When financial institutions detect potential criminal activities, they are mandated to file suspicious activity reports (SARs) with FinCEN. Although tracking these incidents is vital for combating fraud, the process of preparing and submitting SARs can be quite time-consuming.
To ease this burden, DataVisor has introduced a reporting solution that leverages artificial intelligence to assist in drafting SAR narratives, populating report fields, and submitting reports electronically. This tool integrates into an anti-money laundering platform, offering organizations more efficient methods for tracking and reporting fraud.
Considering the substantial demand for improving the SAR process, FinCEN reported that financial institutions submitted approximately 4.6 million SARs last year. Preparing a single SAR typically takes about 21 hours due to the need for detailed information and supporting documentation.
Impact on Institutions
The recent surge in fraud has increased the pressure on financial institutions, which already face significant compliance requirements. SAR filings reflect the overall trends in fraud, with check fraud continuing to be prevalent as criminal groups target mail-based transactions.
Additionally, more SARs have been filed due to elder fraud, a growing concern as older adults become frequent targets of impersonation scams. The rise of the digital economy has also introduced new avenues for fraud, such as identity theft, account takeovers, and ACH fraud stemming from e-commerce and online financial services.
Defensive Filings
The ongoing pervasiveness of fraud means that the SAR filing process will continue to be a significant burden on banks. This is exacerbated by the practice of defensive filing, where institutions file a SAR even when there’s only suspicion of illicit activity.
While organizations are unlikely to face fines for submitting too many SARs, errors or lapses in reporting can have costly consequences. For instance, U.S. Bancorp Investments was fined $500,000 and censured for failing to file 42 SARs over a three-year period due to misjudging the transaction threshold for reporting.
