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Grand Jury Subpoenas and Suspicious Activity Reporting

In an effort to improve the consistency and quality of information being reported in SARs, and to guide financial institutions on compliance with suspicious activity reporting requirements, FinCEN is issuing this guidance about whether, when and how a financial institution should file a SAR after being served with a grand jury subpoena.

Grand juries issue subpoenas in furtherance of conducting investigations of subjects and targets of their proceedings, and therefore the receipt of such a subpoena does not, by itself, require the filing of a SAR. Nonetheless, the receipt of a grand jury subpoena should cause a financial institution to conduct a risk assessment of the subject customer and also review its account activity.33 If suspicious activity is discovered during any such assessment and review, the financial institution should consider elevating the risk profile of the customer and filing a SAR in accordance with applicable regulations. Unless there is something suspicious about the activities of a customer, apart from the service of the grand jury subpoena, a SAR should not be filed.

Receipt of a grand jury subpoena also does not alter the standards for filing a SAR. Financial institutions should only file a SAR for transactions conducted or attempted by, at, or through the financial institution involving or aggregating at least $5,000 when the financial institution knows, suspects, or has reason to suspect that (1) the transaction involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activities; (2) the transaction is designed to evade any requirements under the BSA; (3) the transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining all the available facts; or (4) the transaction involves use of the financial institution to facilitate criminal activity.

The failure to adequately describe the factors making the reported transaction or activity suspicious in the narrative of a suspicious activity report lessens its usefulness to law enforcement. Therefore, if a financial institution does prepare a SAR following the service of a grand jury subpoena, it should provide detailed information about the facts and circumstances of the detected suspicious activity, rather than the mere fact that a grand jury subpoena has been received.

Finally, grand juries are confidential proceedings conducted by state and federal prosecutors to determine whether enough evidence exists to formally accuse the subjects of criminal charges. A financial institution that receives a grand jury subpoena in connection with an investigation relating to a possible crime against any financial institution or supervisory agency, or certain other crimes, is prohibited from directly or indirectly notifying any person named in the subpoena about the existence or contents of the subpoena, or information that the financial institution has furnished to the grand jury in response to the subpoena.

If a financial institution has any questions about SAR filing related to grand jury subpoenas, or about suspicious activity reporting in general, it should contact FinCEN?s Regulatory Helpline at (800) 949-2732.37 Financial institutions with a federal functional regulator may also wish to call that regulator with questions related to that regulator?s suspicious activity reporting requirements, procedures and records the financial institution should maintain.

When Does the 30-Day Time Period in which to File a Suspicious Activity Report Begin?
Guidance on when a SAR must be filed was first set forth in the October 2000 SAR Activity Review: Tips, Trends & Issues. We are issuing updated guidance on this topic to clarify ambiguity in the interpretation of the original guidance.

Our suspicious activity reporting rules require that a SAR be filed no later than 30 calendar days from the date of the initial detection of facts that may constitute a basis for filing a SAR.38 If no suspect can be identified, the time period for filing a SAR is extended to 60 days. Upon identification of unusual activity, additional research is typically conducted, and institutions may need to review transaction or account activity for a customer to determine whether to file a SAR. The need to review a customer?s account activity, including transactions, does not necessarily indicate the need to file a SAR, even if a reasonable review of the activity or transaction might take an extended period of time. The time period to file a SAR starts when the institution, in the course of its review or as a result of other factors, reaches the conclusion in which it knows, or has reason to suspect, that the activity or transactions under review meets one or more of the definitions of suspicious activity.

The phrase ?initial detection? should not be interpreted as meaning the moment a transaction is highlighted for review. There are a variety of legitimate transactions that could raise a red flag simply because they are inconsistent with an accountholder?s normal account activity. A real estate investment (purchase or sale), the receipt of an inheritance, or a gift, for example, may cause an account to have a significant credit or debit that would be inconsistent with typical account activity. The institution?s automated account monitoring system or initial discovery of information, such as system-generated reports, may flag the transaction; however, this should not be considered initial detection of potential suspicious activity. The 30-day (or 60-day) period does not begin until an appropriate review is conducted and a determination is made that the transaction under review is ?suspicious? within the meaning of the SAR regulations.

A review must be initiated promptly upon identification of unusual activity that warrants investigation. The timeframe required for completing review of the identified activity, however, may vary given the situation. According to the FFIEC?s 2005 Bank Secrecy Act/Anti-Money Laundering Examination Manual, ?an expeditious review of the transaction or the account is recommended and can be of significant assistance to law enforcement. In any event, the review should be completed in a reasonable period of time.? What constitutes a ?reasonable period of time? will vary according to the facts and circumstances of the particular matter being reviewed and the effectiveness of the SAR monitoring, reporting, and decision-making process of each institution. The key factor is that an institution has established adequate procedures for reviewing and assessing facts and circumstances identified as potentially suspicious, and that those procedures are documented and followed.

For violations requiring immediate attention, in addition to filing a SAR, financial institutions should immediately notify law enforcement via telephone, and as necessary, their functional regulator. For suspicious activity related to terrorist activity, institutions may also call FinCEN?s toll-free hotline at 1-866-556-3974 (7 days a week, 24 hours a day) to further facilitate the immediate transmittal of relevant information to the appropriate authorities.

Excerpted from SAR Activity Review Issue 10, page 42

First published on 05/01/2006

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