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7/19/2006, 5:59 am

Suspicious Activity Reports (SARs) are being filed by banks in unmanageable numbers according to a story on the MSN Money site. Banks file SARs to protect themselves from Federal fines. More than 1 million SAR filings with the Financial Crimes Enforcement Network (FinCEN) are expected in 2006.

A SAR is a report that financial institutions are required to file when they notice a transaction that is ’suspicious’. There are guidelines for banks and other financial institutions to use in determining what ’suspicious’ means, but ultimately, it’s the responsibility of the bank to correctly determine whether a transaction qualifies for reporting.

The program was designed in 1996 to gather information about ’suspected criminal violations of federal law or a suspicous transaction related to money laundering activity, or a violation of the BSA (Bank Secrecy Act)’. In other words, it’s a good thing … but appears to be going bad because of the hypersentive reporting of financial institutions.

Learn more by reading these two articles:

Why Your Bank Thinks You’re a Terrorist on MSN Money

Guidelines for filing a Suspicous Activity Report on Bankrate.com

Finally, no one at your bank is permitted to notify you if a transaction has been reported. But, as with most things in life, the cliche, ‘honest people sleep well,’ holds true. It’s probably true that only those who initiate suspicious transactions have reason to worry about their bank filing a SAR report. What I think would be interesting to see would be a comparison of reporting behavior by small, community banks and large, megabanks. I imagine a small town bank would report far fewer SARs than a large, impersonal financial behemoth. Just a guess, though …

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