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Making SARs More Effective: Broader Based Feedback From Law Enforcement Needed by Financial Institutions


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If the purpose of criminal laws is to define crime, lay the groundwork for criminal prosecutions, and ultimately, reduce criminal behavior, the functionality of the money laundering laws (and their associated regulations) should be evaluated at least in part by how effective they are at facilitating criminal prosecutions.

For that purpose, the Suspicious Activity Report (‘‘SAR’’) that covered financial institutions must file when potential criminal or ‘‘unusual’’ activity is identified, plays a starring role. Law enforcement can use the information and analysis in SARs to initiate or support investigations and prosecutions of criminal activity. Institutions can file more effective SARs if they know overall the following: Was the activity they identified as suspicious frequently helpful in furthering a criminal investigation? That information is not presently available to them. For this goal, no specific SAR by SAR scorecard for the institutions would be necessary, only an overall understanding of how effective their SAR filing process has been. Apart from the proposed law enforcement feedback, other quality indicators such as communication with law enforcement, closed accounts, new typologies discovered and more complete explanations of problematic activity should be emphasized.

  The result of this proposed supplement (both with and without law enforcement feedback) to the current SAR effectiveness appraisal process is a large part of the answer to an ultimate question: How well is an AML Program working?

A SAR evaluation process better connected to actual criminal investigations may also better address some ongoing shortcomings of the current SAR process, namely, the potential tautology of some risk indicators and ambiguity as to the pros and cons of filing ‘‘defensive’’ SARs. Accordingly, this article looks at the nature of SAR requirements in Part I, the current SAR evaluation process in Part II, and suggests a set of improvements to the SAR evaluation process in Part III.

Download the full article, reprinted with permission from the Bloomberg BNA Banking Report.

“Originally published by Bloomberg Finance L.P. Reprinted with permission.”

As used in this document, “Deloitte” means Deloitte LLP [and its subsidiaries]. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.


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