In its current issue of The SAR Activity Review – Trends, Tips & Issues, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) published extensive guidance to assist financial institutions, including brokerdealers and mutual funds, in filing suspicious activity reports (SARs). The guidance focuses on activity related to foreign corruption, but it could be easily applied to other types of suspicious activity.
Among other things, the guidance lays out the “5 Ws” that FinCEN believes are the key elements for writing an effective SAR narrative:
- who conducted the activity, including pertinent relationships (e.g., a senior political figure and/or his family members and close associates),
- what instruments were used (e.g., wires, cashiers’ checks, etc.),
- where the activity occurred (e.g., the jurisdiction(s) where the subjects of the report, and relevant accounts, were located),
- when the activity took place, and
- why the filer believes the activity was suspicious (e.g., news reports discussing potential corruption, large incoming wire amounts, potential structuring, etc.).
Additionally, the guidance provides examples of an “effective” and “less effective” SAR narrative. According to the guidance, an SAR narrative is less effective in achieving its law enforcement objectives if it lacks details such as pertinent account numbers, names associated with the accounts or types of products or services utilized by the account holder, or relevant transactional information (e.g., dollar amounts that alerted the filer to potential suspicious activity). FinCEN emphasizes that an effective SAR narrative should contain a complete account of the suspicious activity and follow a chronological order.
By referring to this new FinCEN guidance, many filers will be able to significantly improve the narrative portion of the SARs they prepare.