On May 26, 2020, the Financial Crimes Enforcement Network, (“FinCEN”) issued a notice in the Federal Register updating cost estimates related to compliance with filing suspicious activity reports (SARs). Under the Bank Secrecy Act, 31 U.S.C. § 5311 et seq., certain businesses providing financial services are required to file SARs upon suspicion that a crime or violation was committed by, at, or through that financial institution (so long as certain dollar thresholds are met), or upon suspicion of insider abuse of any kind.
Over the past several months, FinCEN has undertaken an extensive review of the costs associated with identifying potentially suspicious cases, reviewing case documents, and preparing and filing the resulting SAR. FinCEN estimates, in general, that SARs can take anywhere from 20 minutes to several days to complete, based on the level of complexity involved, whether the SAR is an original or an update, and whether the firm is batch filing or filing case-by-case. Embedded in FinCEN’s estimates are several key statistics regarding the volume and origin of SARs from the last year. These statistics indicate that money services businesses and banks that offer more complex services and business lines are more likely to file more “complex” SARs, i.e., SARs that involve more transactions, more suspects, and longer narratives.
In 2019, 12,148 financial institutions submitted 2,751,694 SARs. Over 85% were filed by banks (54.4%) and money services businesses (MSBs) (32.9%). Credit unions (7.3%), casinos (2.3%), and broker dealers (1.4%) rounded out the top five categories of filers. Ten filers, six banks and four MSBs, accounted for 49% of all SARs filed.
FinCEN’s extensive review of the 2019 SARs filings determined that, on average:
- There appears to be a positive correlation between the complexity of a financial institution’s main business lines and the complexity of its SARs: the more business lines maintained by a filer and the more complex those business lines are, the higher the number of suspicious transactions identified in a SAR and the longer the narrative.
- Non-depository institutions with a single primary business line (i.e., loan and finance companies or casinos) file the shortest and least complex SARS.
These findings may reflect an expectation on the part of FinCEN and other regulatory and law enforcement agencies that banks and MSBs with complex business lines will file a higher number of and more detailed SARs in any given period than other regulated financial institutions. Accordingly, firms of this type that do not meet this expectation may generate increased regulatory scrutiny of their suspicious activity detection programs.