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#585234 - 07/18/06 09:14 PM SARs on lottery scams
Lee G Offline
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Joined: Feb 2004
Posts: 3
There are getting to be so many "you've won the lottery" scams out there with ever increasing check amounts, as well as bigger Internet scams all the time, for example a customer who builds houses received an e-mail from Canada stating they liked the looks of one of his properties and out of the blue he gets a check for $900,000. Our suspect is a J. Johnson, but because the check is a counterfeit and it's over $25,000 we are filing a SAR. My question, has anybody seen guidance or talked with FinCEN or regulators about not filing SARs on "unknown suspects and amounts over $25,000 involved"? These seem to be growing so quickly that pretty soon they will be as common as the old Nigerian scam letters. Is anybody handling these differently than filing a SAR if you get one $25,000 and not filing anything under that? In talking with one other banker he isn't filing any of these because he says the banks that the counterfeits are drawn on are notifying regulators and authorities so he shouldn't have to.

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#585235 - 07/19/06 11:24 AM Re: SARs on lottery scams
Elwood P. Dowd Offline
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Joined: Aug 2001
Posts: 21,939
Next to Harvey
Quote:

In talking with one other banker he isn't filing any of these because he says the banks that the counterfeits are drawn on are notifying regulators and authorities so he shouldn't have to.




That's an interesting theory, one that might be traced back to a box of Cracker Jacks, but no place else.

You note that there is official guidance indicating that it is no longer necessary to report Nigerian (419) scams except under certain circumstances. There is no similar guidance regarding other types of scams, so the answer remains that they must be reported if they meet the criteria set out in the SAR regulations.

The burgeoning number of SARs has been noted by FinCEN. Clearly, they are past the point of diminishing returns. Regardless of whether the SAR numbers result from "defensive filing" or the effect of reporting standards that have not been revised in ten years, the data base is being diluted.

No illegal activity is more robust or dynamic than money laundering. The longer we attempt to stop it using the same techniques we have always used; e.g. currency transaction reporting and filing SARs without suspect information, the more likely it is that what we are doing is a waste of time and effort.

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#585236 - 07/19/06 04:13 PM Re: SARs on lottery scams
Lee G Offline
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Joined: Feb 2004
Posts: 3
That's about what I told him, but not with such an imaginative phrase. We've kept up on the filings, but it does seem to be non-productive when the best item of information you can provide is a Yahoo address. We've filed 3 in the last 60 days over the $25,000 threshold and we are a small bank, so I can imagine how many others are coming in by the thousands. I appreciate your reply as it's nice to get confirmation that we're continuing to do it the right way. Thank you.

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#585237 - 07/19/06 09:45 PM Re: SARs on lottery scams
Czargazer Offline
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Joined: May 2003
Posts: 298
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Quote:

You note that there is official guidance indicating that it is no longer necessary to report Nigerian (419) scams except under certain circumstances. There is no similar guidance regarding other types of scams, so the answer remains that they must be reported if they meet the criteria set out in the SAR regulations.




I have to disagree. Below is a quote from FinCEN's SAR Review 10 report recently issued.

"In previous guidance, FinCEN advised financial institutions that the filing of a SAR was unnecessary for '4-1-9' or 'advance fee fraud' if there was no monetary loss. FinCEN advised that a financial institution should consider filing a SAR if there was a monetary loss or if the scam involved another illegal activity (such as investment fraud, counterfeiting, forgery, misuse of a U.S. government seal, etc.). Because the activities are similar, the guidance given with regard to '4-1-9' or 'advance fee fraud' scams would apply to third party receiver of funds scams as well ."

I've interpreted this to apply to any type of advance fee fraud, lottery scam or the like. It wouldn't necessarily apply to a situation where someone attempts to pay for a service or property with a counterfeit item, but it should in cases where there's an "overpayment" or a "transfer of funds" out of the country.
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#585238 - 07/19/06 10:30 PM Re: SARs on lottery scams
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Please read all of the paragraphs preceding the one you quote. Others can find them beginning on page 36 (document not pdf) of SAR Activity Review #10.

As your emphasized language indicates, they are talking about "third party receivers of funds." I acknowledge that they added another type of scam they do not want to hear about if there is no monetary loss. They explain that scam in detail, describing the fact situation as "slightly different" than the 419 scenario. They emphasize that it has features similar to 419 scams and give specific examples.

It is a slight expansion of their prior position, not a revelation. They leave no room for third party extrapolation. The expansion definitely does not include every situation where there might be an overpayment or a transfer of funds outside the U.S. and no amount of massage can expand it to include the scenarios posed in the post that started this thread.

You indicate:

Quote:

I've interpreted this to apply to any type of advance fee fraud, lottery scam or the like.




As you note, the interpretation is yours. Before you implement it or offer it to others, you should find confirming sources within both FinCEN and your regulatory agency.

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