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| Suspicious Activity Reports: Terrorism
and you |
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Financial institutions, which long had been required
to have anti-money laundering, or AML, programs, have come under
increased pressure in recent years as identity theft and computer-related
financial crimes have grown exponentially. The feds came down hard
on banks that failed to adequately guard against money laundering.
Among the most heavily fined offenders was Riggs Bank, fined $25
million in 2004, followed by $80 million in penalties against ABN
AMRO Bank in 2005 and a $10 million fine against BankAtlantic in
2006.
Banks sat up and took notice, and the SARs began to
flow. The reports from depository institutions alone climbed rapidly,
more than doubling in four years.
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Suspicious Activity Report filings
by year |
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| 1996 |
62,388 |
| 1997 |
81,197 |
| 1998 |
96,521 |
| 1999 |
120,505 |
| 2000 |
162,720 |
| 2001 |
203,538 |
| 2002 |
273,823 |
| 2003 |
288,343 |
| 2004 |
381,671 |
| 2005 |
522,655 |
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"I believe there will be a million SARs filed
(by banks) in 2006," says Steve Bartlett, president and CEO
of Financial Services Roundtable, a Washington, D.C. association
of the largest financial services companies. "A million SARs
get in the way. The law enforcement agencies have a difficult time
finding real suspicious activity. It's the old joke -- where's the
best place to hide a leaf? On the ground with a million other leaves."
SARs filed by banks or other institutions simply to
avoid the risk of penalty are referred to as "defensive filings."
Banks are under pressure to file, not only from the government but
from their attorneys. John Hall, spokesman for the American Bankers'
Association, was quoted in the National Law Journal in May 2005
as saying, "Our bank counsel are saying if it smells just the
least bit, file. File early and file often."
The abundance of defensive SAR filings caught the
attention of officials at the Financial Crimes Enforcement Network,
or FinCEN, the agency that administers the Bank Secrecy Act. In
April 2005, then-director William Fox wrote in "The SAR Activity
Review":
"While the volume of filing alone may not reveal a problem,
it fuels our concern that financial institutions are becoming
increasingly convinced that the key to avoiding regulatory and
criminal scrutiny under the Bank Secrecy Act is to file more reports,
regardless of whether the conduct or transaction identified is
suspicious. These 'defensive filings' populate our database with
reports that have little value, degrade the valuable reports in
the database and implicate privacy concerns. Financial institutions
from the smallest community banks to the largest international
banks are telling us that they would rather file than face potential
criticism after the fact."
Fox went on to say that the solution to defensive
filings is a "single, clear policy on suspicious activity reporting
combined with consistency in the application of that policy."
A few months later the federal banking agencies and FinCEN issued
a new anti-money-laundering examination manual. The manual was supposed
to give clearer guidance to banks and bank examiners and make interpretations
of the Bank Secrecy Act more consistent.
But with the new guidance now in place for a year,
critics say the situation hasn't improved much.
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