We had a situation with a fraudulent check that was deposited earlier this year. Several back office departments had knowledge that the check was returned and that the customer was likely part of a scam. However, the department that files BSA related reports was not notified until last week.

Am I correct in believing that this is a late filing because the bank had knowledge, even if the department that files SARs did not have knowledge until a week ago? My understanding is that if the other departments failed to report the activity, that doesn't change our date of determination as the institution has knowledge.

Am I interpreting the regulation too strictly?

No, you are not too strict. Knowledge, is institutional knowledge, not the knowledge of one department or person. You have a breakdown in communication. Document it and what remedial actions you are putting into place to make sure it does not happen again.

It's likely that, given the volume of bad checks most banks receive and surges in scam activity, your back office folks may have treated this situation as routine rather than deserving special action. Focus some retraining on the people who handle such checks when they are received. Perhaps their procedures also need fine tuning.

I've seen cases where someone new at the job missed one of these notifications, and everyone else in the department just assumed it was taken care of. Are there written procedures in that unit? Do they include the need for informing someone of suspect activity like this? Is there a report of bad checks that this check should have been included on? Did it somehow not get routed to your BSA folks? Do instances like this get reported to your security officer or legal department? Should they be reporting what they get to BSA folks?

Clearly your internal reporting broke down on this one. You might want to consider this an opportunity to review how information is supposed to get to BSA and whether there's a better way to do that.