Use of the Category?Other? on Suspicious Activity Reports
Use of the Category ?Other? on Suspicious Activity Reports Since the inception of the Suspicious Activity Reporting System in April 1996 through the end of 2006, filers have consistently selected Other from the listed types of suspicious activity on depository institution reports. In fact, Other currently ranks 3rd in the frequency of its selection amongst all available options. To select Other generally indicates that a suspected activity (in whole or in part) is not among the list of other summary characterizations currently made available in Part III of the SAR. Understandably, this list can not be infinite, hence the addition of Other as an available option.
Based on the variety of entries received over the years, the rationale of the Other fixed-field to act as a ?catch-all? alternative in addition to and/or outside of the provided list of other summary characterizations has proven to be quite justified.
In 2006 there were 59,440 instances where Other was designated as the Characterization of Suspicious Activity (in whole or in part). In their description of Other, filers frequently noted the following activities: 1) Unregistered/ Unlicensed MSB; 2) Tax Evasion; 3) Fictitious Instrument(s); 4) Wire Transfer Fraud; 5) ITIN/SSN Fraud or Misuse; 6) Unusual [Cash] Activity; 7) Bank Fraud under 18 USC 1344; 8) Fraudulent W-2; 9) BSA/Structuring/Money Laundering; 10) Phishing and/or Spoofing; and 11) Automated Clearing House (ACH) Fraud.
The value of this information is extensive and useful to FinCEN as it provides insight on: Quality Control; Emerging Trends; Items of Strategic Interest; Due Diligence; Law Enforcement Support; and Reporting Patterns.
An examination of the details accompanying the selection of Other indicated that many SARs were filed improperly.
Improper entries included: comment to See Attached (or similar); one-word descriptions that were too broad (e.g., Fraud; Scam); or fragmentary information in support of the selected characterization (e.g. Unusual Activity; Suspicious; Fraud Ring; Money Orders). In several instances the description portion of the Other field was left blank. Although additional information can be, and in many cases was, provided in the narrative portion of the report, a blank, incomplete, confusing, or otherwise inadequate entry in the description section of the Other fixed-field make the SAR less searchable by law enforcement and the regulatory community. Entries made in the Summary Characterization and the SAR Narrative are not mutually exclusive. On the contrary, data populating the fixedfield sections of the SAR must support the explanation provided and vice versa.
In addition, there were descriptions that indicated the filing of Suspicious Activity Reports was unnecessary. For example, there were SARs that contained the following descriptions: Robbery; Insufficient Funds/Overdraft; Mail Fraud; Bank Error. A SAR is not required for a robbery or burglary committed or attempted as long as it is reported to appropriate law enforcement (see 31 CFR 103.17(c)(1)(i); 103.18(c); 103.19(c)(1)(i); and 103.21(c)). Descriptions in other reports, though less common, included supporting explanations such as: Non Fraud or No Fraud Found.
A number of explanations for use of the Other category contained the phrase Subpoena or Grand Jury Subpoena. FinCEN has issued guidance on Grand Jury Subpoenas, indicating the mere receipt of any law enforcement inquiry does not, by itself, require the filing of a Suspicious Activity Report. Nonetheless, a law enforcement inquiry may cause a financial institution to review the activity for the relevant customer. It is incumbent upon a financial institution to assess all of the information it knows about its customer, including the receipt of a law enforcement inquiry, when determining whether a SAR should be filed. Further information regarding FinCEN?s guidance on Grand Jury Subpoenas and Suspicious Activity Reporting may be found at: http://www.fincen.gov/sarreviewissue10.pdf.
Emerging Trends & Items of Strategic Interest
The breadth of descriptions contained within the ?catch-all? characterization of Other act as a barometer for a variety of known financial schemes, alerting us to the emergence of new trends, as well as identifying original ones. This information enables us to strategically conduct additional, in-depth research on critical themes.
In 2005, for example, descriptions of activities characterized as Other indicated certain emerging trends, including: Automated Clearing House (ACH) Fraud; Phishing or Spoofing Scams; and Financial Abuse of the Elderly (commonly listed as Elder Abuse). Through identifying trends in the Other field, FinCEN can prioritize emerging issues due to their reported frequency and the serious nature of the activity, e.g., Fictitious Instrument(s) and Lottery-Sweepstakes Scams.
The frequency with which known and suspected Unregistered or Unlicensed Money Services Businesses were identified is evidence of due diligence and awareness on the part of the filing industry in recognizing and reporting such entities.
Law Enforcement Support
Several Other types of suspicious activity are regularly indicated and are of enormous value to specific law enforcement agencies, such as: Tax Evasion; Fraudulent W-2; Narcotics Trafficking; Currency Smuggling; and Employing Illegal Aliens.
Filers utilizing the Other fixed-field could have been more accurate and descriptive by clearly designating a more appropriate category: Wire Transfer Fraud; BSA/ Structuring/Money Laundering; Counterfeit Instrument (Other); Mortgage Loan Fraud; or Identity Theft.
Moreover, several explanations involved Advanced Fee Scams or the Office of Foreign Assets Control (OFAC). FinCEN has published guidance related to Advanced Fee Scams (commonly referred to as Nigerian or 419 Scams). To consult these guidelines please refer to Issues 4 and 7 of the SAR Activity Review. Access to this publication may also be obtained via the following link: http://www.fincen.gov/sarreviewissue4.pdf and http://www.fincen.gov/sarreviewissue7.pdf.
In December 2004, FinCEN released interpretive guidance concerning reports filed related to the Department of the Treasury?s Office of Foreign Assets Control (?OFAC?). Details of this guidance may be reviewed in full via: http://www.fincen.gov/sarguidanceofac.html.
There can be no doubt as to the all-around usefulness of the wide reporting discretion offered by the Other characterization box and its descriptive line. The presented observations not only emphasize this, but also point out how the Other field can be more accurately used, specifically in those instances where the type of suspected violation is already offered as one of the other listed summary characterizations. Choosing the relevant available violation will additionally make for more accurate numeric tabulations and a better representation of those summary characterizations.
Excerpted from SAR Activity Review Issue 12, page 12
First published on 10/07/2007