April 1, 2008
William Repasky

Poorly schooled bankers sometimes misunderstand the "Safe Harbor" concept associated with the Bank Secrecy Act and the filing of a Suspicious Activity Report ("SAR"). A SAR is not a license to permit the wrongdoer to carry on his activity. And, you cannot just file and forget.

One of the more interesting recent BSA enforcement cases is seen in the outcome of the action concluded against Sigue Corporation and Sigue, LLC. Reported at 95-146 Federal Banking Law Reports. FinCEN found this money services business had allowed numerous structured transactions. $15 Million was assessed as part of deferred prosecution agreement. However, what is perhaps more interesting for the rest of us is the fault ascribed to the institution for its otherwise properly filed SAR's. The business did "red flag" what should have been noticed and did file its SAR's. Unfortunately, the Reports supported FinCEN's conclusion that the business failed to control its money laundering risk and that it was being misused by criminals. "The ultimate failure of the company is less in the design of the monitoring system, but more on the company's failure to adequately investigate flagged transactions further and its failure to take further action against the suspicious activities identified."

An institution that files a SAR can be said to have also put itself on notice with the filing. A SAR means you are "suspicious," and FinCEN requires that you then act like it. Further, financial institutions have a statutory obligation to prevent known criminal activity, not just report it to the authorities.

Once the institution makes its SAR filing, it then needs to consider what is going to be done internally. Close the account, block remitters, etc? One ignores warning signs, especially self-created signs, at the risk of aggravated enforcement penalties down the road.