Learn how to differentiate between low- and high-quality Suspicious Activity Reports (SARs) and why quality matters in regulatory compliance.
Suspicious Activity Reports (SARs) are an essential tool in the fight against financial crime. By providing regulators and law enforcement agencies with vital intelligence, SARs help uncover money laundering, terrorist financing, fraud, and other financial crimes. However, the effectiveness of a SAR is only as strong as its quality.
Unfortunately, many compliance teams unknowingly submit low-quality SARs that fail to achieve their intended purpose. This article examines the key differences between low- and high-quality SARs, the risks associated with poor-quality filings, and how compliance professionals can ensure their SARs meet the highest standards.
Why SAR Quality Matters
The primary purpose of a SAR is to provide actionable intelligence to regulators and law enforcement. A high-quality SAR enables investigators to identify criminal networks, track illicit funds, and prevent financial crimes. Conversely, a low-quality SAR may obscure critical information, waste investigators' time, and create reputational and regulatory risks for the reporting institution.
Regulators are increasingly emphasizing the importance of SAR quality. For instance, the Financial Crimes Enforcement Network (FinCEN) has highlighted deficiencies in SAR filings in its periodic advisories, while the Financial Action Task Force (FATF) continues to advocate for more robust reporting standards.
To better understand compliance essentials, check out our guide on 5 Components of an Effective Compliance Program in Canada.
Characteristics of a Low-Quality SAR
Low-quality SARs are often the result of incomplete analysis, poor writing, or failure to adhere to regulatory requirements. Common characteristics of low-quality SARs include:
Vague or Incomplete Narratives
High-quality SARs, on the other hand, are concise, detailed, and actionable. They provide sufficient information to allow investigators to make informed decisions. Key characteristics include:
Compliance professionals can use the following checklist to evaluate SAR quality:
Filing low-quality SARs can have significant consequences, including:
To ensure compliance teams produce high-quality SARs, institutions should adopt the following best practices:
Regularly train staff on SAR writing techniques, emerging typologies, and regulatory expectations. Training courses coming soon at AMLI
Leverage advanced transaction monitoring systems, AI-driven analytics, and case management tools to identify and investigate suspicious activity thoroughly.
Establish a dedicated quality assurance team to review SARs before submission.
Monitor regulatory advisories and industry best practices to ensure SAR narratives address the latest threats and typologies.
Include a clear explanation of why the activity was deemed suspicious, supported by evidence.
The distinction between high- and low-quality SARs lies in the details. By focusing on clarity, accuracy, and relevance, compliance teams can ensure their SARs provide meaningful intelligence to regulators and law enforcement.
At AML Incubator, we help businesses improve their compliance processes, including SAR preparation and quality control. Contact us today to learn how we can assist you in producing high-quality SARs that demonstrate your commitment to regulatory excellence.
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By Haik Kazarian
AML Incubator. Don't just meet compliance standards - set them.
Contact: Hello@amlincubator.com