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BENS tasked its members with a "Follow the Money" project in an effort to improve the government’s ability to identify, follow and disrupt financial activity related to terrorism. The Suspicious Activity Report (SAR) is the primary method for financial services firms to report activity that may be related to terrorism.

"The Suspicious Activity Report (SAR) system was created in 1996 to replace six overlapping methods of financial information reporting with a single, more uniform process. The SAR was designed to reduce paperwork for the banking community and to increase the amount of useful information available to investigators. SARs have been called "haystacks of needles", therefore it is crucial the information in these reports is systematically collected and analyzed carefully. Since the Patriot Act in 2001, the SAR process has expanded from money laundering detection to intelligence gathering for identifying financial transactions that may be related to terrorism. Moreover, the Patriot Act requires that many more financial institutions submit SARs resulting in a corresponding increase in the number of reports."

US government has expanded recommendations to recognize traditional money-laundering activity to include possible terrorist activity. These recommendations include:

Financial activity to and from countries identified as state sponsors of terrorism
Financial activity inconsistent with the stated purpose of the business
Financial activity not commensurate with stated occupation
Use of multiple accounts at a single bank for no apparent purpose
Importation of high dollar currency/traveler’s checks not commensurate with stated occupation
Structuring of deposits at multiple bank branches to avoid BSA requirements
Abrupt changes in account activity
Use of multiple personal and business accounts to collect and then funnel funds to a small number of foreign beneficiaries.

Financial institutions express a common concern that the SAR process lacks feedback to filers, i.e., their reports go to a "black hole" despite the publishing the SAR Activity Review Report, information about, and examples of, how SAR’s are being utilized.

Opinions differ as to source of the problem -- better process or systems -- but it is likely both.

I would tend to use this as a guide to how SAR does and doesn’t work in practice. Yes, "more frequent, more concise communication" would be better, and that may work with white collar crime, or organized crime.

It does not affect the off books method of money transfers of the hawala informal financial system in which merchants around the world act as intermediaries for money transfers and is so favored by terrorist groups.

Improving the Suspicious Activity Report (SAR)
Recommendations for Improving the Suspicious Activity Report (SAR)
Business Executives for National Security (BENS)
11 April 2003

Gordon Housworth

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