Tags: CEO Finance

Suspicious Activity Reports: Why They Matter

The Bank Security Act (BSA) states that financial institutions have an obligation to aid law enforcement in identifying suspicious financial transactions through what is known as a Suspicious Activity Report (SAR). As banking agencies note, SARs are key in unveiling money laundering, terrorism, terrorist financing, and other crimes involving finance. The BSA ensures that SARs and any information pertaining to the existence of a SAR are confidential and are not to be disclosed by banks unless extenuating circumstances exist.

Banks utilize numerous methods to identify potentially suspicious activity, such as activity identified by employees during day-to-day operations or transaction and surveillance monitoring system output. However, civil litigants have recently begun requesting SARs, and some courts have thus required banks to produce material related to internal investigations of suspicious activity.

Most recently, in the case of Wultz v. Bank of China the court refused to protect the confidentiality of SAR materials because “investigatory documents do not by themselves reveal the existence of a SAR.” Further, the court expressed a desire to only protect “evaluative” documents pertaining to client information.

The lines with SAR, such as what is considered substantial evidence and what information is allowed to be disclosed, continue to blur. In March 2012, the Financial Crimes Enforcement Network (FinCEN) stressed the importance of legal counsel respecting the confidentiality of SARs, due to concerns that an increasing number of private parties who are unauthorized to view SARs are seeking the reports from financial institutions. Unauthorized legal counsel is not allowed to request or view SARs, even for litigation purposes.

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If you'd like to read more articles by Jeana Goosmann, follow her blog here or on  JD Supra here. If you have any questions on the above, don't hesitate to contact Goosmann Law Firm below. 


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