When a financial institution detects potential criminal activity, it is required to file a suspicious activity report (SAR) with Financial Crimes Enforcement Network (FinCEN). Tracking these incidents is critical in the fight against fraud, but preparing and filing SARs if often a time-consuming process.
To help streamline this effort, a reporting solution from DataVisor is being introduced that incorporates artificial intelligence to assist with drafting SAR narratives, populating report fields, and submitting reports electronically. Integrated into an anti-money laundering platform, the tool is designed to give organizations more efficient ways to track and report fraud.
There is a significant demand for a more efficient SAR process, as FinCEN reported that financial institutions filed roughly 4.6 million SARs last year. Each requires detailed information and supporting documentation, and according to DataVisor, preparing a single SAR can take an average of 21 hours.
Weighing on Institutions
Due to the recent surge in fraud, the SAR process will continue to weigh on financial institutions, who already face substantial compliance requirements.
According to FinCEN, the trends in SAR filings echo the overall fraud landscape. Check fraud remains prevalent as more criminal groups targeting the mail. Additionally, more SARs have been submitted due to elder fraud, as older adults have become frequent targets of impersonation scams.
The emergence of the digital economy has also created new avenues for fraud, with significant increases in identity theft, account takeovers, and ACH fraud stemming from e-commerce and online financial services.
Covering Their Bases
The pervasiveness of fraud means the SAR filing process will continue to be a drain on banks. Even more so because SARs aren’t just filed when fraud is verified—they are also filed when there is suspicion of illicit activity.
However, there is another reason why many financial institutions are filing more SARs: to cover their bases. FinCEN uncovered a trend of defensive filing, where financial institutions submit a SAR if there is any possibility that fraud occurred. While this may require more work on the organization’s part, this trend is likely to continue.
Although an organization isn’t likely to be fined for filing too many SARs, an error or a lapse in reporting can be costly. For example, U.S. Bancorp Investments was fined $500,000 because it failed to file 42 SARs over a three-year period after misjudging the transaction threshold for reporting.
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