpetrators, if there is no financial loss experienced by the institution, law enforcement often does nothing.

For example, a financial institution may detect multiple instances when apparently different depositors attempt to open accounts with fraudulent checks.  Simple due diligence often reveals that the checks have been altered.  The institution may take its research a step further at that point and discover that the last several times when a potential depositor attempted to open an account with a fraudulent check some identifying information about the potential depositors was consistent (for example, a fax number).  The instances may aggregate to a large amount, but no loss was experienced by the institution and no suspect can be identified because the depositor obviously used a fraudulent identity.  In cases such as these, the perpetrators continue to attempt to “hit” the institution, but law enforcement does not pick up the cases because no actual loss was experienced.

Of course we understand that the cases where there were actual losses must be worked by law enforcement, but it is frustrating to never have cases investigated despite the large amounts involved and the obvious connection between cases.  The institutions feel like sitting ducks - if a fraudulent check slips through the system, then perhaps law enforcement will investigate.

No wonder some institutions swear that "SAR" actually stands for "Seldom Any Response."
---Anna Dolak