Financial groups cite challenges caused by suspicious activity report requirements

In a letter to the Financial Crimes Enforcement Network (FinCEN), a group of financial industry organizations outlined the challenges created by requiring financial institutions to fill out suspicious activity reports (SARs).

FinCEN is seeking comments on its proposal to renew, without changes, the form used by financial institutions to report suspicious transactions to the Treasury financial-crimes bureau. SARs are part of the federal anti-money laundering framework, and banks are required to file them to flag transactions that appear potentially suspicious.

The groups, including the Bank Policy Institute (BPI), Financial Technology Association, Independent Community Bankers of America, American Gaming Association, and the Securities Industry and Financial Markets Association, said FinCEN underestimates the time required for a bank to file a SAR.

A BPI survey found that banks spend 21.41 hours for every SAR filed, more than 10x FinCEN’s estimate of 1.98 hours. The process goes far beyond rote box-checking, they said, as it involves extensive due diligence, investigation and documentation.

The Anti-Money Laundering Act of 2020 requires the U.S. Treasury Secretary to review changes to financial institution reporting requirements related to SARs to reduce those that are unnecessarily burdensome and determine the appropriate dollar amount threshold for such requirements. However, the groups state that Treasury has yet to issue its report and any proposed adjustments in this area.

“We believe that FinCEN’s burden estimate of 1.98 hours per SAR substantially underestimates the amount of time required to thoroughly undergo the reviews and processes required under applicable requirements to file a SAR,” the groups wrote in the letter. “An institution’s process is not just the mechanical process of generating, submitting, and storing the SAR. This process includes the time dedicated to investigating the underlying reason for filing a SAR, obtaining and reviewing supporting documentation, conducting a second review, obtaining necessary approvals, documenting the investigation and decision process, and overseeing the process of filing a SAR. These steps are integral to the filing of a SAR and cannot be completed if any step in the process is excluded.”

They recommend that FinCEN undertake an accurate measure of the demands of SARs in order to help both the government and financial institutions make efficient use of their resources.

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