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Feb2 - 21

5 Common Suspicious Activity Report Filing Mistakes

After the implementation of the USA PATRIOT Act in 2001, filings of Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network (FinCEN) have enormously increased.

According to data provided by FinCEN, the number of SARs continues to increase each year. In 2019, more than 2.3 million SARs were filed. This is an average of 6,305 per day.

FinCEN’s data for January through August 2020 showed almost 1.6 million, or an average of 6,452 SARs filed per day.

SAR reporting is helpful to law enforcement; therefore, a company’s SAR reporting should be as accurate and precise as possible. A degree of inaccuracy is unavoidable in some loan-oriented situations (“we know the guy is paying with laundered money, we just can’t prove it”). But the benefits of filing outweigh the risks (“you’re now an accessory – you knew it was laundered money and didn’t tell us”).

The SAR is not a complex filing; it’s really the history of an event. By following the basic rules of journalism, a filer will be able to send off a complete and informative SAR narrative.

The 5 Ws & How

The ‘Five Ws and How” form the basis of journalism and of SAR filing. They serve as a checklist to help a filer in completing the SAR.

1) Who conducted the activity?

  • While building a SAR narrative, always talk about the suspect’s identity, if known, and the relationship of the suspect to your institution.

2) What led to the SAR?

  • Make sure to discuss the instruments involved and any activities that raised suspicions.

3) When did the activity occur?

  • The timings of the activities are crucial in a SAR narrative. State the exact date of the activities if it took place only once and state the amount of time if there was a pattern.

4) Where did the activity take place?

  • State the exact location, i.e., department, branch, or any other location where the activity occurred.

5) Why is the activity suspicious?

  • Describe why you believe the activity to be suspicious. Try to explain the logic behind your suspicion and use a persuasive tone to convince a hypothetical audience.

6) How did the activity occur?

  • Explain the method the suspect used to complete the transaction or pattern of transactions.

Five Common Mistakes

Reviewing our clients records and literature on SAR filings, these appear as the most common errors filers make in their SARs. Studying them should help you avoid making the same mistakes.

1) Empty Narrative Field

  • Sometimes the reporting party may fail to include the description of the suspicious activity. While the person who is filing the report might think that the data included is sufficient it may need expansion beyond the date and amount involved. State whether it was an ACH, an international wire, or an online banking transfer, for instance. Also, you may consider the date the activity was determined suspicious. Consequently, without the description, the SAR might lead to an incorrect investigation because the narrative description helps officials understand what has happened and why it is questionable.

2) Insufficient Narratives

  • Any narrative that does not explain the circumstances of the suspicious activity can be considered as an insufficient or inadequate narrative. When a narrative is incomplete or inadequate, FinCEN cannot figure out the nature and circumstances of the suspicious activity and probably can’t begin to investigate.

3) Inaccurate Special Responses

  • According to the instructions in SAR form, special responses are required when data is unavailable. Special Responses (for example, “N/A” or “Same as above”) should be correctly provided in the form according to the instructions.

4) Non-mandatory “Mandatory” Fields

  • Based upon FinCEN guidance FIN-20120G0002, financial institutions should provide the most complete filing information available whether or not the individual fields are deemed critical.

5) Incorrect Characterization of Suspicious Activity

  • It is very important that the characterization of suspicious activity should correspond to the information described in the narrative description. Together, they can give a clear picture of why and how the suspicions were raised.

To err is human, to improve is divine!

So how did you like our compilation? Have you made any mistakes mentioned? Or is there any mistake we might have missed? Feel free to reach out if you need a refresher on SAR filing requirements and best practices.

For more information on how Bates Group can assist with your compliance needs, please contact us.




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