The​‍​‌‍​‍‌​‍​‌‍​‍‌ Suspicious Activity Report (SAR) is a fundamental element of the new anti-money laundering and counter-terrorist financing system. It is a record that a bank or any other institution related to the financial sector or a regulated entity submits when it identifies transactions or activities that seem to be abnormal, unexplainable, or associable to illegal activities. SARs are indispensable to the preservation of the financial system’s integrity as they commit that suspicious behaviors will be reported timely and in detail to the regulators and the law enforcement authorities, and thus they will be investigated further.
Basically, a SAR is not a formal accusation, but a tool for signaling a possible wrongful act. Financial institutions, banks, fintech companies, DNFBPs, and other entities under obligation have to, by law, keep an eye on the transactions and the behavior of customers. If the activity is out of the customer’s profile or is without any clear lawful purpose, the institution is obliged to determine if the situation is suspicious enough to warrant a report. When it is so, filing a SAR cannot be skipped no matter if the transaction is still going to be done or if it will later be considered legal, and it has to be done within the set time limit.
What SARs are most useful for is their capability to expose financial crimes that are kept under the veil of secrecy. Laundering of money, terrorist financing, fraudulent schemes, insider trading, tax evasion, and bribery usually have as their foundation transaction patterns that are very intricate and in which individual transactions are designed to be too insignificant for them to be detected. SARs provide a tool for the authorities to match the links between different data sets that come from various banking institutions and also cross-border and in this way to gain a fuller picture. This collective intelligence is what enables regulatory and law enforcement agencies to find such phenomena as trends, networks, and risky entities that would have otherwise been impossible to see.
A properly prepared SAR should be concise, real, and impartial in what it says. Usually, it covers the identification data of the customer, the nature of the suspicious activity, as well as monies involved and the time of the transaction or transactions, accounts that were used, and motivations which led to suspicion. It is the narrative part that is particularly vital as it sets out the “who, what, when, where, and why” of the suspicion. The report should not consist of vague terms or view points but rather it should depend on the facts which were witnessed, transaction patterns, and registered discrepancies.
Confidentiality is one of the most important concepts in SAR regulations. In the majority of the regions, revealing to the customer or any other non-authorized party that a SAR has been filed is prohibited and is called “tipping off”. This protection makes sure that the investigations are not hindered and it also stops suspects from changing their behavior in order to be undetectable. People who are involved with the filing of the SAR and are doing it in good faith receive, as well, protection under the law.
