We filed a SAR couple months ago on customer that brought in cash that tested positive for drug money. (drug dog)
We have recently had 2 more positive hits for drug money. She was arrested this past Friday and the police seized most of the funds in her account.
Do we file another SAR, since she has been arrested? Also are we required to close her account? She does deposit her payroll also, into this account.

You would file a SAR to report additional suspicious activity, not the fact that she was arrested. Closing the account or leaving it open is up to the bank.

May I ask, law enforcement notified you that the money tested positive? just trying to understand how you found out that information. I agree with rlcarey - only report if there is additional suspicious activity.

Drug dogs - the hottest new internal control for AML.

Did your examiners rope you into that?

No, when we called law enforcement about the suspected money, they brought the dog over.

We hide the money and see if he can find it.

Very interesting to watch.

LOL! I'm going to have to talk to the Boss Man to see if he can buy us a drug dog. It'd be fun to watch the customer's faces as we tell them that their money has to be sniffed before it's deposited. That - and I can teach it to fetch me stuff from the break room. Good dog!

Intriguing. Next time, I suggest you hide two or three bundles of money to see if Fido alerts on the "right" one or all of them. He may just like the smell of money.

You may not choose to file a continuing or amending SAR just because of the arrest or seizure, but it would be relevant to any LEA reading the narrative of any SAR you do choose to file. My suggestion would be that you mention the arrest and seizure in the narrative of any SAR you file and provide guidance on how to find any public reporting of the issue; e.g. a link to the newspaper's site and the date of the story. Any law enforcement agency interested in your SAR will want to know about the arrest and which other LEA it should contact for additional information.

This person has cost your bank a significant amount of time and trouble. It should be very difficult to establish a reason for keeping the account open and I'm pretty certain the paychecks will stop coming...