Tackling Suspicious Activity Report (SAR) Weaknesses – Part 1

Brandi B. Reynolds, CAMS-Audit

Just like “Trix are for Kids”, “SARs are for Law Enforcement”. Although auditors and examiners review SARs, SARs are primarily written to help law enforcement officers bring down the bad actors. The more clearly and comprehensively a SAR is written, the more utility it will provide to the law enforcement officers reading the SAR. This utility has become such an important topic, Compliance Officers have started to include “Number of SARs that generated Law Enforcement follow-up questions” as a quarterly KPI (key performance indicator) in their Board reporting.

So, imagine this scenario: You’re a new Compliance Officer in a department of entry- to mid-level compliance professionals. When you joined the department, you noticed that the department’s SAR narratives needed enhancement. Technically, the SAR narratives weren’t incorrect, but they needed improvements to be truly helpful to law enforcement.

You met with the Team over a series of Team meetings and provided guidance on the bigger picture SAR topics, as well as the following details.

The Bigger Picture

• Ensure that the first paragraph of the SAR is enticing. In the first few sentences of the SAR, you need to inform the reader (law enforcement) about what exactly you’re filing on, what is suspicious, and give the reader a reason to keep reading. You’re telling the reader that there’s quite a story in the paragraphs below, and you give them a reason to spend time on it. Resist the urge to include a lot of data in the first paragraph, other than total activity if it’s a sizable attention-grabber.
• It sounds trite, but ensure that the story being told is clear, complete, and accurate. This doesn’t just pertain to numbers, but also to the story itself. You need to bring the reader from point to point, describing along the way the activity that is suspicious and why. Example, a personal service provider who has cash deposit activity increase 10-fold during the pandemic would definitely raise suspicion. Emphasize for your reader that the activity was cash-in, and that the activity actually increased during the pandemic, especially if the time period coincided with the total lockdown. That activity would be illogical — cash activity should not increase in a dormant business.
• Note that an inaccurate and incomplete story results from an analyst who is either too inexperienced to understand what really happened, rushed to the point where critical points are left out, or simply lacks writing skills. To address the problem, BSA Officers should require the staff to utilize these two compensating controls:
  • A SAR-Writing Checklist and
  • An iterative internal Quality Assurance (QA) process for SAR writers. An iterative process involves frequent feedback to the SAR writer, as opposed to the QA person making the changes to the SAR and filing it.  Most SAR writers will catch on quickly after seeing how a more experienced SAR writer would improve the SAR.

• Avoid the urge to write a transcript if it doesn’t add value.  Nothing will put your reader to sleep quicker than a transcript of every transaction.  If transactions can be summarized while still making the point, then do so.  A longer SAR isn’t necessarily a better SAR.  Take advantage of the attachment feature of the SAR for case details.

Now for the Details

The devil is in the details, and when it comes to SAR findings in an audit or exam report, it’s usually the details that give rise to the findings.

• Discrepancy with the dates of activity. A finding will result when the dates of activity in the SAR form fields do not match up to the dates of activity in the narrative. (Remember the SAR checklist mentioned above? Be sure a check for the accuracy of the dates is on the checklist!) A discrepancy of dates typically happens when the SAR writer realizes that additional activity was suspicious, and writes about it in the narrative, but forgets to update the SAR form fields.
• Discrepancy with the dollar amounts of suspicious activity. Similar to the above, if the dollar amounts of the activity described in the narrative don’t match the dollar amounts input on the SAR form fields, an auditor or examiner will likely cite a finding. This is also a SAR Checklist item.
• Discrepancy with your subjects.
  • In the SAR form field, you indicate a subject, but the narrative is written in such a manner as to suggest there were really 3 different subjects. Additionally, if you are writing a SAR and your customer was actually the victim of the fraud or other illegal activity, don’t show your customer as the subject.  This is common with fraud SARs, elder abuse SARs, and human trafficking SARs; Or
  • You’re filing on a business entity and on the owner of the business because you see similar suspicious activity in the business account and in the consumer checking account, yet you only include one subject instead of both.

Both types of errors with the subjects of the SAR can be addressed in the SAR Checklist.

As you can see, the SAR Checklist is extremely valuable in eliminating discrepancy errors between the SAR form fields and the narrative.

Our next article, Tackling SAR Weaknesses – Part 2, will address special considerations with three common SARs:

• Structuring;
• Elder Financial Abuse; and
• Human Trafficking.

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