On September 18, 2012 FinCEN held an Informational Webinar regarding the new FinCEN Suspicious Activity Report (SAR).
The corresponding, full PowerPoint presentation of the recorded version of this Webinar is available HERE.
For those interested in actually viewing the Webinar, HERE is the link to the FinCEN webpage.
Recently, FinCEN issued two important reports (available in our Library):
- SAR Activity Review – Trends, Tips & Issues (Issue 22)
- Mortgage Loan Fraud Update - Suspicious Activity Report Filings in 2nd Quarter 2012
The first report offers significant insight and guidance in monitoring suspicious activity, and the second report provides important insights regarding SAR filings related to mortgage loan fraud. For years we have worked with our bank clients on auditing their SAR filings and AML compliance, and I can vouch for the practical advantages of reading these on-going FinCEN reports to enhance your risk management responsibilities.
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IN THIS ARTICLE
SAR Narrative: "5 W's and the How"
Mortgage Loan Fraud - Statistics and Charts
Foreclosure Rescue Scams on the Rise
California: Highest 2012-Q2 Foreclosure Rescue SARs
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SAR Narrative: "5 W's and the How"
In the recent SAR Activity Review, sections are provided that outline the basic aspects toward filing a SAR. In particular, the section on writing an effective SAR Narrative is important to consider.
FinCEN rightly states that the narrative "is a critical part of the SAR because it is where the filer can summarize and provide a more detailed description of the activity being reported." For that reason, it is essential that the narrative be clear, complete and thorough.
This section of the FinCEN report offers the "5 W's" that I have written about extensively as a way to develop the SAR narrative. (See, for instance, my magazine article, Anti-Money Laundering Program - Preparation is Protection, August 2012.)
Our clients have learned how to use this narrative method. The FinCEN report does not mention the "How" narrative that I have advocated - and which I will discuss below. In my view, the Anti-Money Laundering Program should have an appendix devoted exclusively to the SAR Narrative procedures, especially outlining the "5 W's and the How" method of writing it.
The narrative must be clear, complete and thorough and the method I advocate is an effective means toward accomplishing these goals.
FinCEN's outline is rather brief, so I will provide a much more extensive set of action steps for you to follow.
The following are the "5 W's" method provided by FinCEN, after which I will add some remarks about narrating the "How".
Who is conducting the suspicious activity?
While one section of the SAR form calls for specific suspect information, the narrative should be used to further describe the suspect or suspects, including occupation, position or title within the business, and the nature of the suspect’s business(es). If more than one individual or business is involved in the suspicious activity, identify all suspects and any known relationships amongst them in the Narrative Section.
While detailed suspect information may not always be available (i.e., in situations involving non-account holders), such information should be included to the maximum extent possible. Addresses for suspects are important: filing institutions should note not only the suspect’s primary street addresses, but also, other known addresses, including any post office box numbers and apartment numbers when applicable. Any identification numbers associated with the suspect(s) other than those provided earlier are also beneficial, such as passport, alien registration, and driver’s license numbers.
What instruments or mechanisms are being used to facilitate the suspect transaction(s)?
An illustrative list of instruments or mechanisms that may be used in suspicious activity includes, but is not limited to, wire transfers, letters of credit and other trade instruments, correspondent accounts, casinos, structuring, shell companies, bonds/notes, stocks, mutual funds, insurance policies, travelers checks, bank drafts, money orders, credit/debit cards, stored value cards, and/or digital currency business services. Specific suspect identifying information is provided in the relevant Suspicious Activity Report for RMLO filings.
In addition, a number of different methods may be employed for initiating the negotiation of funds such as the Internet, phone access, mail, night deposit box, remote dial-up, couriers, or others. In summarizing the flow of funds, always include the source of the funds (origination) that lead to the application for, or recipient use of, the funds (as beneficiary).
In documenting the movement of funds, identify all account numbers at the financial institution affected by the suspicious activity and when possible, provide any account numbers held at other institutions and the names/locations of the other financial institutions, including MSBs and foreign institutions involved in the reported activity.
When did the suspicious activity take place?
If the activity takes place over a period of time, indicate the date when the suspicious activity was first noticed and describe the duration of the activity. Filers will often provide a tabular presentation of the suspicious account activities (transactions in and out).
While this information is useful and should be retained, do not insert objects, tables, or pre-formatted spreadsheets when filing a SAR.
These items may not convert properly when keyed in or merged into the SAR System. Also, in order to better track the flow of funds, individual dates and amounts of transactions should be included in the narrative rather than just the aggregated amount.
