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#2048687 - 11/09/15 02:42 PM false alerts=SAR not filed??
Trees Offline
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Historically, we have not reported to the board decisions not to file SAR alerts, generated through our AML software, that were determined to be false alerts. Instead, we felt that "SARS not filed" should be those instances where the transaction appeared suspicious but where we were able to determine, through investigation, etc. that the transactions did not warrant a SAR.

We are not aware of any guidance from FINCEN or "best practice" saying that the bank needs to include all AML software false alerts as "SARS not filed" especially when the bank was able, through a quick review, to determine that the alert was a "false hit".

Please advise.

Thank you.

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#2048697 - 11/09/15 02:55 PM Re: false alerts=SAR not filed?? Trees
edAudit Offline
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Just wondering who suggested it.

I do not think that you will find guidance as there is no Fincen guidance to even have an automated system. It is however a regulatory expectation to have the systems.

In a prior we were expected to report as the system was not deemed effective by the examiner (they were correct) and there was a huge backlog of reviews.
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#2048720 - 11/09/15 03:40 PM Re: false alerts=SAR not filed?? Trees
Elwood P. Dowd Offline
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We cannot blame any requirement to report SARs to the board of directors on FinCEN. I'm quite certain that they would rather you didn't report them to the board at all.

The requirement to report SARs to the board comes from your federal functional agency's regulations, not those issued by FinCEN interpreting the Bank Secrecy Act. The "suggestion" that banks write a memo explaining why a SAR that was considered was not filed comes from the Examination Manual. It doesn't even come from the regulations.

No credible source has ever suggested that you take it a step further and report the "duds" to the board and certainly not "alerts" generated by an automated system.

Banks that spend hours wringing their hands over these issues should think about SAR filings in the mega banks; e.g. B of A or Wells. Do they really think that their board members ever hear the details on an individual SAR? A few times a year, they get the details on a SAR situation, but not the SAR itself. All they get are charts, graphs, and statistics regarding SAR filings and that's probably more than they need. The breadth of this ridiculous requirement is only an issue in small banks.
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#2048725 - 11/09/15 03:46 PM Re: false alerts=SAR not filed?? Trees
edAudit Offline
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The breadth of this ridiculous requirement is only an issue in small banks.

Very much agreed, now if you have a few hours I will let you in on other items that are more ridiculous and time consuming than this that I am currently working on.
Last edited by edAudit; 11/09/15 03:48 PM.
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#2048744 - 11/09/15 04:39 PM Re: false alerts=SAR not filed?? Trees
ACBbank Offline
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Other posters have summed it up more efficiently, but your response can simply be "Thank you, but we are not going to do that."
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#2048754 - 11/09/15 05:02 PM Re: false alerts=SAR not filed?? Trees
Princess Romeo Offline

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One wonders at what point, at a small bank, that the Board of Directors is expected to perform the day-to-day management of the Bank. From examiner expectations as to what must constitute the Board approved BSA "policy" (read - policy and explicit day-to-day procedures) to Board review of SARs, details of risk assessments, detailed review of complaints, and not to mention the "other side" involving safety and soundness such as liquidity, interest-rate, and credit risks. I have seen monthly board packages at small banks (less than $250 Million in assets) that are easily 800+ pages. So much noise and competing "risk" issues that to me, make it very difficult to see the forest for the trees.
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#2048762 - 11/09/15 05:29 PM Re: false alerts=SAR not filed?? Trees
edAudit Offline
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One wonders at what point, at a small bank, that the Board of Directors is expected to perform the day-to-day management of the Bank

At that point the bank will be written up for board independence (you can not win)
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#2048764 - 11/09/15 05:45 PM Re: false alerts=SAR not filed?? Trees
Kathleen O. Blanchard Offline

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Originally Posted By Trees
Historically, we have not reported to the board decisions not to file SAR alerts, generated through our AML software, that were determined to be false alerts. Instead, we felt that "SARS not filed" should be those instances where the transaction appeared suspicious but where we were able to determine, through investigation, etc. that the transactions did not warrant a SAR.

We are not aware of any guidance from FINCEN or "best practice" saying that the bank needs to include all AML software false alerts as "SARS not filed" especially when the bank was able, through a quick review, to determine that the alert was a "false hit".

Please advise.

Thank you.


The only thing I ever used that information (# of alerts that were reviewed, no SAR resulted) was in staffing justification (or to consider if we needed to adjust alerts!) Those are tasks that require staff. Normally, the board is not involved in deciding staffing issues.
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#2048789 - 11/09/15 06:25 PM Re: false alerts=SAR not filed?? Trees
Trees Offline
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Wow. Lots of strong feelings about our fav topic.
Not my idea, either. Do you even provide stats, ie, we reviewed 240 alerts from out automated system and determined that none warranted a SAR".

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#2048846 - 11/09/15 08:40 PM Re: false alerts=SAR not filed?? Trees
ACBbank Offline
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Trees - As part of my parameter review process I conduct an analysis on how many alerts were generated by each scenario, how many of those alerts were escalated to cases, how many of those cases led to SAR filings, etc. I even do some above/below the line testing. This scenario/parameter review is part of a larger review of the AML system itself.

I use this analysis as justification to modify or not modify the parameter settings within the AML system itself. I provide this information, along with my recommendations to the Audit & Compliance Committee (a Board Committee) annually and address any inquiries they have. However, attempting to this monthly is an exercise in futility.
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#2048858 - 11/09/15 09:03 PM Re: false alerts=SAR not filed?? Trees
Sunshine Lady Offline
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We do not report number of alerts reviewed, but we do the SARS filed monthly to the BOD.
Last edited by Sunshine Lady; 11/09/15 09:04 PM.
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#2048935 - 11/10/15 02:53 PM Re: false alerts=SAR not filed?? ACBbank
Elwood P. Dowd Offline
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Nice thread. "Alert management" is minutiae. It's a critical index, but only to the people who are actually doing the work.
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#2049117 - 11/10/15 08:54 PM Re: false alerts=SAR not filed?? Trees
J2C Offline
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Originally Posted By Trees
Historically, we have not reported to the board decisions not to file SAR alerts, generated through our AML software, that were determined to be false alerts. Instead, we felt that "SARS not filed" should be those instances where the transaction appeared suspicious but where we were able to determine, through investigation, etc. that the transactions did not warrant a SAR.

We are not aware of any guidance from FINCEN or "best practice" saying that the bank needs to include all AML software false alerts as "SARS not filed" especially when the bank was able, through a quick review, to determine that the alert was a "false hit".

Please advise.

Thank you.



Trees, did the examiners put this in writing in an exam report? If not, I would tell them you will take it under advisement. Unless they have something in writing-- which I can't seem them doing with this, then you shouldn't just be trying to plug holes because they "said so". Or, is it possible the comment made was that more reporting on the BSA function should be provided to the Board of Directors and this was interpreted to include this category of alerts not warranting a "SAR"? Just trying to figure out where this comment is coming from.

You should have procedures to address the timely clearing of alerts. If any of those alerts escalate to SAR review and the determination is that a SAR doesn't need to be filed, the only expectation is that you keep that information documented.

All this being said--- if your Board is requesting these statistics, well then--- that is an entirely different issue. I would educate them as to why that information really isn't of too much value in the grand scheme of things but if they want it, you should provide.
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#2049162 - 11/10/15 09:51 PM Re: false alerts=SAR not filed?? Trees
Trees Offline
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The Board is not requesting this info. Examiners didn't say we needed it, either. Audit decided all alerts not resulting in a SAR=SAR not filed and should be reported. We disagree and will tell that so. Nice, useful info here, by the way.

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