When SARs Fail: Why Quality Matters in Financial Crime Investigations
Financial crime investigations are multi-faceted and complex. Gaining insight into the activities observed by financial institutions is an essential and valuable asset for investigations.
The investigative process is like a puzzle being carefully crafted together, while not knowing what the complete picture looks like. The objective is to follow the evidence, gather the facts, and put together a picture based on what the evidence says.
Imagine that you are an investigator, leveraging financial clues that you hope will lead to uncovering what it is that you need to know to build a solid financial crime case for prosecution.
And one of those tools at your disposal is a SAR.
A SAR is found within the FinCEN database, which was filed by a local bank and relates to your investigation. The hope is that what is found within the SAR is useful in the investigation.
While a number of scenarios can play out, in this example, one of two scenarios presents itself.
Scenario 1:
The effectiveness of the SAR was either limited or ineffective because of how poorly it was written, lacked cohesion, included outdated information, and did not contain enough information to provide a comprehensive picture of the suspicious activity.
Additionally, the optional attachment, a CSV file, was not described in the narrative section of the SAR, further adding confusion to what the suspicious activity was.
Keywords noted in FinCEN advisories were not used.
Scenario 2:
The SAR was effective because it was well-written and contained valuable and timely information that provided a comprehensive picture of the suspicious activity.
The contents of the attached CSV file were described in the narrative section of the SAR so that law enforcement was able to understand what was included within the optional CSV file attachment.
Keywords noted in FinCEN advisories were used.
SARs fail when…
It is just a checkbox on an extensive list of compliance requirements to simply check off to say that the financial institution is complying with its regulatory requirements.
Analysts and investigators cannot easily access the information that they need to write a comprehensive SAR.
The quality control and assurance processes in place focus more on the grammatical errors that were found in the process, but ignore the material quality issues that should have been focused on instead.
A compliance department has inadequate resources to maintain its SAR program, leading to filing untimely, inaccurate, and poor-quality SARs.
A financial institution files one, then creates a mountain for law enforcement to climb over to get information derived from the SAR because it is more focused on protecting itself from liability than helping law enforcement.
SARs are such powerful tools. Not only do SARs help identify how money moves through accounts along with the financial products used to facilitate its movement, but there are other clues that can be found in a SAR that are not captured within transaction activity in an account statement that are valuable to investigators:
Digital footprint of account access information, such as device login information, IP address with dates and timestamps, and geolocation data
Video surveillance of branch activity is kept for a limited period of time
Customer service correspondence
Cash exchanges conducted at financial institution branches are logged in teller journals
Safe deposit box entry data
Use of the bank’s night drop access for deposits
Whether the same bank personnel are always involved with the suspicious activity identified within the SAR
Any other persons accompanying the subject during branch visits
KYC information collected during onboarding or periodic reviews
Statements made to bank personnel related to the source of funds, occupation, or other information that provides relevance to the activities observed
Whether multiple persons are conducting activities on bank accounts that are inconsistent with the account’s purpose
Whether cash is requested or deposited in certain denominations
Information on customer behavior, particularly erratic or suspicious behavior
Notes made at the account or customer level by bank personnel
Notes collected by bank personnel from the subject
What alerts were generated, or what information led to the identification of the suspicious activity
We could keep going, but then, it may no longer be merely an article.
As a financial institution, think about the information available to analysts and investigators who conduct SAR investigations and write narratives. How can you support their work to ensure consistently well-written and valuable SARs? What is your institution's collaboration with law enforcement like? Are you aware of what they need for certain types of criminal activities noted within SARs? Do you know that this can vary across law enforcement agencies and regions? And now that you know this, how can both sides work together to align their efforts?
Before I wrap up, there are a few other things to keep in mind.
Law enforcement agencies vary in how they approach certain types of investigations.
This varies across local, state, and federal agencies, as well as across regions.
Local law enforcement agencies may look for certain red flags when reviewing SARs that are related to certain enforcement practices within their regions for certain types of crime.
Law enforcement agencies are not your financial institution’s regulators or examiners.
Without well-written, comprehensive SARs, the investigator has a limited amount of information to work with and can hamper their ability to follow the money and put those puzzle pieces together to build the financial crime case.
A well-built case by knowledgeable investigators increases the likelihood of successful prosecution. And a well-written SAR goes a long way in this process.
So, as you can see, when a financial institution utilizes the information that it has at its disposal to draft a comprehensive narrative using accurate and timely information, keywords from FinCEN advisories, and properly uses the optional CVS file attachment, this can go a long way to clearly let law enforcement know what you, the financial institution knows about the subject(s) of the SAR and what it is trying to let law enforcement know.
