Independent Banker - September 2018 - 23

Next: What UMBSs will mean for your community bank
Q Transactions conducted or attempted by, at or through
the bank (or an affiliate) and aggregating $5,000 or
more, if the bank or affiliate knows, suspects or has reason
to suspect that the transaction:
Q may involve potential money laundering or other
illegal activity
Q is designed to evade the BSA or its implementing
regulations
Q has no business or apparent lawful purpose, or is not
the type of transaction that the customer would normally
be expected to engage in, and the bank knows
of no reasonable explanation for the transaction after
examining the available facts, including the background
and possible purpose of the transaction.
Insider abuse and criminal activity exceeding the $5,000
and $25,000 thresholds, when detected, are most easily
identifiable and clearly require a SAR. But, what does it
take to detect criminal activity? What should bank employees
look for, and what should they do when they suspect
potentially illicit transactions or actions?
Five steps to SAR success
The BSA examination guidance maintains that effective
suspicious activity monitoring and reporting systems
include five key components:
1. Identifying and alerting on unusual activity
2. Managing the alerts
3. SAR decision making
4. SAR completion and filing
5. Monitoring and SAR filing on continuing activity
Identification-through employee training and internal
monitoring-is the foundation of the SAR process. The
bank may receive information from outside parties, such
as law enforcement inquiries or referrals, but employee
discovery is critical to compliance.
Training
BSA training should include background and technical
recordkeeping and reporting requirements, including
reporting activity that continues over an extended period.
It should also include the bank's procedures. To whom
should questions or alerts about unusual transactions or
behavior be referred? What bank form or electronic record
is used to document the occurrence(s)? What should the
bank employee tell the customer, if anything? (SAR information,
including the fact that a SAR was or was not filed,
is generally confidential and disclosed on a limited basis.)
Training that keeps bank staff
informed and empowered to
observe unusual or potentially
suspicious transaction
activity is ... the cornerstone
of SAR compliance.
Who can complete a SAR? Who must review, approve and
sign it? And, who can submit it to FinCEN?
Training should highlight types of day-to-day activities
that might be at risk for criminal activity, and the types
most likely in the department or operations of the employees
being trained. Use examples to breathe life into terms
like " criminal violations, " " aggregation, " " smurfing " and
" fraud. " Give examples of how a loan-fraud or check-kiting
scheme might look.
FinCEN offers an index of topics it has reported on in
The SAR Activity Review-Trends, Tips & Issues, a periodical
that discusses cases of suspicious activity and the
circumstances under which they occurred in financial
institutions. FinCEN also publishes enforcement actions
for violations of the BSA, including SAR violations, and
each includes an overview of the circumstances on which
the enforcement was based.
Procedures
A bank's BSA program should also include a defined system
of procedures for identification, monitoring, the
SAR decision-making process, maintaining supporting
documentation, filing SAR records, and pertinent communications
with FinCEN and the bank's primary regulatory
agency. The SAR process must be included in the scope of
the bank's periodic independent review of the BSA program.
SARs serve as vital law enforcement tools to identify and
track funds derived from criminal activity. Training that
keeps community bank staff informed and empowered
to observe unusual or potentially suspicious transaction
activity is a good risk-management practice, and the cornerstone
of SAR compliance.
Mary Thorson Wright, a former Federal Reserve examiner, is
a financial writer in Virginia.
independentbanker.org Q 23
http://www.independentbanker.org
Independent Banker - September 2018

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