Legal Definitions - suspicious-activity report

A Suspicious Activity Report (SAR) is a confidential document that financial institutions are legally required to file with federal authorities when they detect or suspect certain types of illegal financial activity. This report serves as a crucial tool in the fight against financial crimes like money laundering, terrorist financing, and fraud, by alerting law enforcement to potentially illicit transactions or behaviors.

Here are some examples of situations that would typically lead a financial institution to file a SAR:

• Example 1: Unusual Large Cash Transaction

  Scenario: A customer who typically uses electronic payments for their small online business suddenly attempts to deposit $75,000 in cash, consisting of various denominations, into their business account. They are unable to provide a credible explanation for the sudden, large influx of physical cash, which is significantly out of line with their usual business operations.

  Explanation: The bank's compliance team would likely file a SAR because the transaction is highly unusual for this customer's profile and involves a substantial amount of cash without a clear, legitimate source. This raises suspicions of potential money laundering, tax evasion, or other illicit activities, obligating the financial institution to report it to federal regulatory authorities.

• Example 2: Structuring Deposits to Avoid Reporting Thresholds

  Scenario: Over a period of several days, a customer makes multiple cash deposits, each exactly $9,500, into different branches of the same bank. The total amount deposited over this short period exceeds $30,000, but each individual deposit is just below the $10,000 threshold that would trigger an automatic Currency Transaction Report (CTR).

  Explanation: Financial institutions are required to report cash transactions over $10,000. When a customer intentionally breaks up larger sums into smaller deposits to avoid this reporting requirement, it is known as "structuring." This behavior is a strong indicator of an attempt to conceal the origin or destination of funds, often associated with illegal activities, and would prompt the bank to file a SAR.

• Example 3: Attempted Fraudulent Account Opening

  Scenario: An individual attempts to open a new bank account using identification documents that appear to be expertly forged. When a bank teller questions the authenticity of the documents, the individual becomes agitated, provides inconsistent answers, and then abruptly leaves the bank without completing the account opening process.

  Explanation: The bank would file a SAR because the attempted use of fraudulent identification and the individual's suspicious, evasive behavior strongly suggest an attempt at identity theft, financial fraud, or other criminal activity. Even though no money was exchanged, the *attempt* to engage in a suspicious activity is sufficient grounds for the financial institution to file the report.