Suspicious Activity Report Best Practices for MSBs
As an MSB, you are probably aware that you have to file a suspicious activity report (SAR) if you detect any kind of facts that point to suspicious financial activity. This is a necessary requirement that can either create a layer of work that detracts from your focus of growth or can become an integral part of your business and fuel growth.
Similar to a Currency Transaction Report (CTR), a SAR reports the information of the customer in question but then gives as much information about the actual suspicious activity found by your team.
Depending on the activity, some customers can fly under the radar if your team isn’t trained to spot subtle actions that add up over time or point to some larger issue. Unlike a CTR, suspicious activity is not always as noticeable. Having a team that is defaulting to a mindset of watching for suspicious activity versus trying to catch things that have already happened is a good start to making this a priority.
Here is a good example of the not so obvious suspicious activity:
Frank Smith comes into your business and asks for 12 money orders in the amount of $1000.00 each. The cash Frank hands over consists of mostly large bills. When you ask him for additional information to complete your CTR he gets defensive and is wondering why you are asking him so many questions. He asks you how much money he can deposit without having to provide additional information. He gets irritated and decides to cancel the transaction and take all his cash back.
This is an example of structuring.
Structuring is the breaking up of transactions for the purpose of evading the Bank Secrecy Act reporting and record keeping requirements and, if appropriate thresholds are met, should be reported as a suspicious transaction under 31 C.F.R. § 103.18.
Why should you make your SAR a priority?
Besides the obvious negative results that will come at some point, making your SAR process a priority puts you in the driver’s seat in your business. You are choosing to stay on top of something that will inevitably blow up if not paid significant attention.
By making this a priority you are also choosing to say no to certain less than desirable customers who might actually be a good source of revenue. As an MSB, at times you can be incentivized to ignore some types of suspicious activity. The trade off between servicing and not reporting customers who bring you revenue or not servicing those customers, is a decision that will keep you in business for many years and allow you to sleep soundly at night. Just remember that one bad customer can put you out of business.
How to properly approach SAR filing:
Use compliance as your competitive advantage. We see MSBs go out of business all the time because they aren’t prioritizing the efforts that make up the fundamentals of their business.
Have a set process for how your team identifies and reports suspicious activity. Build this into your culture. Hiring people who want to help you run a business that’s above board and giving them a solid process, means you don’t have to manage them as closely and can still get the same result.
Reach out to our BSA team through our website at mysuretybank.com/msb for more information or connect with directly our CEO by email: firstname.lastname@example.org.
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