Setting up an AML Compliance Program Part V: Filing SARs

Setting up an AML Compliance Program Part V: Filing SARs

June 16, 2021

Filing SARs Doesn’t Have to Hurt! RegTech Can Automate Tedious Tasks, Reduce Costs, and Maybe Even Help Stop Crime

Slight possibility you could help identify a crime ring? Okay, that does make regulatory compliance kind of exciting.

Filing out long, complicated forms? Ah, not so much.

We’ve been going fairly light in this series on explaining how Hummingbird’s anti-money laundering RegTech tools can help, but Suspicious Activity Report (SAR) filing has such a glaring need for automation that we have to be blunt here: it’s time to move on from manual processes. Efficiency and cost reduction are compelling reasons for your company. Better SAR data accuracy and quality could serve your compliance performance, employee morale, and society.

SARs are the predominant channel for information in AML compliance. If a case investigation concludes a customer’s activity could be suspicious, your company will then need to file a SAR (or a UAR). To recap from earlier, suspicious activity includes financial transactions that: do not make sense, are unusual for a customer, or appear to be obfuscating another transaction.

The SAR form has many fields, nebulous requirements, and is tricky to validate. Overall filing them is a complex process, prone to errors. Without automation each SAR can take investigators around 2-4 hours. Financial institutions spend 28% of total compliance costs on this practice area. Incorrect or overlooked SARs can result in costly penalties and painful remediation requirements.

Basically SARs are difficult to operationalize at a financial institution and can be a huge drain on compliance resources. Technology can help make SAR information more accurate, complete, and useful. AML RegTech tools can help:

  • Ensure investigations follow a thorough process.
  • Get more detailed information into SARs.
  • Spot trends across different reports.
  • Run checks to ensure that the information is valid and meets specifications.
  • Use automation to eliminate the time spent filling out forms by hand.
  • Increase information security through direct integration with FinCEN rather than maintaining PDF reports on employee computers.
  • Deliver the information to law enforcement quickly.

Most financial institutions file SARs directly to a regulatory agency—overall they filed 2.5 million in 2020.  But fintechs that have a compliance program in order to support a banking partnership typically file Unusual Activity Reports (UARs) to the regulated financial institution, which then holds the responsibility for determining in each case whether or not to file a SAR. Note that the word “suspicious” carries legal weight for regulated financial institutions. Fintech partners should be very careful about how and where you use it.

These two types of reports have different requirements for formatting, timelines, and content. Filing them the right way, at the right time is important. Hummingbird makes filing either type of report easy—we know the regulations inside-out and have built the technology to automate the process. To ensure that your banking partner or regulatory agency receives accurate, timely, and correctly formatted reports consider how a Hummingbird system could be a strategic choice for your company.

Then, as we mentioned earlier, there’s also your compliance team’s sense of purpose and the good of society. The information in SARs can be difficult to parse, and there are significant unmet needs for collaboration among the financial industry, regulators, and law enforcement. A recent U.S. Government Accountability Office report addresses how law enforcement “may be underutilizing these reports — to the detriment of their investigations.” Meanwhile criminals are getting increasingly sophisticated in their use of technology. Better data and broader adoption of AML RegTech across institutions could enhance communication and capabilities among banks, regulators, and law enforcement.

Read Part I: Start Here
Read Part II: KYC
Read Part III: Transaction Monitoring
Read Part IV: AML Case Investigations