Suspicious Transaction Reporting – A Checklist

First Reviewed : January 30, 2019

Last Reviewed: January 30, 2019

Tariq Hafeez

Suspicious Transaction Reporting (STR) or Suspicious Activity Reporting (SAR) has become the prime focus of the finance industry, which is particularly under the radar of law enforcement agencies and regulators. Financial companies are struggling to comply with the Bank Secrecy Act (BSA) and to efficiently report suspicious transactions. SARs are critical to the nation’s BSA and effective utilization of financial data can serve as a deterrent to terrorism financing and money laundering . Maintaining a structured and streamlined SAR process helps organizations file complete, informative, and timely SAR reports. Companies need to ensure that their SAR process includes but is not limited to policy, privacy, civil rights, technology, training, and outreach.[1]

1. Advocate the SAR Process

First and foremost, the company’s leadership team must vigorously advocate the SAR process both within and outside the company. They must effectively communicate this to their employees and ensure that adequate measures are taken to implement the process as and when necessary.

The company must work jointly with fusion centers, homeland security officials, Joint Terrorism Task Forces (JTTFs), and the eGuardian programe.[2] The senior-most executive team must discuss the company’s SAR process in detail with their senior management, designate appropriate command staff, and organize training programs for both the senior management and the command staff on the optimal implementation of the SAR process.

2. Curate the SAR Process

The second step would be to weigh the pros and cons of the existing SAR process and assess if the company needs to revise or amend it. The company must create Standard Operating Procedures1 (SOPs) that outline the collecting, processing, analyzing, and reporting of any suspicious activity. The company needs to, at all times, ensure that it incorporates national standards and guidelines for the SAR process.

To begin with, a competitor analysis of SAR processes will help determine where the company is lacking and identify what enhancements it needs to make to its process. Collection of suspicious activities can be a momentous task. It is wise to establish intake points for them, and set up electronic collection for the Records Management System[1] to easily access and analyze the data. The company can also ease the reporting by amending other reports such as basic incident report, offense report, information report, field interview report etc.[1] to include fields that can record suspicious activity data.

3. Abide by National Guidelines

Following the national guidelines will help streamline the SAR process and ensure that your practices meet all requirements. The company should establish a response system for the SAR data, i.e whether to respond, refer, determine unfound etc.[1] .It must use the standardized codes presented in the Information Sharing Environment (ISE) Functional Standard (FS) Suspicious Activity Reporting (SAR). It must also designthe data transfer process to the fusion center and JTTF, and confirm that reports are vetted within 24 hours. Also, the company must create a data retrieval system and a feedback process that conveys results to the reporter of the SAR data.

4. Maintain a Privacy Policy

It is crucial that the company’s SAR process doesn’t traverse civil rights. Developing a concrete privacy, civil rights, and civil liberties[1] policy collaboratively with privacy/legal advisers is key. The company should publicize this privacy policy throughout the organization to educate all employees about subtle transgression possibilities. Also, the company can broadcast this privacy policy to the public, community groups, and any other groups who may need to be aware of it.

5. Train Personnel

The agency needs to institutionalize the SAR process by providing training to all employees. Creating a training module and schedule, and making sure that the training includes but is not limited to[1] the following component scan serve as a vital initiative:

• The company’s privacy policy

• The basis and steps of the SAR process

• Collection of SAR data through behavior-based or intelligence-led policing

• The SAR data processing method

• The SAR data analyzing method

• The suspicious activity reporting method

• The guidelines for sharing the suspicious activity information

The company should also incorporate a training assessment to fill gaps and advance it as and when necessary.

6. Continuously Optimize the SAR Process

Conducting regular audits of the SAR process, using metrics[1] to determine its effectiveness, and modifying the process to suit changing trends will lead to a system that is alert and capable of dealing with suspicious activity. The company should utilize the SAR process to enforce alerts, notifications, and other pertinent reports. It should also appoint a liaison officer to ensure that terrorism-related activity is being reported to the right personnel, JTTFs, fusion centers.

7. Educate and Partner

The agency should strive to retain transparency and share its SAR process with the community[1] through email, newsletters, commercials, interactive programs, workshops, flyers, and other campaigns. A participative program that engages community stakeholders may even help with the optimization of the SAR process. Maintaining an E-Tips systems for external stakeholders will provide them the ability to report suspicious activity[3].

Partnering with law enforcement agencies, public health & safety agencies, private sector agencies, and other external stakeholders will help reinforce the SAR process. Last but not the least, the company must constantly educate itself and its employees by accessing the state’s criminal justice network, intelligence database, and fusion center resources. As an added measure, the company can train its personnel to export RMS data in the National Information Exchange Model (NIEM) Extensible Markup Language (XML)format for SARs[1], which will significantly improve the SAR process..

Conclusion

Stock market crashes, the credit crisis,and rising fraudulence are causing regulators and law enforcement agencies to scrutinize financial institutions for timely delivery of Suspicious Activity Reports. Thus, it is in every financial institution’s best interest to create a simple, standardized, and effective SAR process that will bolster the company in the event of suspicious transactions and lead to promising SAR practices that will help mitigate or prevent emerging criminal and terrorist activity[3].

LegalEase Solutions offers corporate legal departments and law firms innovative support with compliance, Contract Life cycle Management, and legal intelligence. Over the past decade, we have become a premier legal service provider for the finance industry, with expertise in suspicious transaction reporting, anti-money laundering auditing, and information security. We are designed to function as an extension to your legal department, providing you the capabilities and resources to stay up to date with your needs. If you have a project you need a hand with, feel free to reach out to us at contact@legaleasesolutions.com. Our team is happy to assist.