Suspicious Activity Reports: What You Need to Know

Mark Halstead Compliance

All businesses have a role to play in detecting and reporting suspicious activity. The goal of these actions is to prevent criminal behaviour such as money laundering and terrorist financing. Most countries facilitate these vital functions by allowing businesses to submit a Suspicious Activity Report (SAR).

In this article, we explain more about SARs and how businesses can use them to meet their AML compliance obligations.

What is a Suspicious Activity Report?

Suspicious Activity Reports are official document filings that are used to inform financial authorities of potential criminal activity. They can be used to flag transactions that seem unusual, particularly where it suspected that a business or individual is involved in fraud, money laundering, or terrorist financing.

Many financial institutions must submit suspicious activity reports as part of their compliance obligations. The reporting of suspicious activity is mandatory under the Financial Action Task Force's International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation.

The data provided in a SAR is used by the UK Financial Intelligence Unit (UKFIU), an arm of the National Crime Agency (NCA).

Which Institutions Need to Be Aware of Suspicious Activity?

All businesses are responsible for the detection and prevention of financial crime under the Money Laundering Regulations 2017.

Some firms have a more explicit duty to monitor transactions and customer behaviours for suspicious activity. These include:

● Banks

● Credit unions

● Stock brokers

● Money service businesses

● Casinos

● Dealers of precious metals, gems, and other valuable commodities.

● Insurance companies

● Mortgage companies

When is a Suspicious Activity Report Required?

Financial institutions are required to file a suspicious activity report whenever it detects an unusual or suspicious transaction involving one of its clients. Businesses generally have 30 days from the date of detecting suspicious activity to submit a SAR, however that period can be extended to 60 days if further supporting evidence is required.

There are a wide variety of circumstances that can make a SAR necessary, but some common examples include:

  • Transactions over a set value
  • High value international money transfers
  • Unusual transactions and account activity that is out of character for a specific client.

Businesses must be alive to the risks of money laundering and terrorist financing, but there are other situations in which a SAR may be necessary. In addition to monitoring client activity, financial institutions must also file suspicious activity reports whenever they detect employees engaged in suspicious behaviour or if their computer systems are compromised.

Who Can Submit a Suspicious Activity Report (SAR)?

Suspicious activity can be monitored and detected in a number of ways, but it is often picked up by automatic systems that banks and other financial institutions use to keep tabs on transactions. Once suspicious activity has been flagged, it is up to analysts and administrative staff to verify the risk of financial crime and to file a report with law enforcement.

Every financial institution must train their staff to recognise suspicious activity, and anyone can complete and file a SAR. In most financial organisations they will be supported by a nominated AML officer who is ultimately responsible for submitting a suspicious activity report to the authorities.

It could be, for instance, that a customer adviser at a large financial institution recognises unusual activity on a client's account. This might take the form of an unusually large transaction that does not match a pattern of behaviour or doesn't seem to make any commercial sense. The employee could then prepare a SAR online with the support of the company's appointed AML officer.

Are SARs Confidential?

The nature of SARs means that they typically involve reviewing and logging a clients' confidential personal information. It is essential for the reporting process to be confidential to ensure that the subject of a SAR is not 'tipped off'. This also means that no third-parties or media organisations should be informed of the circumstances, regardless of how prominent the parties involved may be.

Once reported, SAR documents are held in the strictest confidence and stored on a secure system. Employees that report suspicious activity are also granted special privileges that are designed to keep them anonymous.

How Do You Submit a SAR?

Businesses in the UK can submit a suspicious activity report either as a physical file or digitally using the SAR Online System.

SARs can be accessed via the NCA website, and the law enforcement agency recommends using the online system when requesting a defence against money laundering (DAML). This may might occur when a financial institution suspects that it has dealt with criminal property in a way that could amount to a principal offence under the Proceeds of Crime Act 2002.

Where Can I Find SARs Forms?

The majority of countries facilitate SAR filing via an online system. This makes it easy to submit reports about potential money laundering or terrorist financing within the legally mandated timeframe.

Documents related to SAR filing can be found on the NCA website. The UK's electronic SAR filing system can be accessed via the UKCIU website.

Guard Against Money Laundering with Red Flag Alert

Businesses and financial institutions are duty-bound to report known or suspected financial crime, including potential fraud, tax evasion, money laundering, and terrorist financing. They can do this by monitoring each client transaction and submitting SARs to law enforcement agencies.

Red Flag Alert makes it easy for businesses to stay on top of their compliance obligations. With AML checks and enhanced due diligence support, our solution provides an accurate financial overview of every company in the UK. This means you can quickly gather all the date needed to submit an accurate SAR.

Users benefit from real-time updates, an extensive bank of data, and features that can improve the client onboarding process. The system is updated every day and can help to simplify the process of monitoring clients - all while maintaining a secure audit trail.

To discuss how Red Flag Alert can help your business meet AML requirements quickly and easily, contact Richard West on richard.west@redflagalert.com or 0344 412 6699.

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Mark Halstead Mark Halstead Partner

Mark's experience is big data analytics, financial services and building businesses provides Red Flag Alert with strategic direction.